The budget approved by Congress on Wednesday raises premiums companies must pay to the Pension Benefits Guaranty Corp., a point that might cause many employers to settle their retirement plan liabilities through lump sum payments or by buying annuities.
The effect of the premium hikes, according to Aon Hewitt, could increase the carrying costs of unfunded pension liabilities by more than 3 percent. That would cause companies to consider derisking their pension plans.
The two approaches to doing that are either offering plan participants a lump sum payout or purchasing an annuity from an insurance company. In each case, the pension liabilities are removed from the company books.
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