Massive revisions in the Pension Protection Act have opened the door to automatically enroll every employee or to pay retirement benefits even as senior members of your team keep working. Here’s what you need to know about these new PPA-driven opportunities.
Employers are generally leery of anything coming out of Washington that affects them. But one new law, the Pension Protection Act of 2006 (PPA), which went into effect this year, has been earning their praise.
Two features in particular have caught their interest, with each directed toward an opposite end of the retirement spectrum.
At the front end of any employee’s retirement situation is the question of whether workers are putting enough money away for their “golden years” (“the time of life,” as one wag put it, “when you better have enough gold for all your years”), and also whether they’re putting it in the proper place.
Learn how changes in the PPA will affect you, in plain English, at BLR’s special Nov. 1 audio conference on the subject. Click for more info.
This is of gigantic concern. An estimated 75 million Americans, half the workforce, says the AARP Bulletin, are making insufficient preparations for retirement and may wind up living on little more than Social Security.
PPA helps by creating rules, for the first time, that allow employers to offer automatic IRA plans. These plans enroll every employee, who does not consciously opt-out, in a retirement plan, from the first day he or she starts work.
The law mandates that the plans be designed around a target date for retirement. Working backward, they take the least amount of the employee’s pay when he or she is young and making less, and more when the worker has a higher salary and is closer to retirement.
The investment mix also changes, with faster growth, riskier, vehicles such as stocks, at the start, swinging toward more conservative investments, such as bonds, later. “These plans make a lot of the right decisions for the worker,” says AARP retirement expert Jon Dauphine. “Even if inertia rules and the employee doesn’t do anything, they’ll still be in a plan with a good outcome.”
At the other end of the retirement spectrum, PPA has tried to address the threat of losing large numbers of key employees to retirement, en masse, as the Baby Boom generation matures.
The antidote is a set of rules allowing the creation of phased retirement plans. These plans allow companies paying defined benefits to pay a portion of these benefits even if the employee is still working. Employees can go part-time or even be rehired after retirement and still collect some or all of the perks they worked so long to earn.
Train your entire staff on your obligations under PPA for one low fee, satisfaction assured, at BLR’s special 90-minute November 1 audio conference. Click for info, to register, or to pre-order the CD.
“Even though implementing regulations have yet to be defined, the new law helps make phased retirement a viable option for employers wanting to capitalize on mature talent,” says a report by the Conference Board. “The playbook on retirement is being rewritten.”
Should your company make use of phased retirement?
Assess your organizational needs and what functions or elements will most be affected by retirements,” says a report on the website, HR.com. Look at whether relationships with key customers or the brand itself will be impacted, which could happen if the company’s public image is built around a certain individual. Then decide the course to follow. “Clearly the best phased retirement plan is one that matches organizational talent requirements to employee interests and needs,” says the Conference Board.
For more detailed information on PPA and the impact it has, we suggest you attend BLR’s special November 1 audio conference on the law or, if you can’t attend, that you pre-order the conference CD. You can get more information, register, or pre-order the CD by clicking on the link in the announcement below.
Got PPA Questions?
Get answers to your specific e-mailed or phoned-in questions on the new Pension Protection Act in BLR’s special November 1, 90-minute audio conference. Plain English. Affordable. Satisfaction assured. Click for details.