The White House’s proposed budget for 2019 includes an increase to PBGC premiums for multiemployer plans. This premium hike is expected to raise approximately $16 billion dollars in a 10-year window.
As a reminder, the PBGC’s multiemployer program, which insures the pension benefits of more than 10 million Americans, is anticipated to be insolvent by 2025. Although the budget does not discuss the specifics of a potential premium increase, it is anticipated that the budget will create the variable rate premium (VRP) and exit premiums that remained in the proposal phase in the 2017 and 2018 budgets.
The multiemployer VRP would require multiemployer plans to pay increased fees based on their levels of underfunding up to a certain amount. The exit premium would be assessed on employers who exit a multiemployer pension plan. Sponsors of multiemployer pension plans should continue to monitor budget discussions for the possible implementation of VRP and exit premiums, or potentially another type of PBGC premium increase all together.