The PBGC has announced the 2016 premium rates for defined benefit pension plans.
The flat rate premium is $64 per participant for single employer defined benefit pension plans and $27 for multi-employer plans.
We knew that the variable rate premium (per $1,000 of unfunded benefit liability) would be at least $29 with a possible increase for indexing. Now we know that the rate will actually be $30.
For plans with unfunded benefit liabilities, all contributions to the plan will generally offset the premium, in effect giving an automatic 3.0% return on the contribution (with the limited exception of plans that hit the premium cap of $500 per participant). Plan sponsors should consider the impact on PBGC premiums when deciding what level of contributions to deposit to the plan.
Here’s a snapshot of the premium schedule in recent years:
|Year||Single Employer Flat Rate||Single Employer Variable Rate||Per Participant Variable Rate Cap||Multi-Employer Flat Rate|
After 2016 all rates are subject to indexed increases, following an inflation factor.
and Then… Stay tuned to our blog to find out if the recent budget proposal in Congress will go all the way to law with even further increases in PBGC premiums!
Blog authored by Cheryl Gabriel, CPC.