2018 PBGC Premium Rates Released

by and | Oct 18, 2017

On October 17th the PBGC published the increased premium rates that will be used in 2018. For underfunded plans that are limited by the variable premium cap, the total premium payment for 2018 increased to $597 per participant. For plans not limited by the cap, the total premium increased to the sum of $74 per participant and 3.8% of the unfunded liability.

The flat rate premium increase was legislated from the Bipartisan Budget Act of 2015, while the increase in the variable rate premium was due to a combination of legislation and indexing. The variable rate premium cap increase was fully attributable to indexing.

The chart below shows the premiums for 2018 and earlier, along with estimated future premiums due to legislated and index-driven increases.

 201220162017201820192020
Per participant$35$64$69$74$80$82*
Variable rate percent of underfunded0.9%3.0%3.4%3.8%4.3%*4.4%*
Variable premium cap per participantN/A$500$517$523$539*$555*
Maximum per participant premiumN/A$564$586$597$619*$637*

*Assumes 3% annual wage inflation

Sponsor considerations

The increase in the variable rate premium percentage along with the change in required mortality tables will push more plan sponsors towards the variable rate premium cap. Plan sponsors that end up in this situation should strongly consider risk transfer strategies that will help lower their PBGC premium burden going forward (see our article series on annuity purchases Part 1, Part 2, and Part 3).

In addition, plan sponsors will want to continue to assess the economic feasibility of lump sum cashout windows as well as borrow-to-fund and other strategies in 2018 and beyond.

Michael Clark

Director & Consulting Actuary

Bio: Click Here

Kevin Morrison

Director & Consulting Actuary

Bio: Click Here

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SECURITY INDICES: This presentation includes data related to the performance of various securities indices.  The performance of securities indices is not subject to fees and expenses associated.  Investments cannot be made directly in the indices.   The information provided herein has been obtained from sources which River and Mercantile LLC believes to be reasonably reliable but cannot guarantee its accuracy or completeness.

CONFIDENTIAL:  For addressee use only, not to be disclosed to any other person without express consent from River and Mercantile LLC.  Past performance cannot be relied upon to predict future results.  River and Mercantile LLC is an investment advisor registered with the US Securities and Exchange Commission.

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