By a vote of 93 to 5, the Senate on August 3, 2006, passed the Pension Protection Act of 2006 (HR 4). The legislation would tighten controls on companies that fall behind in meeting funding requirements for defined benefit plans, providing generally for a seven-year catch-up requirement. Special breaks are provided to the airline industry and defense contractors. The legislation also promotes alternative retirement vehicles by permitting automatic investment in 401(k) plans and sanctioning certain hybrid defined benefit plans such as cash balance plans. Any company with a defined benefit plan that is less than 80 percent funded or in danger of bankruptcy would have restrictions imposed on increases in benefits and executive compensation. The legislation appears to do little to stem the continuing decline in the number of companies offering defined benefit plans.
The legislation also would permit more latitude in providing investment advice to 401(k) account holders. Other provisions seek to strengthen the Pension Benefit Guaranty Corporation and expand disclosure requirements.
The legislation would also permanently extend the pension-related provisions of the 2001 tax legislation that otherwise would have expired in 2010, including increased contribution and benefit limits.
Included in the legislation is a package of charitable giving incentives and reforms unrelated to the pension provisions.
The huge 900 page bill would cost $73 billion over ten years. The President is expected to sign the legislation.
Also on August 3, 2006 the Senate failed to invoke cloture on a bill (H.R. 5970) to provide estate tax relief, extend expired provisions, and raise the minimum wage. The vote was 56 to 42.