What Was the Pension Protection Act of 2006?
The Pension Protection Act of 2006 (PPA) made important reforms to U.S. pension plan rules and regulations. Signed into legislation by means of President George W. Bush on Aug. 17, 2006, the PPA sought to give protection to retirement accounts and hang companies that underfunded provide pension accounts accountable.
The legislation moreover made a lot of pension provisions from the Monetary Expansion and Tax Aid Reconciliation Act of 2001 (EGTRRA) permanent, along side the higher particular person retirement account (IRA) contribution limits and bigger salary deferral contribution limits to a 401(good enough). It moreover attempted to give a boost to all of the pension software and reduce the reliance on the federal pension software and the Pension Benefit Guaranty Corporate.
Key Takeaways
- The Pension Protection Act sought to give protection to retirement accounts and hang companies that underfunded provide pension accounts accountable.
- The legislation makes it more uncomplicated to enroll staff into their 401(good enough) plan.
- The legislation moreover made a lot of pension provisions from the Monetary Expansion and Tax Aid Reconciliation Act of 2001 permanent, along side the higher particular person retirement account (IRA) contribution limits and bigger salary deferral contribution limits to a 401(good enough).
Figuring out the Pension Protection Act of 2006
The Pension Protection Act of 2006 used to be as soon as the federal government’s method of final the loopholes that allowed the companies that paid into the Pension Benefit Guaranty Corporate to cut pension funding. Those loopholes created issues for the loads of hundreds of U.S. workers who participate in defined benefits and pension plans all through the private sector.
In an try to economize, some employers found out tactics to cut funding for pension plans and skip expenses. Others decided to terminate the plans altogether, growing a greater criminal accountability for the PBGC. To close the loopholes that made it conceivable for organizations to skip expenses, the PPA now requires those answerable for underfunding to pay higher premiums.
The Pension Protection Act of 2006 led to one of the vital important changes made to pension plans since the Employee Retirement Income Protection Act of 1974 (ERISA). The act moreover addressed a number of other retirement investment vehicles; in particular, those staff eligible for 401(good enough) benefits won a number of benefits from the legislation’s passage as smartly.
Explicit Considerations
401(good enough) Plans
The legislation requires all staff to be robotically enrolled inside the 401(good enough) plan when introduced to them. Lawmakers sought the automatic enrollment provision to help those who may not be familiar with retirement possible choices assemble their retirement monetary financial savings. In addition to, the business impressed employers to train their staff on one of the best ways to invest and get able for retirement.
Many regarded as the legislation’s passage as a step forward for behavioral finance. Behavioral finance research displays that automatic enrollment and investor coaching reason why staff to pay further attention to their financial planning than when left to navigate the process on their own.
The legislation not best protected retirement plans then again the safe harbor and automatic enrollment provisions moreover provided benefits to companies.
