that the $7.50 rate will amortize the current deficit over 15 years, fund future losses as they occur and provide for overhead expense. Expected future claims are based on the Corporation's experience to date. In particular, net claims for FY 1984 were unusually low. This serves to lower the trend implied by the preceding two record high claim years: FY 1983 and 1982. The net claims for 1982, 1983 and 1984 are $264 million, $189 million and $36 million, respectively. Combining the experience for the most recent three years with that of the prior seven years of the Corporation's history (see Attachment III) produces expected future claims which will average $185 million for the next 15 years. The required premium to provide for future claims is $4.96. This amount does not assume the occurrence of any extraordinarily large claims. An additional premium of $1.62 is required to retire the 1984 fiscal year-end deficit of $462 million over 15 years. administrative expenses add $1.00. The total of the three components is $7.58 which has been rounded to $7.50. Finally, In The PBGC believes that taking 15 years to eliminate its deficit is a very modest request under the circumstances. order to keep the requested increase at the lowest possible level, events such as larger-than-projected claims, unfavorable investment experience, mortality losses and increased administrative expenses over projected levels, which could result in additional deficits, have not been included in the premium basis. |