Dramatic Pension Benefit Guarantee Corp. premium increases last summer and the potential for major new hikes are likely to lead more employers to cut  benefits and eliminate new hires from coverage, a representative of the American Benefits Council told the ERISA Advisory Council Wednesday.

“While the bulk of the proposed (premium) increases are intended to fall on those plan sponsors that pose the most significant risks to the PBGC, it is widely believed that it will be impossible to accomplish anywhere near the proposed $25 billion premium increase by raising premiums on those sponsors alone,” said Craig Rosenthal, a partner of Mercer, on behalf of the plan sponsor trade group.

In written testimony, he said the moves might not be as severe if funding and accounting obligations are stabilized and the spiraling of PBGC premiums is reversed.

Ilana Boivie, research economist for the Communications Workers of America, said steps should be taken to protect plan members when companies purchase annuity contracts as a de-risking tactic.

She said a plan should be above a minimum level of funding before it can purchase an annuity. The union economist also said plan sponsors should be required to formally notify all participants at least 90 days before transferring plan funds to an annuity and an independent fiduciary should be hired to protect the interests of plan participants.

To lower pension costs, she said, an employer could consider contributing a large preferred equity interest of its own stock to the plan.

Alluding to the benefits for one CWA employer that is doing that, she said, “The equity contribution will eliminate its need to make a cash contribution in 2012 and pay down nearly the entire value of the current unfunded liability of the pension plan.”