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Letter from Douglas Holtz-Eakin, Director Congressional Budget Office to Carolyn McCarthy regarding H.R. 2830 1 (December 2005)

handle is hein.congrec/cbo10191 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Douglas Holtz-Eakin, Director U.S. Congress Washington, DC 20515 December 29, 2005 Honorable Carolyn McCarthy U.S. House of Representatives Washington, DC 20515 Dear Representative: As you requested, the Congressional Budget Office (CBO) has estimated how the enactment of H.R. 2830, the Pension Protection Act of 2005 as passed by the House of Representatives on December 15, 2005, would affect the 10-year net economic costs of the Pension Benefit Guaranty Corporation (PBGC). Net economic costs differ significantly from the cost measures used for budgetary purposes; specifically, the 10-year net economic costs of the PBGC equal the present value of the unfunded insured liabilities of pension plans that terminate during the period minus the present value of premiums that PBGC receives over the period. CBO estimates that under current law the 10-year net economic costs of the PBGC are $68 billion. We estimate that H.R. 2830 would increase PBGC's 10-year net economic costs by $3 billion, or about 4 percent, compared with current policy. This estimate differs from CBO's previous estimates of net economic costs for three technical reasons: it is based on more recent data on the financial condition of sponsors and pension plans; it reflects current Treasury and corporate bond rates; and it incorporates a revised assumption about the amortization of plan underfunding. This estimate also differs from previous estimates because the bill now delays the effective date of the new funding requirements by 1 year and requires sponsors of plans that have undergone distress or involuntary terminations to pay a termination premium for three years. This estimate also differs significantly from CBO' s estimate of the budgetary effect of the proposal. First, the net economic costs of PBGC do not include the effects on federal tax revenues, which would be reduced by an estimated $5.0 billion over the 2006-2015 period as a result of changes in employers'

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