PBGC Premiums Increase


by Lori Mayer 

If you are a plan sponsor of a Defined Benefit plan subject to the Pension Benefit Guaranty Corporation (PBGC) requirements, expect to see an increase in your premium payment.  The PBGC is the government created corporation that guarantees pensions against plan insolvency.  When the large Fortune 500's plans go belly-up, they turn to the PBGC to pay benefits.  The PBGC then turns to premium payers which include the smaller fully funded plans.  The Deficit Reduction Act of 2005, signed into law on February 8, 2006, increased the flat-rate premium from $19 to $30 per participant.  This rate increase is effective for plan years starting in 2006.

Also, look for changes in future years.  Starting in 2007, the flat-rate premium of $30 will be automatically adjusted each year based on the national average wage index that is currently used for the Social Security indexing.