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WASHINGTON, DC -- Buried in the fine print of President Bush’s 2006 federal budget is a multi-billion-dollar premium hike for the nation’s underfunded defined pension plans.  The weakest pension plans will be forced to pay almost $2.0 billion in new premiums next year, and about $3.3 billion for FY 2007.  The premium hike is in addition to billions more in make-up payments that companies with weaker pension plans must pay to become adequately funded. 

Over the next five years, the President’s plan will increase premiums by over $15 billion. Most of that will come from the nation’s weakest pension plans, those most at risk of failing and adding to the debt of the Pension Benefit Guaranty Corporation (PBGC), which the Government Accountability Office recently placed on its watch list of high-risk federal agencies for the second year in a row.

Representative George Miller (D-Calif.), the senior Democrat on the Education and Workforce Committee, issued the following statement about the Bush pension proposal today:

“Imposing a $12 billion pension tax on the nation’s shakiest pension plans places the retirement security of millions of Americans in jeopardy.  After reviewing this plan and his Social Security proposal, I have to ask: What exactly does the President have against retirees anyway?

“These shortfalls were caused by the failure of the American steel industry and the consolidation of our airlines, not by anything employees or retirees have done.  Repaying that huge debt should be fairly shared among all pension plans, not loaded onto the weakest ones.  The Bush plan virtually ensures that even more plans will fail, increasing the record PBGC deficit and jeopardizing healthy pension plans. 

”The President is acting as irresponsibly with the nation’s private pension plans as he is with Social Security. Under the Administration’s plan, all employers will pay a flat $30 premium per participant per year, up from $19 currently.  This amount will be automatically adjusted for wage growth.  However, most of the new premium comes from adjustments in the ‘variable-rate’ premiums paid only by the weakest companies. 

“Obviously, the purpose of this scheme is to cause weak pension plans to fail, and to undermine healthy plans by imposing billions of dollars in new costs on them.  The net result of the Bush Administration’s retirement security strategy is fewer benefits under Social Security and weaker pensions.”