New Opportunities for 401(k) Plans Provided by the Pension Protection Act of 2006

LOS ANGELES, Aug. 17 /PRNewswire/ -- President Bush's signing of the much-anticipated landmark Pension Protection Act clears the way for new opportunities that could help employers maximize the benefits of their defined contribution retirement plan for their employees who are plan participants, reports the Transamerica Center for Retirement Studies.

The Pension Protection Act makes permanent certain retirement savings opportunities created by the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") that were scheduled to sunset in 2010. These savings opportunities include the Roth 401(k) feature along with higher 401(k) contribution limits and catch-up contributions for employees age 50 and over. The Act also permanently extends the Saver's Credit, scheduled to sunset at the end of this year, which allows eligible individuals who contribute to a 401(k) plan, qualified pension plan or IRA to receive a federal "match" in the form of an income tax credit for the first $2,000 of their annual contributions.

"The success of building a retirement nest egg rests on how much someone saves, as well as how well they manage their savings," says Catherine Collinson, market and trends expert for the Transamerica Center for Retirement Studies. "The tremendous overall benefit of the Pension Protection Act is that it both encourages and enables American workers to contribute more to their company-sponsored retirement plan and it offers new solutions to help them manage their investments."

For example, automatic enrollment has received much attention in the media and the retirement industry as a means for boosting 401(k) plan participation rates -- especially among workers in their 20s who have the lowest level of plan participation. However, legal concerns have prevented many employers from adopting this feature into their retirement plans.

"Many plan sponsors were wary of automatic enrollment due to concerns over the fiduciary liability associated with the default investment option. They also had concerns about conflicting state laws surrounding involuntary payroll deductions," says Emily Urbano, chief plan compliance officer for Transamerica Retirement Services. "The Pension Protection Act very effectively addresses these concerns as well as provides some innovative plan design options."

The Pension Protection Act includes provisions for automated plan features like automatic deferrals into a default investment option such as a strategic allocation or lifecycle fund, and automatic annual increases in an employee's salary deferral rate that take effect for plan years beginning in 2008 provided certain requirements are met. Also, there's immediate Federal preemption of any conflicting state involuntary payroll deduction laws.

The desire and need to receive investment advice through one's employer also is addressed in the new legislation. "Most employees do not know as much as they should about retirement investing and many would like to receive advice through their employers," adds Catherine Collinson. "Until now, there have been legal implications that discouraged employers from offering investment advice through their plan administrators."

Under the new law, beginning in 2007, plan sponsors will be able to offer fund-specific investment advice to their plan participants through their retirement plan provider or other fiduciary adviser. Such fund-specific advice may be made available using a computer model that is appropriate for retirement investing and is certified and audited by an independent third party. This new law also allows for face-to-face advice under a stringent set of guidelines.

"With these opportunities for Americans to build their retirement nest eggs, it's now up to employers to re-evaluate their company-sponsored retirement plans and adopt the new features that will enable employees to maximize the possible benefits," says Emily Urbano.

Over the coming months, Transamerica will be reaching out to plan sponsors, advisers and third-party administrators to provide expertise and insight on this new legislation. In addition, the company will be rolling out a number of new products and service offerings throughout the remainder of 2006 and into 2007 to help plan sponsors and their participants take advantage of the opportunities created by the Pension Protection Act.

About the Transamerica Center for Retirement Studies

The Transamerica Center for Retirement Studies ("The Center") is a collaboration of experts assembled by Transamerica Retirement Services to promote public awareness of emerging trends surrounding retirement security in the United States. The Center's research emphasizes employer-sponsored retirement plans, issues faced by small to mid-sized companies and their employees, and the implications of legislative and regulatory changes. For more information about The Center, please refer to http://www.ta-retirement.com/thecenter .

About Transamerica Retirement Services

Transamerica Retirement Services ("Transamerica"), a marketing unit of Transamerica Financial Life Insurance Company and its affiliates, designs customized retirement plan solutions to meet the unique needs of small to midsized businesses. Transamerica Retirement Services is a leading pension provider and has more than 15,000 retirement plan clients totaling more than $11.9 billion in assets as of December 31, 2005. For more information about Transamerica Retirement Services, please refer to http://www.ta-retirement.com/ .

About AEGON

The AEGON Group is one of the largest listed insurance groups ranked by market capitalization and assets. Transamerica Retirement Services is part of the AEGON Group, which is headquartered in the Netherlands and through its operating subsidiaries employs more than 27,000 people worldwide. AEGON's businesses focus on life insurance, pensions, and savings and investment products. For more information on AEGON, please refer to http://www.aegon.com/ .