US - The Bush administration has proposed an overhaul of the funding rules for single-employer pension plans that include raising the Pension Benefit Guaranty Corporation (PBGC)'s flat per-participant premium from $19 to $30.
The proposal would also change the funding rules to reflect the use of fair market value of assets and a seven year amortisation period for funding shortfalls, among other changes. Minimum required contributions to defined benefit plans would be set based on funding targets that vary from plan to plan, the administration said.
Additional proposals would make companies improve disclosures to workers, investors and regulators about pension plan status, and improve the PBGC’s financial health by allowing the insurer’s board to set risk-based premiums themselves and allow the PBGC to perfect liens for companies in bankruptcy that miss pension payments.
PBGC executive director Bradley Belt (pictured) reacted positively to the administration’s proposals.
The Administration's proposal would better protect workers and retirees by strengthening the pension funding rules, by prudently increasing premiums sponsors pay to the insurance program, and by requiring more timely disclosure about the financial health of pension plans,” he said.
“We look forward to working with Congress to promptly enact the Administration's proposal.
However, Rep. George Miller, the senior Democrat on the Education and Workforce Committee said that the proposed PBGC premium hikes would force the weakest pension plans to play almost $2bn in new premiums in 2006, more than $3bn in 2007, and over $15bn over the next five years.
“Imposing a $12bn pension tax on the nation’s shakiest pension plans places the retirement security of millions of Americans in jeopardy,” Miller said in a statement. “ After reviewing this plan and his Social Security proposal, I have to ask: What exactly does the President have against retirees anyway? These shortfalls were caused by the failure of the American steel industry and the consolidation of our airlines, not by anything employees or retirees have done.”
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