Filed Under:Markets, Employee Benefits

Fear and loathing at PBGC

PBGC Director Josh Gotbaum, testifying before a Senate committee in 2010. Photo: Senate Committee on Health, Education, Labor and Pensions.
PBGC Director Josh Gotbaum, testifying before a Senate committee in 2010. Photo: Senate Committee on Health, Education, Labor and Pensions.

There’s a sense of foreboding building at the Pension Benefit Guarantee Corp. nowadays.

Late last month, the insurer of the country’s private defined benefit plans announced that the condition of single employer-provided pensions has greatly improved, and that projected deficits are expected to narrow dramatically in the next few years, thanks in large part to controversial premium increases shouldered by plan sponsors.

Plan sponsors, particularly those in underfunded multiemployer plans, took advantage of the PPA in a big way. In 2010, $2 billion in excise taxes were avoided. Another $2 billion in liabilities were reduced thanks to adjustments allowed under the law.

Absent an act of Congress, these relief measures won’t be available going forward.

In Donovan’s tenure as advocate, all of the 4062(e) claims she’s dealt with involved frozen plans, meaning they were not accruing liabilities going forward. What’s more, they all had been making faithful annual contributions to their plans, and were generally funded at a 92- to 97-percent level.

Her point: these were not distressed plans. In fact, their sponsors were often models of pension funding efficiency. So why, she wonders, is the PBGC assessing liabilities for routine sales of assets?

Originally published on BenefitsPro. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Nichole Morford

Nichole Morford
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