Pension Benefit Deal Looms in Congress

Jason Hammersla, a spokesman for the ABC, explained that current artificially low interest rates are forcing companies to increase their contributions to defined benefit plans, money that could be better used for investment or hiring, “because the last 10 years are a combination of historically low interest rates and artificially low interest rates.” 

Another issue is premium increases for the Pension Benefit Guaranty Corporation. That would also be used to offsets the costs of both the student loan fix and funding of the transportation bill, S. 1813.

The pension provision could be used to help fund a 27-month extension of the highway bill, as opposed to the option of a 15-month extension. However, Lieber cautions that because time is rapidly running out, a short-term extension on current legislation may be necessary because Congress leaves soon for its July 4th recess.

One of the concerns of ABC and other private sector interested parties about the PBGC provision is that it hasn’t been analyzed yet by Congress. The Obama administration has proposed to raise premiums payable to the PBGC by $16 billion over 10 years.

This would be achieved partially by increasing the flat-rate premium and partially by giving the PBGC the right to set its own variable rate premiums, as well as to base such premiums on factors that include the financial condition of the employer.

“Adoption of this proposal in whole or in part would substantially accelerate the decline of the defined benefit plan system and adversely affect job retention,” ABC argues in a position paper. “Several myths about PBGC that have been raised during the policy debate are highlighted here.”