The two-year budget deal struck by Rep. Paul Ryan, R-Wis., and Sen. Patty Murray, D-Wash., si moving toward final Senate passage after sailing through the House of Representatives on Thursday by a 332-94 vote.
The agreement sets spending levels at just above $1 trillion for fiscal 2014 and 2015 and eliminates $63 billion in automatic sequestration cuts. New spending increases would be offset by increasing the amount federal workers must contribute to their retirement plans as well as increasing premiums for pensions backed by the Pension Benefit Guaranty Corp.
The American Benefits Council balked at the $8 billion in PBGC premium hikes that are to be paid by employer plan sponsors under the measure. The pension premium increase, said ABC President James Klein, “follows a $9 billion increase in premiums enacted just a year ago.”
Klein said in a statement that “It is simply unacceptable that members of Congress of both parties, as well as both Democratic and Republican administrations in recent years, view pension plans as a piggy bank for other budget priorities, without regard for the real-life policy implications of their actions.”
As the Bipartisan Budget Act of 2013 notes, the sequester relief is fully offset by savings elsewhere in the budget, which includes “dozens of specific deficit-reduction provisions, with mandatory savings and non-tax revenue totaling approximately $85 billion.” The agreement says it would reduce the deficit by between $20 billion and $23 billion.
Securities and Exchange Commission spokesman John Nester told ThinkAdvisor Friday that there are “no details at present” on how the budget deal impacts the agency.
Lawmakers and the executive branch, Klein argued, “sometimes cite the PBGC’s self-reported $36 billion deficit to justify new premium increases.” However, he said the current PBGC deficit projection is “highly misleading and is based on both today’s historically low interest rates and flawed assumptions by the PBGC in the way it determines its financial situation.”
Said Klein: “Today’s $36 billion ‘deficit’ is no more real than its purported $11 billion ‘surplus’ several years ago when interest rates were high.”
While the Federal Reserve Board’s low-interest rate policy “is appropriately designed to help spur economic recovery,” Klein added, “it has the perverse effect of undervaluing pension assets, understating the funding levels of employer-sponsored plans and the financial position of the PBGC itself.”
Check out Don’t Break Our Thriving 401(k) System, Groups Urge Government on ThinkAdvisor.