The President came out swinging for the middle class Monday in his fiscal year (FY) 2013 budget proposal, and part of that is a budget request to strengthen the defined benefit pension system by giving the board of the Pension Benefit Guaranty Corp. (PBGC) authority to adjust premiums and evaluate risks to it, and keep it viable for the times when plans fail.
The U.S. Department of Labor total budget request totals $12 billion in discretionary funding.
For its part, the PBGC must take into account the risks that different sponsors pose to their retirees and to the PBGC itself to encourage companies to fully fund their pension benefits and ensure the continued financial soundness of the PBGC, according to the DOL, which released this part of the budget request proposal. It is estimated that this proposal will save $16 billion over the next decade.
To manage risk and be able to act in a timely fashion, the PBGC will coordinate with treasury and DOL in responding to risks that cut across organizational boundaries, explore and develop ways to prevent plan sponsor-initiated terminations and maximize recoveries and analyze credit, investment and actuarial risks to the pension insurance programs and build and improve risk models to quantify and measure the impact of these risks to the insurance programs, according to the 6o-page budget justification.
“We are at a make or break moment for the middle class, and the Labor Department’s fiscal year 2013 budget request reflects our commitment to supporting an American economy that’s built to last,” stated Secretary of Labor Hilda L. Solis.
“Our budget request focuses on programs that will help keep America’s workforce strong and innovative, while providing needed worker protections.
It also makes responsible and reasonable cuts that are rooted in current economic realities and a continued focus on increased efficiency and effectiveness,” she stated.
The PBGC administers two insurance programs. Our single-employer program protects nearly 34,000,000 workers and retirees in about 25,000 pension plans. Our multiemployer program protects about 10,000,000 workers and retirees in about 1,500 pension plans.
In FY 2011, PBGC paid out nearly $5.5 billion for approximately 873,000 retirees in more than 4,300 failed plans (an additional 628,000 workers will receive benefits when they retire), became responsible for more than 57,000 people in failed plans, and started paying benefits to an additional 15,000 retirees, without missing a single payment, according to the budget request.
For more information on the president’s FY 2013 budget request for DOL, click here.