NCPA - National Center for Policy Analysis


August 21, 2006

The pension legislation President Bush signed last week will make the most significant changes to U.S. retirement laws in three decades, affecting workers of every age, from graduates on their first job to employees who are about to retire, says the Washington Post.

Younger workers may be the biggest winners under this bill because they will be in the workforce the longest and have the most time to save, according to the National Center for Policy Analysis.  Additionally:

  • The new law encourages employers to offer automatic enrollment allows for contributions to automatically increase as pay increases, and makes it possible to automatically diversify holdings; workers can elect to opt out -- a big change from the current system, in which they must opt in.
  • The nonprofit Employee Benefit Research Institute estimates that automatic enrollment will result in a 92 percent participation rate, compared with today's 66 percent.

Middle-aged workers will also benefit, says Day:

  • Efforts to shore up traditional pensions will help middle aged workers the most, because they are more likely than younger workers to be enrolled.
  • They will find it easier to save for college, as several expiring laws that promoted savings were made permanent; the contributions to retirement accounts will be permitted to rise with inflation.

Lastly, the new legislation will help workers near retirement:

  • Older workers will benefit more than any other group from the provisions on traditional pensions, according to AARP.
  • They should receive more information from companies about the health of their pension plans.
  • They should also see companies put more money into underfunded pensions.
  • New protections against employers that would promise increased benefits, even though a plan is funded, are also expected to benefit older workers most.

Source: Kathleen Day, "Generations Will Feel Pension Act Differently." Washington Post, August 21, 2006

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