Pension Protection Act of 2006 Encourages 401k Savings

The Pension Protection Act (PPA) of 2006 further promoted retirement savings and 401k plan participation. Among its many provisions, the Act made EGTRRA pension rule changes permanent and made some of the rules governing pension plans more flexible. For example,the PPA encourages employers to automatically enroll employees in their 401k plans and allows employers to offer appropriate default investments. These measures seek to increase participation in 401k plans and facilitate the best use of these plans’ options by workers.¹

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Source: Investment Company Institute, 401k Plans: A 25-Year Retrospective [↩]

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Some Myths About 401k’s
Myth 4: Most people take loans or cash out of their 401k's.

• A loan from a 401k's is sometimes a necessity for a participant, however, nearly four out of five participants have rejected the urge to take out a loan.

• Seven out of 10 participants opt not to cash out of their 401k's in the months following a separation from an employer, instead wisely electing to stay in-plan or rolling over into another qualified retirement account such as an IRA.
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Facts to Help You Appreciate Your 401k:
1. In 1979, 51 percent of nonagricultural wage and salary workers in the private sector age 25-64 participated in a pension plan; in 2008, that number was 44 percent.
2. four-fifths of those without coverage are employed by a firm without a plan. The bulk of these employees work for small employers (firms with fewer than 100 workers).
3. One-fifth of workers covered in 401k plans choose not to participate.
4. A substantial proportion of households – roughly one-third – ends up with no pension coverage at all during their entire work life and must rely exclusively on Social Security during retirement.

Pension Protection Act of 2006 Encourages 401k Savings

Speak Your Mind

Some Myths About 401k’s

401k Recent Articles

401k Facts