The Pension Protection Act of 2006 (PPA) was signed into law in August of 2006. A major goal of the PPA was to reform the pension laws and ensure that pension plans are funded.

What Retirement Plans Does the PPA Apply to?

The PPA affects mostly defined contribution pension plans and defined benefit plans. However, the act also affects individual retirement accounts. In addition, the Pension Protection Act also contains various provisions that only affect certain sectors. For example, this includes state and local governments, airline industries and churches.

What are Some Major Points of the PPA?

Basically, the PPA requires employers to take extra precautions when it comes to employee pension plans. While this aims to benefit employees, it provides more things that an employer is required to do in order to ensure these plans are kept funded.

Most of the provisions of the PPA provide requirements for companies whose pension plans are underfunded. The PPA seeks to ensure that employers keep their 401(k) plans funded. Some major points of the PPA are:

  • Companies with underfunded pension plans must pay additional premiums;
  • Companies that terminate pensions must provide additional funding for a newly-created pension insurance system;
  • The PPA provides more rules to make sure that employers are monitoring pension plans very closely;
  • The PPA closes certain loopholes that had previously allowed under-funded plans to skip pension payments;
  • The PPA arises the cap on the amount that employers may invest into pension plans. The goal of this is to help prevent pensions from “running dry” in times of economic difficulty; and
  • It prevents companies with underfunded plans from promising extra benefits without first paying for the promises up front.

Should I Hire a Lawyer for Assistance with PPA Issues?

The provisions of the PPA are very broad and intricate, and therefore may be hard to comprehend. What is outlined above is just a basic overview of the goals of the PPA. If you are an employer, it may be beneficial to hire an employment lawyer to ensure you are compliant with the PPA requirements. If you have violated the PPA, a lawyer can help you strategize and fix the errors made in a cost-effective manner.

If you are an employee, a lawyer can help you with any disputes or questions about your particular pension plan. Hiring a lawyer would particularly be helpful if your employer has an underfunded plan and has failed to comply with the PPA.