Pension Policy

Pension Protection Act of 2006

On August 17, 2006, President Bush signed the Pension Protection Act of 2006 (PPA) [PDF] into law. The Senate passed the bill on August 3, 2006, and the House of Representatives passed it on July 28, 2006. The provisions of the law are summarized in a report by the Joint Committee on Taxation [PDF]. A number of these provisions are discussed in the following links.

The Pension Protection Act of 2006:

• Allows companies to set up new kinds of plans
  • Cash balance and other hybrid plans
  • Combined pension and 401(k) plans (“DB-K” plans)

• Changes the funding of traditional pension plans
  • Limits on shut down benefits
  • Multiemployer Plan Benefit Cutbacks

• Makes plans fairer to women
  • Company and union plans
  • Railroad Retirement System

• Makes increased contribution limits permanent
  • Increased IRA and 401(k) contribution limits

• Affects how plan money is invested
  • Investment of company stock in 401(k) plans

• Encourages people to save for themselves
  • Automatic enrollment in 401(k) plans
  • Expansion of the Saver’s Credit

• Increases the number of people earning benefits
  • Faster “vesting” for individual account plans

• Increases information provided by plans
  • Information provided to individuals about their benefits
  • Access to Multiemployer Plan Information
  • Pension Funding Notices

• Allows companies to transfer “surplus” money out of pension plans
  • Single employer plans
  • Multiemployer plans

• Increases penalties and bond amounts for plan fiduciaries
  • Penalties for Coercive Interference with Pension Rights
  • Maximum Bond Amount
    
    
• Changes the calculation of lump sum payments
  • New interest rate to apply to pension cashouts