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PBGC Premiums Rise With Enactment of Budget Reconciliation Bill

February 08, 2006

WASHINGTON-The Deficit Reduction Act of 2005 signed into law today includes increases in premium rates paid by sponsors of defined benefit pension plans insured by the Pension Benefit Guaranty Corporation (PBGC).

Under the new legislation, flat-rate premiums for single-employer pension plans increase from $19 to $30 a year for each plan participant. For multiemployer plans the yearly premium rises from $2.60 to $8 per participant. The new rates are effective for plan years beginning on or after January 1, 2006 and will be indexed for wage inflation beginning in 2007.

Underfunded pension plans pay an additional variable-rate premium of $9 per $l,000 of unfunded vested benefits. That rate is unchanged by the measure enacted today.

The legislation also introduces a new termination premium payable when a company transfers its underfunded pension plan to the PBGC. The new premium is set at $1,250 per participant per year, payable for three years after plan termination. It applies to certain terminations occurring on or after January 1, 2006.

Additional information for pension plan sponsors is available on the PBGC's Web site at: .

The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.

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PBGC No. 06-26