Pension Protection Act of 2006 — a federal law affecting major aspects of the Pension Benefit Guarantee
Corporation (PBGC) and defined contribution (i.e., 401(k)) plans. The intent of
the Act was twofold: (1) to ensure the solvency of defined benefit pension
plans and (2) to encourage employee participation in defined
contribution/401(k) plans by making it easier for employees to increase their
retirement plan balances. Among the key provisions are (1) a requirement that a
company must have in its defined benefit pension fund 92 percent of the money
needed to meet its pension obligations in 2008, 94 percent in 2009, 96 percent
in 2010, and 100 percent by 2011; (2) allowance of higher dollar contribution
amounts for 401(k) savings plans, including "catch-up" contributions
for older (i.e., 50 and up) workers; and (3) provisions allowing automatic
enrollment of workers in 401(k) plans, whereby every new employee is
automatically enrolled in the company's plan, unless the employee
specifically opts out of enrollment. In December of 2008, however, defined
benefit plan funding requirements (item 1, above) were relaxed considerably,
given the fact that the stock market had suffered severe losses during the
preceding year. This circumstance vastly reduced the assets of nearly every
pension fund in the United States, thereby making it nearly impossible for such
plans to comply with the more stringent funding requirements originally
mandated by the Act.