Resources

Pension Insurance Premiums Fact Sheet

Premium Rates:

The Pension Benefit Guaranty Corporation (PBGC) protects the retirement benefits of more than 40 million workers and retirees without the use of tax dollars from the general fund. PBGC's revenue is derived from insurance premiums paid by nearly 26,000 insured defined benefit pension plans, assets from terminated trusteed plans, investment income, and recoveries from employers responsible for terminated underfunded plans. Net premium revenue totaled about $2.7 billion in 2012.

For plan years beginning in 2013, all single-employer pension plans pay a basic flat-rate premium of $42 per participant per year. Underfunded pension plans pay an additional variable-rate charge of $9 per $1,000 of unfunded vested benefits. The flat-rate premium for multiemployer pension plans is $12 per participant per year. The comparable rates for plan years that began in 2012 are $35 per participant for single-employer plans and $9 per participant for the multiemployer program. The variable-rate charge for single-employer plans is the same whether you are filing premiums for the 2012 plan year or for 2013. A termination premium of $1,250 per participant per year applies to certain distress and involuntary plan terminations, payable for three years after the termination.

Background:

The single-employer premium was a flat rate of $1 per participant when the PBGC was created by Congress in 1974 under the Employee Retirement Income Security Act (ERISA). Congress raised the premium to $2.60 in 1978, and to $8.50 in 1986. In 1988, the basic premium was raised to $16 and an additional variable-rate premium was imposed on underfunded plans for a maximum total premium of $50 per participant. In 1991, Congress raised the basic premium to $19 per participant and set the maximum premium at $72 per participant for underfunded plans. Legislative reforms under the Retirement Protection Act of 1994 increased PBGC premiums for the plans that pose the greatest risk by phasing out the maximum limit on premiums for underfunded plans. The maximum was completely eliminated during 1997.

The Deficit Reduction Act of 2005 changed the per-participant flat premium rate for plan years beginning in 2006 to $30 for single-employer plans and $8 for multiemployer plans and provided for inflation adjustments to the flat rates for future years.   The rates for 2012 plan years are $35 for single-employer plans and $9 for multiemployer plans.  The law also created a "termination premium" that is payable for three years following certain distress and involuntary plan terminations that occur after 2005. Special rules apply in certain cases involving bankruptcy: the three-year payment period begins after emergence from bankruptcy, and the premium applies only if the bankruptcy was filed on or after October 18, 2005. This legislation did not alter variable-rate premium charges.

The interest rate used to calculate the variable-rate premium was increased from 80 percent of the spot rate for 30-year Treasury securities to 85 percent beginning with July 1997 plan years. This rate was temporarily increased to 100 percent of the 30-year Treasury spot rate for plan years beginning in 2002 and 2003 by the Job Creation and Worker Assistance Act of 2002. Under the Pension Funding Equity Act of 2004 (enacted April 10, 2004, and retroactively effective as of January 1, 2004), the rate for plan years beginning in 2004 and 2005 was 85 percent of the annual rate of interest determined by the Secretary of the Treasury based on long-term investment-grade corporate bonds ("corporate bond rate") for the month preceding the month in which the plan year begins. Under the Pension Protection Act of 2006, the rate for plan years beginning in 2006 was 85 percent of the "corporate bond rate," and the rate for plan years beginning in 2007 was 100 percent of the "corporate bond rate." The change from 85 to 100 percent of the corporate bond rate resulted from the publication of new mortality tables by the Internal Revenue Service for plan years beginning in 2007. For plan years beginning in 2008 and later, the interest assumptions are completely different. Instead of one rate, a plan now uses three "segment rates" derived from a corporate bond curve. The first of these applies to benefits expected to be paid within five years of the first day of the plan year, the second applies to the following 15 years, and the third applies to benefits expected to be paid after that. For example, the segment rates for January 2012 calendar-year plans were 2.07%, 4.45%, and 5.24% for the first, second, and third segments, respectively.

The Moving Ahead for Progress in the 21st Century Act (MAP-21) increased premium rates (both flat and variable) and put a cap on the variable-rate premium.  The following table summarizes the premium rates for 2013 - 2015.  The rates shown represent the base rates after reflecting the MAP-21 increases, but before reflecting the complicated indexing provisions.  The italicized numbers may go up after reflecting indexing.  Other numbers won't be affected by indexing.

Year	Flat-Rate per participant	Variable-Rate Premium
		Rate per $1,000 unfunded vested benefits	Per participant cap
2013	$42	$9	$400
2014	$49	$13	$400
2015	$50	$18	$400