Friday, January 13, 2017

Pension Protection Act of 2006 Did Little to Relieve Retirement Crisis

Congress’ Pension Protection Act of 2006 may have resulted in enrollment increases into defined contribution pension plans, but it provided little relief to the retirement crisis in Texas, or elsewhere in the United States, according to a recently released brief by the National Institute on Retirement Security.

The institute’s November 2016 report examines the impact of the Pension Protection Act 10 years since enacted. Trends in defined benefit and defined contribution retirement plans for private sector workers were analyzed. As Texas legislators and local public employee pension funds debate the merits and cost of various retirement plan structures, including adopting defined contribution plans, the report’s private sector findings could serve as a crystal ball of what could happen to Texas’s public workforce. 

According to the institute’s report, the Pension Protection Act made employers less willing to continue offering defined benefit pension plans, which resulted in fewer Americans with pensions. The act lead to more workers covered by defined contribution plans that use automatic enrollment in 401(k) accounts; however, that wasn’t much of a good thing. In fact, the number of households with retirement plans still fell from 55 percent in 2007 to 51 percent in 2013.

Plus, according to the NIRS brief, automatic contributions to defined contribution accounts are too little to provide most middle-class workers with retirement savings. If Texas legislators and local government pension funds decide to adopt defined contribution plans, it could mean the state’s public sector employees may not accumulate enough funds to ensure an adequate retirement income.

Read the entire report online.


The graph depicts U.S. Department of Labor and U.S. Census Bureau data regarding private and public pension contribution levels from 2005-2013. Corporate pension contributions, the green line, was much more volatile compared to public pension plan contributions during the time period.