Bush signs pension overhaul

WASHINGTON — President Bush signed a broad overhaul of pension and savings rules Thursday, giving millions of people a better chance of getting the retirement benefits they have earned.

The law, passed with fanfare by Congress two weeks ago, gives companies seven years to shore up funding of their traditional pensions, also known as defined benefit plans. Special rules for seriously underfunded companies require them to catch up faster.

The 30,000 such plans run by employers are estimated to be underfunded by $450 billion.

"Americans who spent a lifetime working hard should be confident that their pensions will be there when they retire," Bush said.

He added a stern instruction to corporate America.

"You should keep the promises you make to your workers," the president said. "If you offer a private pension plan to your employees, you have a duty to set aside enough money now so your workers will get what they've been promised when they retire."

At the same time, the law recognizes the evolution in workers' benefits — a gradual disappearance of pensions in favor of savings accounts such as 401(k)s that require workers to amass their own retirement savings.

Those accounts, also known as defined contribution plans, got a boost in the new law. It is this step that many expect will do the most over time to help people working toward retirement.

The law lets employers automatically enroll workers in 401(k) plans. In addition, there is a mechanism to increase gradually the amount saved, and employers are encouraged to match some of the dollars that workers stash away.

A nonprofit research organization, the Retirement Security Project, estimated that the change, when fully in effect, could mean employees will save an additional $10 billion to $15 billion in 401(k) accounts each year.

"Those additional contributions will bolster retirement security for millions of workers," said Peter Orszag, director of the project, which works to improve retirement benefits for low- and middle-income workers.

Some changes were sparked by corporate scandals that saw workers, who had put much of their nest egg in company stock, lose their retirement savings. The new law requires companies to give their workers more investment options.

The law is not without its critics, some of whom say it does nothing to encourage employers to offer pension benefits and the reliable income they give retirees.