WASHINGTON—Employers with underfunded pension plans could face higher pension insurance premiums if Congress enacts a proposal made Monday by the Bush administration.

Under the proposal, included in the administration’s federal budget for 2008, the Pension Benefit Guaranty Corp.’s board of directors would have authority to set the size of the so-called variable rate premium. That annual premium is $9 per $1,000 of plan underfunding. That premium is on top of a base PBGC premium of $31 per participant.

Additionally, the variable rate premium would be applied to nonvested as well as vested liabilities.

The reform, the administration said, would help improve the PBGC’s financial condition. The agency, supported by premiums paid by employers with defined benefit plans, as well as by investment income, now has a more than $18.8 billion deficit.

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