Summary of the Pension Protection Act of 2006

Publication Date: October 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

Type:

Abstract:

On July 28, 2006, the House of Representatives passed H.R. 4, the Pension Protection Act, by a vote of 279-131. The bill was passed by the Senate on August 3 by a vote of 93-5 and was signed into law by the President as P.L. 109-280 on August 17, 2006. The Pension Protection Act is the most comprehensive reform of the nation's pension laws since the enactment of the Employee Retirement Income Security Act of 1974 (ERISA, P.L. 93-406). It establishes new funding requirements for defined benefit pensions and includes reforms that will affect cash balance pension plans, defined contribution plans, and deferred compensation plans for executives and highly compensated employees.

Prompted by the default in recent years of several large defined benefit pension plans and the increasing deficit of Pension Benefit Guaranty Corporation (PBGC), the Bush Administration in January 2005 advanced a proposal for pension funding reform, which was designed to increase the minimum funding requirements for pension plans and strengthen the pension insurance system.

In 2005, major pension reform bills were introduced in both the Senate and the House of Representatives. In the Senate, Senator Charles Grassley, Chairman of the Finance Committee, introduced S. 1783, the Pension Security and Transparency Act. In the House, Representative John Boehner, then Chairman of the Committee on Education and the Workforce, introduced H.R. 2830, the Pension Protection Act, which subsequently was renumbered as H.R. 4. The legislation ultimately passed by the House and Senate and signed into law by the President on August 17, 2006, was based mainly on these two bills, with the final version being the result of conference negotiations between the House and Senate that began in March 2006 and continued through July.

This report summarizes the main provisions of the Pension Protection Act (PPA) as they affect single-employer defined benefit plans, multiemployer defined benefit plans, and defined contribution plans. It will not be updated.