Apr 20, 2017 12:17 pm ET
https://blogs.wsj.com/cfo/2017/04/20/verizon-borrows-to-fund-pension-avoid-pbgc-fees/?mod=yahoo_hs&yptr=yahoo
Verizon Communications injected $3.4 billion of borrowed funds into its pension plan during the first quarter to lessen the burden of high premium fees, said finance chief Matt Ellis, in an interview with CFO Journal.
“Premiums have gone up to the point where it makes more sense to borrow money” and fund the pension, said Mr. Ellis.
The contribution will lower the fees that Verizon will need to pay to the Pension Benefit Guaranty Corp., or PBGC, the nation’s pension insurer, he said.
Mr. Ellis declined to reveal how much Verizon saved by using the financing tactic.
Companies pay premiums to the PBGC, which insures their pension plans. The federal agency collects a fixed fee for each person enrolled in private-sector pensions and a separate fee, or variable premium, for each dollar the plans are in deficit.
Congress increased the variable rate premium to 3.0% last year, from 0.9% in 2012. A separate, fixed rate premium charged for each person enrolled in private-sector pensions rose to $64 from $35.
The increases almost quadrupled the average annual fees large companies paid to the PBGC between 2009 and 2016, according to a study by October Three Consulting LLC.