Pension Protection Act Of 2006 - PPA
You’ve been working 30 years at Joe Schmo’s. Joe pinkie-promised you a pretty pension plan. Now it’s time to retire, but Joe explains to you that they’ve had to make cutbacks, including into your pension.
But you promised, Joe. Pinkie-promised.
The Pension Protection Act of 2006 was signed into law by George W. Bush to hold firms who promised pensions accountable. Either make your pension promise and stick to it, or don’t make it at all. Fool me once, shame on...shame on you? Is that how that goes?
Anyway, the PPA requires firms who underpay on their pension promises to overpay (well, pay higher premiums) into their Pension Benefit Guaranty Corporation. That’s the Department of Labor nonprofit that’s supposed to make sure private sector employees keep getting their pension benefits that they were promised. Kind of like federal pension insurance for firms.
Besides making sure workers are getting the pension plan pinkie-promise, the PPA did other retirement-related things too. For one, it required automatic 401(k) enrollment when it was offered to employees. It also increased the amount you could contribute to your IRA and 401(k). Leave it to George Dubbya to bring the sexy back to pensions...or at least safety.
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Finance: What is Pension Benefit Guarant...0 Views
Finance Allah shmoop What is the Pension Benefit Guaranty Corporation
Well the PBGC is a notionally independent agency of the
federal government Its goal is to protect the retirement incomes
of nearly forty million American workers in nearly twenty four
thousand private sector defined benefit engine plans And that mission
statement is right off their website The agency was set
up in nineteen seventy for is part of Arisa Employee
Retirement Income Security Act to protect defined benefit plans That
one were there Benefit is a huge deal because it's
non identical Twin sister is a defined contribution plan The
big diff well in a defined contribution pension plan employees
contribute some percentage of their income to their retirement pension
and the employer matches it and that's it The money
gets invested in the stock market and goes up and
down and up and down but over time mostly up
And then the employees retires Decades later owning whatever the
market or their investments that they risk say they young
period End of story But in a defined benefit plan
the employer essentially guarantees a minimum amount of invested return
That is the big boss Usually the federal government with
its union employees on taxpayer dollars then guarantees a raid
of say nine percent a year to the employee retiring
in the form of a minimum monthly draw from their
pension that the employees can take out If the market
goes through a really bad spell well then it's up
to the company to make up the difference to that
employees The people who framed a Risa knew of the
likely issue that the guaranteed investment return could end up
bankrupting states and or the country So PBGC was formed
and it helps a lot of people like one point
five million who ultimately rely on PBGC to bail out
their pensions And if you're one of those people while
you can expect to get something like sixty five thousand
dollars annually or about fifty three hundred bucks a month
assuming you retire at sixty five So if you retire
early well those cheques arriving in your mailbox won't be
quite so heavy Retire late in while the numbers go
up And maybe the best part is that the U
S taxpayer doesn't need to get all up in arms
Since the dough used to manage PBGC doesn't come from
John Q Taxpayer but rather from the private worlds employers
So in forty or fifty years PBGC may be your
best friend but until then well you're invisible Rabbit pal 00:02:30.543 --> [endTime] will be with you through thick and thin
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