Release Date: September 26, 2006
U.S. Secretary of Labor Elaine L. Chao Announces Proposed Rule on Default Investment Alternatives for Participant-Directed Plans - First Pension Law Regulation Would Boost 401(k)s
Washington, DC - U.S. Secretary of Labor Elaine L. Chao today announced a proposed rule to make it easier for fiduciaries of 401(k) plans and other participant-directed defined-contribution plans to adopt automatic enrollment design features. The proposed rule is the first major regulation resulting from the Pension Protection Act signed into law by President Bush on August 17, 2006.
“Too many workers, some overwhelmed by investment choices or paperwork, are leaving retirement money on the table by not signing up for their employers’ defined contribution plan,” said Secretary Chao. “This regulation would boost retirement savings by establishing default investments for these workers that are appropriate for long-term savings.”
The proposal implements provisions of the Pension Protection Act of 2006 to provide relief to plan fiduciaries who invest the assets of participants in “qualified default investment alternatives” in the absence of participant investment direction. Upon adoption, the rule will remove a major impediment to automatic enrollment programs created by employers. Default investment alternatives under the proposed regulation are intended to encourage the investment of employee assets in appropriate investment vehicles for long-term retirement savings.
“The new default options will help workers accumulate larger nest eggs for retirement,” said Assistant Secretary of Labor Ann L. Combs. “Workers who don’t feel equipped to make investment decisions will be automatically invested in a mix of stocks and bonds appropriate for long term savings.”
A fact sheet detailing the proposed rule can be found at www.dol.gov/ebsa.
Public comments on the proposed rule should be submitted to the U.S. Department of Labor, Employee Benefits Security Administration, Room N-5669, 200 Constitution Ave., N.W., Washington, D.C. 20210, Attention: Default Investment Regulation; or electronically to e-ORI@dol.gov or www.regulations.gov. The proposed regulation is to be published in the September 27, 2006 Federal Register.
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