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Pension Reform Bill Approved by Congress

n August 3, the Senate approved, 93-5, the Pension Protection Act of 2006 (H.R. 4). The House approved the measure on July 28 (see The Source, 7/28/06). The president is expected to sign the bill into law.

The legislation requires that employers who terminate their pension plan pay the Pension Benefit Guarantee Corporation $1,250 for each program participant.

The bill makes permanent several individual retirement accounts (IRAs) and pension provisions enacted in 2001 and scheduled to expire in 2010, including the Coverdell Educational Savings Account, which allows adults within certain income limits to save for a child’s college education.

The bill allows firms that administer 401(k) retirement plans to give advice regarding their own financial products so long as any investment is made at the sole discretion of the plan participant, the advisor’s fees are reasonable, and any financial projections are based on an independently certified and audited computer model. It also makes permanent the “saver’s credit,” which encourages retirement savings among low-income individuals by allowing them to receive credit for first $2,000 of annual contributions to a qualified retirement plan.

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