Pension Protection Act Of 2006 - PPA

  

You’ve been working 30 years at Joe Schmo’s. Joe pinkie-promised you a pretty pension plan. Now it’s time to retire, but Joe explains to you that they’ve had to make cutbacks, including into your pension.

But you promised, Joe. Pinkie-promised.

The Pension Protection Act of 2006 was signed into law by George W. Bush to hold firms who promised pensions accountable. Either make your pension promise and stick to it, or don’t make it at all. Fool me once, shame on...shame on you? Is that how that goes?

Anyway, the PPA requires firms who underpay on their pension promises to overpay (well, pay higher premiums) into their Pension Benefit Guaranty Corporation. That’s the Department of Labor nonprofit that’s supposed to make sure private sector employees keep getting their pension benefits that they were promised. Kind of like federal pension insurance for firms.

Besides making sure workers are getting the pension plan pinkie-promise, the PPA did other retirement-related things too. For one, it required automatic 401(k) enrollment when it was offered to employees. It also increased the amount you could contribute to your IRA and 401(k). Leave it to George Dubbya to bring the sexy back to pensions...or at least safety.

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liabilities owed by the employer like a big corporation or

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the government which were promises to employees for dough to

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be around when they retired so that the employees could

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you know like live live in a decent condo not

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in their old SUV Parked down by the river pension

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is just another word for retirement savings And clever union

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negotiators somehow got the government and or corporate America Tio

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this system would retire relatively wealthy with seemingly almost no

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risk This problem is worth some explaining here Best example

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California A state which you'd I think would be one

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of the wealthier in the nation but in fact is

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one of the closest toh bankruptcy currently in silver medal

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position Teo Gold medal favorite Illinois in California For decades

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politicians wanted to coddle police and firemen because they wanted

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to look good to their constituents and get re elected

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cops and fireman But politicians negotiated and their advisors presumed

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that California's economy would always remain strong over time as

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taxes crept upward in California businesses and wealthy individuals began

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leaving and the Internet made telecommuting and other things dramatically

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easier to manage So the tax dollars started to decline

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as the wealthy and don't just a lot of businesses

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began to leave the state and suddenly cities inside the

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state no longer needed to grow their police and fire

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forces In fact they couldn't afford the ones that they

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already had And it was one piece of very bad

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legislation that harmed things financially for the cities they created

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a structure which most cities blindly followed in any given

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city with say a hundred thousand people there likely dozens

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and dozens of cops who are retired taking home today

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Fifty to one hundred fifty thousand dollars a year in

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die Huge liability of many millions of dollars per year

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population was that cutbacks would have to be made to

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ludicrously high pension grants to retired cops and fireman Well

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about the suggestion And for good reason They did nothing

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wrong They just cut the best deal they could It

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was the government of those local cities who sold out

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the people who sold out their future in these commitments

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fire their entire police and fire departments and outsource them

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the pension liabilities have become such a large line item

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percent of the city's budget now allocated the pensions They'll

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garner a lot more scrutiny Going forward with the key

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concept When you think about a pension liability is that

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a year in base salary and hope to get another

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on another five grand a year for dental vision and

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free Yahoo email account You know stuff like that Then

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they only make sixty five grand a year you can

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