WASHINGTON - For the second time in two years, Congress is targeting employers that still offer traditional pensions for a hefty increase in their insurance premiums to help finance a budget deal.
The latest increase comes after Congress moved last year to raise the basic annual premium for pension insurance from $42 for each covered worker in the private sector to $49 in 2014. Under the budget agreement nearing final approval in the Senate, premiums would rise again to $57 in 2015 and $64 the following year.
The U.S. Chamber of Commerce and National Association of Manufacturers support the overall deal, yet they and other business groups warn that the move to increase premiums more that 50 percent over the next three years will only encourage more companies to freeze plans or close them to new workers.
"It only provides another reason for sponsors to exit the system, thus further harming retirement security and the participants the system is intended to help," said Scott Macey, president of the ERISA Industry Committee, a group that represents large employers on benefits issues. ERISA is an acronym for Employee Retirement Income Security Act.
The House passed the bill last week, and it was scheduled for a final vote in the Senate on Wednesday.
The estimated $8 billion in new premiums over the next decade would go toward reducing deficits by the Pension Benefit Guaranty Corp., a government agency that covers pension payments to retirees when bankrupt companies can't.
The PBGC has complained for years that operating in the red threatens the agency's ability to act as a safety net in the future, as more employers default on their pension plans.
Pensions used to be the most common type of retirement benefit, guaranteeing workers a specific monthly payment for life regardless of the ups and downs of the stock market.
Fewer than 9 percent of private-sector employers still offer them, while 88 percent of employers opt instead to sponsor 401(k) retirement plans.
The number of pension plans the PBGC insures for individual employers has plunged from an all-time high of 112,208 in 1985 to about 23,000 this year. The number has continued to drop by about 1,000 per year since 2010, according to PBGC figures.
Lawmakers can count the $8 billion as new revenue without having to raise taxes, even though the higher premiums can hit businesses just as hard as a tax increase.