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Benefits September 12, 2007
EBRI: Low-Income Workers to Benefit from PPA Provisions
September 12, 2007 (PLANSPONSOR.com) - Low-income
workers are expected to see the greatest increase in their
401(k) accounts as a result of the automatic increases
allowed by the Pension Protection Act of 2006, according a
recent study.
Reported by Adrien Martin
Along with opening the door for automatic enrollment, the PPA allows employers to automatically increase a worker’s 401(k) contribution to coincide with a raise or a work anniversary-though the employee can decline both enrollment and the increase.
The findings by EBRI suggest that the introduction of automatic escalation will result in a significant increase of 401(k) accumulations-especially for low-income workers-compared with estimates previously determined for automatic enrollment.
The automatic escalation scenarios executed by the Washington, D.C.-based group were found to increase 401(k) accumulations by 11% – 28% for 401(k) participants in the lowest-income group and 5% – 12% for participants in the highest-income group.