The Pension Benefit Guaranty Corporation (PBGC) is a federal corporation that insures most defined benefit plans in the United States. The PBGC is funded solely by premiums paid by plan sponsors. Currently the PBGC is experiencing deficits due to the large amount of plans which are terminated with insufficient funds to cover all its liabilities.
The President has recently signed into law the Deficit Reduction Act raising the insurance premium that single employers pay per participant to the PBGC for each plan year. Starting with 2006 plan years, single-employer sponsored defined benefit plans that are insured by the PBGC will pay $30 per participant, up from the old amount of $19 per participant. The Act also raises the multiemployer plan premium to $8 up from the current premium of $2.60 per participant.
The new law also subjects terminated plans to an additional “termination premium” of $1,250 for every participant in the plan immediately before the plan’s termination date. The “termination premium” only applies to plans that are terminated due to the plan sponsor’s bankruptcy. The new premium will not apply to a plan sponsor that filed for bankruptcy reorganization before October 18, 2005, or after December 31, 2010, unless the premium is reauthorized by Congress.
Read Section 8101 of the Deficit Reduction Act of 2005 Public Law 109-171 [PDF]
Read the PBGC’s 2008 premium increase notice.< Back