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Defined Contribution Plans In A Post PPA Environment

Defined Contribution Plans In A Post PPA Environment. Employee Research Institute’s 62 nd Policy Forum May 8, 2008. David L. Wray President Profit Sharing/401k Council of America davidw@psca.org. Impact of the 2006 Pension Protection Act. PPA Set the Table Permanence Saver’s Credit

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Defined Contribution Plans In A Post PPA Environment

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  1. Defined Contribution Plans In A Post PPA Environment Employee Research Institute’s 62nd Policy Forum May 8, 2008 David L. Wray President Profit Sharing/401k Council of America davidw@psca.org

  2. Impact of the 2006 Pension Protection Act PPA Set the Table • Permanence • Saver’s Credit • Automatic Enrollment • Utilization • Plan Design • Investment The Flaws The Future

  3. Impact of the 2006 Pension Protection Act Automatic Enrollment Utilization 2007* 33.3% 2006 23.6% 2005 16.9% 2004 10.5% 2003 8.4% 2002 7.4% 73.1% New Hires Only, 26.9% All Non-Participants

  4. Impact of the 2006 Pension Protection Act Design: Automatic Enrollment Deferral Percentage Year 1% 2% 3% 4% 5% 6% and up 2007 10.0 10.0 47.5 15.0 7.5 10.0 2006 4.2 14.3 58.5 8.5 6.1 8.5 2005 3.2 15.4 60.3 10.9 3.2 7.1 2004 2.3 19.8 55.8 10.5 5.8 5.8 2003 3.8 21.5 58.2 3.8 6.3 6.3 2002 3.1 24.6 55.4 12.3 0.0 4.6

  5. Impact of the 2006 Pension Protection Act Design: Automatic Enrollment With EE Contribution Escalation 2007 31.6% 19.6% Voluntary 2006 31.2% 2005 14.8% 2004 8.5%

  6. Impact of the 2006 Pension Protection Act Automatic Enrollment Default Investment Year SV MM Bal Life/ Other Target 2007 8.9 2.5 13.9 64.6 10.1 2006 19.2 6.4 14.6 53.4 6.4 2005 30.3 9.7 17.0 37.0 6.1 2004 26.9 23.7 29.0 8.6 11.9 2003 30.3 19.7 36.4 9.1 4.5 2002 31.5 25.9 22.2 14.8 5.6

  7. Impact of the 2006 Pension Protection Act The Flaws • $1,000 Per Day Fine For Violating Notice Req. • Safe Harbor Not attractive Enough The Future • Very Bright For Medium And Large Companies (78% of 401(k) participants: 2005) • Doubtful For Small Companies of 250 Or less 85% participation rate already

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