A study released last week by the Pension Coalition—a group of trade associations including the ERISA Industry Committee, the National Association of Manufacturers, and the U.S. Chamber of Commerce—projects that the increases in Pension Benefit Guaranty Corp. (PBGC) premiums slated for later this year will act as a significant damper on the U.S. economy. Researchers used the Long-term Inter-industry Forecasting Tool (LIFT) to predict the macroeconomic effects of the repeated increases in PBGC premiums that were included in the 2012 MAP-21 law, the 2013 Bipartisan Budget Act, and the Obama administration’s 2014 budget proposal. The LIFT approach combines an input-output model across industries with extensive use of regression analysis.

The result of this analysis pegs the cumulative effects of the PBGC premium hikes as:

  • a reduction in gross domestic product (GDP), peaking at a 0.04 percent GDP reduction in 2016 and 2017;
  • a reduction in real personal income, due to increased inflation and decreased production, that peaks at 0.07 percent in 2016 through 2018;
  • the loss of an average of 42,000 jobs per year (primarily in manufacturing, retail and wholesale trade, and healthcare); and
  • total economic damage from 2013 to 2023 of $51.4 billion.

“It is imperative that Congress reject any further increases in PBGC premiums, as well as the proposal to allow the agency to set risk-based premiums,” says Kathryn Ricard, senior vice president of retirement security for the ERISA Industry Committee. “Not only would additional premium increases be harmful for job creation and economic growth, [but] further increases would only provide another incentive for employers to flee the defined-benefit pension system, harming the very participants who benefit from the system and the PBGC itself.”