The U.S. Department of Labor (DOL) released its budget request for the federal fiscal year (FY) 2013 on Feb. 13, as part of the budget proposal President Obama sent to Congress.
The DOL budget request for FY 2013 is $12.0 billion, down from $12.6 billion for FY 2012. The department’s press release emphasized this reduction, stating that the request “focuses on efficiently achieving the department’s goals while exercising fiscal restraint.”
A key item in the DOL’s budget request is the indication that the Pension Benefit Guaranty Corporation (PBGC) should have the authority to adjust its own premiums. This authority currently rests with Congress, but the DOL said the switch “will encourage companies to fully fund their pension benefits and ensure the continued financial soundness of the PBGC. It is estimated that this proposal will save $16 billion over the next decade.”
Whereas Congress often does not weigh individual circumstances of company sponsors when determining the PBGC’s premium levels, a self-administering PBGC would, theoretically creating fairer premium increases for different companies and strengthening this federal pension safety net.
The DOL proposed granting premium authority to the PBGC in its 2012 budget request; however, it was not warmly received by everybody.
Phyllis Borzi, Assistant Secretary, Employee Benefits Security Administration, explained in a Q&A session that the 2012 proposal was carried forward into the 2013 budget request. “Premium reform that allows PBGC to price insurance realistically would put PBGC’s finances on sounder footing,” she said. “Under the proposal the PBGC Board would take into account the risks that different sponsors pose to their retirees and to the PBGC. This will encourage companies to fully fund their pension benefits and ensure the continued financial success of the PBGC.”
PBGC reported a record $26 billion deficit in November.
The detailed budget request is available on the DOL’s website.