From the September 2006 issue of Research Magazine • Subscribe!

September 1, 2006

Pension Act Passes

Members of the securities industry are generally pleased with the Pension Protection Act of 2006 passed by Congress.

"I applaud Senate leaders for making this bill's passage a priority before the August recess, " shares Liz Varley, vice president and director of retirement policy for the Securities Industry Association. The SIA says that under the act:

o Financial-services firms can provide advice to 401(k) plan participants; the Secretary of Labor has been asked to issue a class exemption for advice provided to IRA account holders.

o Collective funds, such as a hedge fund, can accept additional assets from private pension plans without being subject to the Employee Retirement Income Security Act; now, private pension plans will have new opportunities to diversify their investments and manage risk.

o Contribution limits for IRAs and employer-sponsored plans must keep pace with increases in the standard of living; provisions that allow workers to contribute more to their employer's retirement plan or to an IRA via "catch-up" contributions for workers age 50 and up are made permanent.

o Automatic savings mechanisms by 401(k) plan sponsors are encouraged.

Bill Novelli, CEO of AARP, says his organization -- which represents more than 36 million members -- is generally pleased with the legislation. Still, the group remains concerned that some investors may be at greater risk of receiving conflict-tainted investment advice.

According to research conducted by a unit of the Vanguard Group, some 5.5 million more Americans could enroll in 401(k) plans over the next five years because of the latest pension legislation.

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