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.