Federal legislation approved in 2006 is expected to help Americans save more for retirement, health care and college. The most significant law of the session for investors was the Pension Protection Act of 2006. The legislation focused on closing the funding gap in traditional employer-sponsored, defined-benefit pensions, in which the employer bears responsibility for funding the pension. But it also included a number of provisions that encourage savings. Most notably, it made it easier for employers to automatically enroll workers into company 401(k) retirement plans, which are defined-contribution plans that put most of the onus of retirement savings on individuals. The legislation could’ve been called the “Personal Responsibility Act,” said Richard Rosso, a consultant for financial services provider Charles Schwab Corp. (SCHW) in Houston, “because the underlying message of the act is for all of us to save for retirement.” As traditional pensions have waned, the burden of saving for retirement has shifted to the individual, making 401(k) and Individual Retirement Accounts even more important.
Source: Scottrade News