Pension De-Risking is Double-Edged Sword for PBGC (Business Insurance)

As companies unload pension obligations, federal guarantor sees premium income cut along with risk exposure.

As companies move pension risk off of their balance sheets, whether by buying annuities for retirees, as Verizon announced recently that it plans to do, or offering plan participants lump sums, their efforts have two effects on the U.S. Pension Benefit Guaranty Corp. (PBGC), according to an article in Business Insurance.

The lessening in companies’ pension obligations reduces the premiums companies owe to the PBGC, thus undermining its finances. (Companies currently pay the PBGC $35 per plan participant, which will rise to $49 per participation by 2014.) On the other hand, the PBGC’s exposure to pension risk is lessened.

Josh Gotbaum, the head of the PBGC, said last week that Congress should give the PBGC the leeway to set premiums according to plan sponsors’ financial risk.


See the full story here.



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