Trumpfs budget raises PBGC multiemployer premiums, hits federal employee benefits
By Hazel Bradford
May 23, 2017 4:03 pm; Updated 4:07 pm - Pensions & Investments
President Donald Trump's proposed budget for fiscal year 2018
released Tuesday calls for increased spending on the military and
infrastructure, paid for by tax reform, regulatory rollbacks, reduced
non-defense spending and cuts in federal employee retirement benefits.
Revenue projections to have a balanced federal budget within 10 years are
based on 3% annual growth in the economy, in contrast to the Congressional
Budget Office's projection of 1.9%.
The proposed budget also calls for additional premiums paid to the Pension
Benefit Guaranty Corp. by underfunded multiemployer pension plans by adding a
variable rate premium and exit premiums similar to existing rates for
single-employer plans. The changes are projected to raise an additional $16
billion to keep the multiemployer program solvent for the next 20 years, plus
another $5 billion that would come from having multiemployer plans pay premiums
faster, so that they fall within the 10-year federal budget window. Adding these
new premiums would require legislation.
Some of the revenue raisers in the proposed budget would help finance an
infrastructure initiative budgeted for $5 billion in the first year, and $200
billion total through fiscal 2027. The administration will propose additional
funding focused on incentives for private investment, according to the budget
document.
Federal retirement costs for employees would increase under the proposal,
with benefits based on a worker's last five years instead of three, and workers
sharing half the cost of defined benefit contributions with employers.
Cost-of-living increases would be reduced or eliminated. The changes are aimed
at bringing the federal government in line with private-sector companies, which
the budget notes gare providing less compensation in the form of retirement
benefits.h
On tax reform, the president calls for a lower individual rate and protecting
deductions for retirement savings, while business tax rates would be lowered and
special interest tax breaks eliminated. That reform could reduce taxes on
upper-income families, which would place the burden of reaching a balanced
budget through federal spending cuts of programs primarily benefiting low- and
middle-income recipients. G. William Hoagland, senior vice president at the
Bipartisan Policy Center in Washington. gMany of these programs need reform, and
the goal of reducing public debt is laudable, but there is a level of unfairness
in the president's budget proposal that would be devastating to low-income
families and states struggling to provide critical public services.h
Mr. Hoagland called the president's budget gjust the opening bid in what will
be a very contentious debate over the next several months on the budget and
other competing priorities.h
The president's budget does not cover the Securities and Exchange Commission
and the Commodity Futures Trading Commission, which submit their own
budgets.
SEC funding, which does not affect the federal budget because it is offset by
transaction fees, would remain unchanged from the current $1.6 billion level and
keep the current hiring freeze. It calls for continued access to a Reserve Fund
to finance information technology improvements, but the president's budget would
eliminate that fund by 2027.
CFTC officials called for $31.5 million in additional funds to implement its
fintech initiative, perform more cost-benefit analysis and oversee swaps
clearing organizations.