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Smith Works to Protect and Strengthen Employer-Sponsored Pension Plans
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August 3rd, 2006 - Washington, DC – In an effort to strengthen the funding requirements of employer-sponsored pension plans and increase the financial stability of the Pension Benefit Guaranty Corporation, Chairman Gordon H. Smith (R-OR) voted in favor of H.R. 4, the Pension Protection Act of 2006. The measure, which includes several provision introduced by Chairman Smith, is awaiting the president’s signature.
“Even as we are living longer, most Americans, especially those with low incomes, are saving less for their retirement,” said Smith. “We should encourage people to invest more in their future and do all that we can to ensure more Americans can live comfortably and financially secure in their retirement years.”
A key component of Smith’s legislation involves encouraging employers to adopt automatic enrollment in 401(k) plans. Studies have shown automatic enrollment significantly increases participation rates in 401(k) plans, especially among low and moderate income individuals. Other provisions based on Chairman Smith’s legislation included in the Pension Protection Act of 2006 include:
• Saver’s Credit: The Saver’s Credit is used by more than five million low and moderate-income individuals who contribute to workplace retirement plans and IRAs. This provision is scheduled to expire in 2006. The bill would make the Saver’s Credit permanent.
• Default Investment Arrangements: The bill allows employees who fail to choose an investment option in defined contribution plans to earn a higher return on their investment by requiring the Department of Labor to establish guidelines on default investments. This will allow employers to direct contributions into more appropriate long-term investments instead of defaulting into money-market funds, which traditionally have low rates of return.
• Annuity Distributions for Defined Contribution Plans: This provision removes the current barrier to offering annuity distributions from defined contribution plans. Annuities are a vital part of a retirement plan because they protect against the risk of employees exhausting their retirement income.
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U.S. Senate Special Committee on Aging
G31 Dirksen Senate Office Building
Washington, DC 20510
Phone: 202-224-5364
Fax: 202-224-8660
mailbox@aging.senate.gov
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