After A Hot Summer..A Pension Freeze?
We've mentioned several of the changes likely inside your 401k plan, but here's the downside to the new pension legislation. The bill will raise PBGC insurance premiums and require increased contributions by employers to fully fund their plans. It really could put many plans in jeopardy-its doubtful employers will create new defined benefit plans and existing ones may be frozen or converted into cash-balance plans.
Marshall Loeb explains the freeze.
Just this year alone, steady-Eddie companies such as Coca-Cola Bottling Co., Consolidated, IBM, Nissan and Alcoa have said they would totally or partly freeze their plans. Why? To stay competitive.
If you work at a large corporation with a pension plan, you should assume a freeze is going to happen to you, too.
USAToday explains the cash-balance plan.
Wise Owl
US News reports mixed views on the new pension legislation.
But Bradley Belt, former executive director of the Pension Benefit Guaranty Corporation, stressed what the new legislation would not do.
"It's not going to save the defined-benefit system," Belt said at the eighth-annual conference of the Retirement Research Consortium. "It was not an explicit goal of the administration. It will not insure against future loss of benefits under defined-benefit plans. It will not in itself ensure financial security." He also said it would not restore the PGBC to financial solvency but acknowledged that it would be a modest improvement to current law.