Advancing a Free Society

The Administration’s PBGC Premium Proposal Deserves Support

Thursday, April 21, 2011

In this year’s budget submission, the Obama Administration included a proposal to partially reform the finances of the Pension Benefit Guaranty Corporation (PBGC). In essence, the proposal would give PBGC increased authority to modify both the level and structure of premiums that pension sponsors are charged for pension insurance.

Proposals similar to President Obama’s have previously been offered both by the George W. Bush Administration and by the Simpson-Bowles commission. The proposal also faces energetic opposition from much of the business community. I believe that the basic conception of the Administration proposal is sound and that its enactment would strengthen the insurance system standing behind worker pension benefits.

Background: When employers make defined-benefit (DB) pension promises to their workers, those benefits are insured (up to a statutory cap) by the PBGC. Employers are assessed premiums for that insurance. A core principle underlying the PBGC system is that it is supposed to be self-financing; that is, funded by pension sponsors without taxpayer support.

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