Congress passes pension reform bill – what does it mean to you?
8 August 2006Some important news if you’re either living on a pension or planning to – Congress has just passed a bill reforming the rules that govern how companies can fund pensions. It hasn’t been signed by Bush yet, but it’s expected to meet his approval and should become law soon. So what does it mean for the average person?
The bill toughens up pension funding rules and makes it harder for companies to claim that a pension is financially sound when it’s a little bit shaky. It requires them to fully fund pensions within the next ten years or so. It also encourages automatic enrollment in 401(k)’s – you should be enrolled already, but you may notice your company changing its policy for people who aren’t. It also maintains the higher contributions allowed to IRA’s and 401(k)’s that we’ve had for the last several years, but that were going to expire.
It’s tough to tell exactly how all this will play out, however. Like many laws that sound good on the surface, the actual result depends on what companies do in response. As the CNN article notes, if these new requirements are too expensive, it may be more common for them to just freeze pensions and move everything over to a private retirement account system. Hopefully the long phase-in period for the rules won’t cause that to happen – but be aware that your pension will be in for some changes one way or the other after this law goes into effect, for good or for ill.
Discuss this on the Free the Drones Retirement Forums here.
Comments are closed.