A new proposal on how the PensionBenefit Guaranty Corp. premiums are set may affect plansponsors who offer defined benefit options.

The PBGC is an independent federal agency created by ERISA thatguarantees basic pension payments. It does not receive taxpayerfunds; the money to fund it comes from insurance premiums paid bysponsors of defined benefit pension plans; assets held by thepension plans it takes over; recoveries of unfunded pensionliabilities from plan sponsors' bankruptcy estates; and investmentincome. In the past, Congree has set the premiums for the fund.

But the president's 2012 budget proposal may change all that. In the proposal, the powerto set premiums shifts away from Congress to the PBGC, allowing thecorporation to set premiums based on the individual health of thecompany and considerations of the individual plan. Additionally,changes must be phased in over a series of years, and the PBGC hasbeen directed to avoid premium increases when the economy isweak.

The current structure requires financially strong companies tosupport those that are not, the assumption being that the PBGCwould provide discounted premiums to financially sound companies,and weaker companies have to pay higher premiums.

The new premium structure is based on the structure used by theFederal Deposit Insurance Corporation, and will be required toundertake comprehensive study before it is implemented.