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401(k) changes will help or hurt?
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Here is a brief article that helps us understand some of the recent changes to the company pension plans 401K. Within The Pension Protection Act of 2006, signed by President Bush, are several tax provisions that will benefit individuals who do their own golden years saving.
The aim of the law is to boost the 30,000 defined-benefit plans run by employers that are now underfunded by an estimated $450 billion. Those plans must reach 100% funding, up from the current 90% requirement, in seven years. That could save taxpayers from funding a multibillion-dollar bailout of the federal agency that insures pension plans. The law gives a lot of attention to defined-contribution plans, too. These are company-sponsored retirement plans such as 401(k)s that help you save for tomorrow while simultaneously reducing today's tax bill.
Many workers invest their 401(k) money too cautiously or, worse, don't put any money at all into the plan. The new pension law will change that. Sign right up, automatically "Historically, with 401(k) plans, you affirmatively elected in," says Mark Luscombe, principal tax analyst at CCH, a tax publisher and software provider. "Now companies will be permitted to assume you're in unless you choose otherwise."
Some companies are already automatically enrolling employees in savings plans, but the new bill clarifies the situation. It offers employers additional guidance and makes it easier for companies to institute the system beginning in 2008.
While such a system might mean more work for a business, Luscombe says some companies might choose that method because it could provide benefits for upper-level employees. Read on here:
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Barry
Mr. Do It All
Aug 22, 2006, 1:12 PM
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