PLANSPONSOR Readers Make a Slight Turnaround About the PPA

When we surveyed PLANSPONSOR NewsDash readers right before the Pension Protection Act (PPA) was passed in 2006, their views of the legislation were mostly negative.

More than one-quarter (25.93%) said it was a bill best left unsigned, while roughly 15% said it was a “disappointment.” Most of the negativity was about provisions relating to funding defined benefit (DB) plans, with one reader noting, “In seeking to ‘protect pensions,’ as the name implies, the bill ultimately makes it more onerous to companies who have them, who will in turn abandon the plans in greater numbers.”

But, still, in general, no one said the bill was a “monumental improvement on the current system,” and one reader said, “I do not see any real change here, just a remix with a couple of twists.”

In a separate survey about the PPA’s automatic enrollment provisions, while a few were looking forward to implementing automatic enrollment, only 28% said auto-enrollment’s impact would be “huge.” A plurality of respondents (38%) anticipated a modest impact from the auto-enrollment provisions.

Among those who saw the legislation as a detriment was the reader who said, “I believe that the rigorous auto-increases in deferral percent on an annual basis will be off-putting to employers and employees. I like the concept, but I’d rather do a better job of reminding employees to check their deferral percent when they receive a pay increase rather than auto-increase it and have them waive that increase retroactively, which then impacts administration of the plan.”  

One reader predicted that “auto-enrollment will be widely, if not 100%, adopted.”  But then said that the “real question is, will it help ultimately the savings in America?”

In another survey about the advice provisions in the PPA, most responding readers found them reassuring. However, one reader noted, “What good is governmental advice?  They will only change it later and hold us responsible for having not already followed what they were going to decide to change to later.” Interesting observation considering the Department of Labor’s final conflict of interest rule. 

How Readers Feel Now

Fast forward 10 years later, and our latest survey of PLANSPONSOR NewsDash readers, finds a slight turnaround about specific provisions.

Despite reservations about automatic enrollment provisions 10 years ago, respondents in the latest survey ranked that at the top of the list (59.3%) of provisions of the PPA and related regulations that have helped improve retirement security the most. Other top choices were “making Roth contributions a permanent option” (51.8%), “qualified default investment alternatives” and “eliminating sunset for catch-up contributions” (48.1% each).

Despite positive reaction to ‘computer model’ advice rules in the PPA 10 years ago, in the recent survey, only 3.7% indicated this was a provision of the PPA and related regulations that have helped improve retirement security the most, while 26.1% said it missed the mark.

Perhaps the only sentiments that haven’t turned around are feelings about the DB plan funding provisions. Readers in the recent survey ranked new funding rules for DB plans at the top of the list (43.5%) of PPA provisions that missed the mark. More than 17% said new funding rules for multiemployer plans missed the mark.

Most respondents (55.6%) had mixed feelings about whether, overall, the PPA has improved the retirement security of American workers; 18.5% said it has, and 25.9% said it has not.