Compliance July 18, 2016

Bill Would Move PBGC Premiums ‘Off Budget’

The bill aims to eliminate the motivation for legislators to raise PBGC premiums.

Reported by

Senator Mike Enzi (R-Wyoming) has introduced S.3240, described as a bill to prohibit the use of premiums paid to the Pension Benefit Guaranty Corporation as an offset for other federal spending.

In an announcement of similar legislation introduced in the House of Representatives in April, it was explained that under current law, pension insurance premiums that are paid by employers to the Pension Benefit Guaranty Corporation (PBGC) are included in the federal budget and are considered “on-budget.” This provides the illusion that this revenue can be used for general government spending, even though these premiums cannot be allocated to other government programs besides the PBGC’s programs, the senator explains. 

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In recent years, Congress has increased the PBGC premiums several times in order to offset increased spending; most recently increasing premiums through 2025 by $7.65 billion in the Bipartisan Budget Act of 2015.

Confronting these challenges, S. 3240 would ensure that premiums paid to the PBGC are no longer counted as general fund revenue, eliminating the motivation for legislators to raise premiums in order to pay for unrelated initiatives and programs.

In a letter to Enzi, industry groups thanked him for introducing the legislation. “Eliminating the ability to ‘double-count’ these premiums for other spending will keep lawmakers from using pension plans as a piggy bank,” said Lynn Dudley, senior vice president, global retirement and compensation policy for the American Benefits Council.

Information about S. 3240 will be available here.

Compliance July 18, 2016

Universal Retirement Plan Bill Introduced

The bill would require employers with 10 or more employees that do not already offer a retirement plan to contribute 50 cents per hour worked, per employee, to retirement accounts for employees.
Reported by

U.S. Representative Joe Crowley (D-New York), vice chair of the Democratic Caucus, introduced the Secure, Accessible, Valuable, Efficient Universal Pension Accounts (SAVE UPs) Act.

The new legislation would establish universal retirement savings accounts so every American worker would have assets for retirement. The SAVE UPs bill would require employers with 10 or more employees that do not already offer a retirement plan to open individualized retirement accounts for every employee and contribute to those plans 50 cents per hour worked, per employee. Alternately, if an employer has an existing retirement plan that qualifies, they can keep contributing to that plan for their employees.

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In addition to the employer contribution, once enrolled, employees would automatically begin contributing 3% of their pre-tax income, which would increase gradually over time, unless they opt-out.

To help with the cost of contributing to these plans, smaller employers can receive a tax credit worth the value of contributions to 10 employee accounts. For small businesses with fewer than 10 employees, while they are not required to contribute, this tax credit will make it financially possible for them to do so voluntarily.

SAVE UP accounts will have built-in protections to cushion against dramatic losses like those seen after the market crash of 2007-2008, giving some reassurance to workers nearing retirement. Additionally, similar to the Thrift Savings Plan currently offered to federal employees, SAVE UP accounts will enjoy government oversight, private management, and a limited number of low-fee index fund options.

Last year, Crowley unveiled his “Building Better Savings, Building Brighter Futures” plan to address the savings and retirement security crisis in the U.S. The plan will make Americans more financially secure throughout their lifetimes by creating new financial options that encourage personal saving, expand employer-provided retirement plans, and strengthen Social Security. Details of the plan can be read here.

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