Budget Deal May Hasten Demise of Traditional Pensions

Employers that still offer workers traditional pension plans are in line for hefty insurance premium increases, under the budget just approved by the Senate.

The estimated $8 billion in new premiums would go towards reducing deficits by a government agency, the Pension Benefit Guaranty Corporation, that covers pension payments to retirees when bankrupt companies can’t. Supporters of the fee increases say they’re crucial to keeping the agency solvent.

Robert Cirkiel heads the actuarial practice at accounting firm UHY.

“Pessimists believe that the increasingly higher cost of doing business when you maintain a pension plan is just accelerating the demise of pension plans.”

The increases come on top of a $9 billion boost in pension premiums that Congress approved last year, in order to finance an earlier spending deal.

Roughly 10% of American private companies offer defined benefit pension plans to their employees, down from more than 90% in the 1970s.

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...