Pension Bill Becomes Law

On August 17, 2006, President Bush signed the Pension Protection Act of 2006, requiring companies to fully fund their defined-benefit pension plans within seven years.  A critical provision in the new law permits companies to automatically enroll their workers in 401(k) programs.  While this will undoubtedly lead to increased use of the 401(k) investment vehicle, it is also likely to incentivize companies to terminate their traditional pension plans, particularly those that are already underfunded.  Moreover, insofar as the new law represents a move away from more traditional pension plans, it is likely to benefit high-income employees much more than low or middle income workers.  This issue is discussed in an interesting article from cnnmoney.com.

Click here for key sections of the law.