Key Savings Provisions in the Pension Protection Act of 2006:

  • Automatic enrollment: Research by ICI and the Employee Benefit Research Institute (EBRI) shows that 401(k) participation at businesses that offer such plans would increase from today's 66 percent of eligible employees to 92 percent under automatic enrollment. Among the lowest-income quartile of the workforce, automatic enrollment would more than double participation rates-from 42 percent of eligible employees to 91 percent.
  • Updated contribution limits: ICI calculates that a 40-year-old who started an Individual Retirement Account in 2002, taking advantage of the higher deductible contribution limits and catch-up contributions passed in 2001, can accumulate almost $304,000 by age 65. Had the higher limits been allowed to expire after 2010, the saver's account would grow only to about $172,000-a difference of more than $132,000.

    Similarly, a 40-year-old worker who started making 401(k) contributions at the maximum tax-deferred level in 2002 could have an account balance of more than $1.1 million by age 65. If those higher limits and catch-up contributions had been allowed to expire, the account would only be worth $888,000-a difference of $215,000.
  • Default investment: Providing greater clarity to plan sponsors in their selection of default investments is vitally important. Research by ICI and EBRI indicates that using a default investment appropriate for a long-term retirement savings investing horizon significantly increases the amount that workers in all income levels can accumulate for retirement.
  • Investment advice: The legislation's advice provision will make it easier for 401(k) and IRA savers to turn to professionals for advice on the investment choices that are best suited for them.
  • Section 529 plans: Assets held in Section 529 college savings plans have grown from $200 million in 1998 to $68.7 billion in 2005, according to ICI and the College Savings Plans Network. Saving for education is a financial goal for 30 percent of the households that own mutual funds.

See the Library of Congress's Thomas website for the latest version of the legislation.

  

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