Bipartisan legislation has been introduced in the House of Representatives to prohibit the use of premiums paid to the Pension Benefit Guaranty Corporation from being used to pay for federal spending initiatives.
Introduced July 25 by Rep. Derek Kilmer (D-WA) and cosponsored by Reps. George Holding (R-NC) and Anthony Gonzalez (R-OH), H.R. 4035 would prohibit legislative proposals that increase or extend an increase of PBGC premiums from being counted in the House or Senate as a revenue offset for other federal spending.
On several occasions over nearly the past decade, Congress has turned to increasing PBGC premiums to offset spending that has nothing to do with funding defined benefit plans, such as highway transportation funding. The lawmakers did this in order to avoid congressional “budget points of order” requiring super-majority votes to waive the rules against underlying legislation that increases the deficit.
The federal government’s general revenues do not receive this funding, yet responsible employers are unnecessarily penalized for sponsoring a DB plan for their employees. In fact, the American Retirement Association, along with several other industry groups, signed a letter to the sponsors of the legislation on July 30 expressing support for H.R. 4035.
“As organizations representing employers who sponsor defined benefit plans and pension plan chief investment officers, we strongly support this important legislation that would ensure that Pension Benefit Guaranty Corporation (PBGC) premiums are only used to fund the PBGC’s mission, as Congress originally intended,” the letter states.
The letter explains that a 1980 change in law to make PBGC premiums “on budget” allowed premiums to be counted as general fund revenue for purposes of budget scoring, resulting in a “budget gimmick” that allowed premium increases to “pay for” unrelated programs. As the organizations note, such increases make plans more expensive essentially constitute tax increases on employers that sponsor DB plans, jeopardizing their ability to continue offering them.
Similar legislation was introduced previously – in 2016 by Rep. James Renacci (R-OH) in the House and Sen. Mike Enzi (R-WY) in the Senate, and again in 2017.
H.R. 4035 was referred to both the House Rules and Budget committees.