Human Resource Blog

Pension Protection Act of 2006 Basics in Rhode Island

	Benefits
Total Compensation Summary Performance Improvement Plan Performance Appraisal and Review Employee Payroll Status/Change Form Employee Change Form

	Compensation
Employee Payroll Action Form W-4 Employee Withholding Allowance Cert. Employee Payroll Status/Change Form Direct Deposit Form Total Compensation Summary

	HR Management
Confidential Employee Folder Confidential Employee Medical Folder Job File Worksheet Folder Daily EEO Applicant Flow Log Workplace Information Sheets Request to Inspect Personnel Files

	Labor Laws
Complete State & Federal Labor Law Posters 1 Year Compliance Protection Plan State ONLY Labor Law Posters Federal Labor Law Posters

We would like more information about the Pension Protection Act of 2006 and how it might impact our Rhode Island Company. Can you provide it?

Yes. George W. Bush signed the Pension Protection Act of 2006 into law on August 17, 2006. The Act is a piece of federal legislation aimed at protecting the retirement of American workers. Basically, the Act requires that companies that have underfunded their pension plans pay higher premiums to the Pension Benefit Guaranty Corporation (PBGC).

The PBGC is an organization that serves as an independent agency with the U.S. government. It was created by the Employee Retirement Income Security Act of 1974 (ERISA) in order to encourage businesses to maintain voluntary pension plans for their workers, provide timely payment for those pensions and keep the pension insurance premiums as low as possible.

The Pension Protection Act also extends the requirements that businesses have to meet when they provide extra funding to pensions systems when they terminate their pension plans. In general, the Act requires companies to analyze their obligations to their pension plans, closes loopholes that had allowed some companies to underfund their plans, closes loopholes that had allowed some companies to skip payments, and also raises the maximum amount that employees are allowed to invest in their pension plans.

Thanks to the Act, employers may also deduct more money when they are making high profits under to the pension tax shield. Furthermore, the Act provides the following elements:

It gives statutory authority that lets employers enroll workers in defined contribution plans (before the Act, the authority to automatically enroll employers in such a plan had to come from the Department of labor).

It expands the information that workers can get regarding the performance of their pension plans

It eliminates a conflict of interest liability that was associated with giving investment advice that was in the self-interest of the company.

It gives workers more control over the investments made with their accounts.

It extends the IRA and 401(k) limits within the 2001 tax act.  CB