Today Congress passed the surface transportation bill (HR 4348), which will be sent to the President for signature. The bill has two important changes that affect pension plans. The first change is the interest rate stabilization for single-employer plans. The second change is an increase in the Pension Benefit Guaranty Corporation (PBGC) premiums with respect to all pension plans covered by the insurance provisions of title IV of ERISA.

Interest Rate Stabilization for Single-Employer Plans

For single-employer plans, the bill adopts the proposed changes of using a 25-year average of rates to provide relief from the current level of the segment rates used for funding plans. Use of this relief will be elective before 2013.

PBGC Premiums to Increase

The bill also provides for an increase in the PBGC premiums. The per capita single-employer premium will increase to $42 in 2013 and $49 in 2014. It appears that the variable rate premium of $9 per $1,000 of unfunded vested benefits for single-employer plans will increase for inflation beginning in 2013 plus an additional $4 in 2013 and by another $5 in 2014. There will be an overall limitation of $400.

There will also be a premium increase for multiemployer plans. In 2013, the multiemployer plan premium will increase to $12.

Cheiron is continuing to analyze the bill and will be issuing a further alert once the bill is signed into law.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Therefore, we do not provide legal services or tax advice.