What Is The “Pension Protection Act?”
November 28, 2008 – 5:07 am
The Pension Protection Act of 2006 was a set of tax rules that were signed in to law in August of 2006. I’m not a CPA, but from what I’ve read these are the key provisions:
- a requirement that most pensions become fully funded over a seven year period starting in 2008. I’m not sure what “most” implies, but like most tax laws nothing is ever completely clear.
- employers are allowed to auto-enroll new employees in retirement plans
- it’s easier to withdrawal funds from a 401k’s for “hardship withdrawals”
- allows the direct rollover of a 401k to a Roth IRA (the rollover is treated as a Roth conversion)
- extended some laws set to expire, including catch-up provisions for investments in qualified accounts for people 50 or older
- makes permanent the increase contribution limits on IRA’s that were approved back in 2001
- permanently allows for Roth 401k’s. Not that my company will probably ever offer one, but a finance geek can dream.
- a requirement that donors keep documentation for all cash contributions to charities
Above all I’m glad to see that underfunded pensions are being addressed. Pensions are becoming less prevalent today for new employees, but there are still millions of people who will be depending on a pension in retirement. I wish they’d pass a “Social Security Protection Act of 2008″ to shore up the other pension that a lot of people will need to receive. Or better yet just give me back my contributions and I’ll take care of myself. I know. That’s crazy talk.
Image Credit: SouthbankSteve
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3 Responses to “What Is The “Pension Protection Act?””
Some good info here Todd. Why is it that companies are not offering Roth 401’s and alike? Is it because they will have to manage the accounts?
By Rick Vaughn on Nov 29, 2008
This is just my opinion, but I think Roth 401k’s are more expensive (for companies) than regular 401k’s, and therefore a lot of companies don’t want to offer the Roth option. I wish more would offer it, or at least my company would.
By todd on Nov 29, 2008