Now is the time for small business owners to bone up on a new law that makes big changes in employee retirement plans.
The Pension Protection Act of 2006, passed in August, rewrote many of the rules on pensions in an effort to aid owners and employees alike. While some changes won’t kick in for a year or two, others went into effect this month.
A major benefit: Business owners and key personnel, who had been limited in their own 401(k) savings, can now sock away more if the company enrolls employees automatically in its plan and contributes a required amount to each account.
Potential pitfalls include new rules that require more communication with employees. Quarterly statements are now required, for example. Until now, 401(k) statements weren’t technically required at all—though many plans did issue some form of statement to stay in line with accepted industry practice.
Photo by MS Design.
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