Newspaper article THE JOURNAL RECORD

New Federal Pension Protection Law Makes Changes

Newspaper article THE JOURNAL RECORD

New Federal Pension Protection Law Makes Changes

Article excerpt

Key changes in 401(k) retirement plans and traditional pension requirements are on the way in the new Pension Protection Act that passed Congress recently, which President Bush has said he will sign.

The comprehensive measure increases the maximum amounts workers can contribute each year and expands authorization of automatic enrollment in 401(k)s, among other changes.

It also requires currently underfunded classic pension plans to catch up on their contributions to the federal entity that insures them.

One change that will affect many workers maintains the $15,000 annual contribution limit, which was set to return to $13,000 in 2011. It also provides for annual inflation-related adjustments.

Ted Hughes, executive vice president of Retirement Investment Advisors Inc. in Oklahoma City, said that extra $2,000 could add a lot to a worker's nest egg over the years.

Hughes said that with an 8-percent return over 20 years, those additional contributions could amount to more than $91,500. Over 30 years, he said, the additional retirement income expands to more than $226,500.

Hughes said the automatic enrollment provisions will help many workers who might put off joining their company's 401(k).

For participants, the number one reason that people fail financially is procrastination, he said.

Hughes said former law was unclear as to whether a company could automatically enroll employees.

The language in this new act makes it clear that you can do that, he said. So it at least gets people off high center.

Hughes said this will push employees to get involved in planning and saving for retirement, following what's happening with their money and the benefits they will receive from it.

Under the automatic enrollment provisions, employee contributions must equal at least 3 percent of pay in the first year, increasing annually by one percentage point until reaching 6 percent. …

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