401(k) enrollment change is good

If you're like me, you struggle with trying to decipher your quarterly 401(k) statement, let alone with complicated decisions about your retirement investments.

But that doesn't mean we can ignore new laws that will affect those investments.

Such a law will start to be implemented next year, thanks to the Pension Protection Act President Bush signed last week.

Much has been written about this act's impact on traditional pension plans. But other provisions of the law will affect those of us who are focused more on 401(k) plans for our financial future. To find out more about the latter, I talked to Shane Stewart, a certified financial planner and chartered financial consultant with Deseret Mutual in Salt Lake City.

Shane says the new law has generated considerable excitement among some investors, primarily because it made permanent some provisions of a 2001 law that were scheduled to expire at the end of 2010.

For example, he says, the 2001 law called for regular increases in contribution limits for 401(k)s and individual retirement accounts, or IRAs. Those contribution limits — $15,000 for 401(k)s and $4,000 for IRAs this year — now may continue to increase in future years.

The law also makes permanent the provisions that allow people over age 50 to make "catch-up" contributions to their 401(k)s or IRAs, over and above the maximums mentioned above. And it makes permanent the provision that allows for Roth 401(k)s.

"We've had great participation in the Roth 401(k), but there are some people who were holding out because in 2010 it was going away, so they were not sure they wanted to do it," Shane says. "This bill making it permanent will open up doors for people who were a little apprehensive."

In addition to allowing businesses to change traditional pension plans to "cash-balance" or "hybrid" plans without facing age discrimination charges, he says, the law also gives employers more opportunities to help their employees get advice about investments in 401(k) or other defined contribution plans.

And, in a change that I particularly like, it will let employers automatically enroll employees in a 401(k)-type plan, as long as they meet certain contribution and matching guidelines and give employees the ability to "opt out" of the plan if they do not want to participate.

Several companies already were automatically enrolling employees, Shane says, but others were nervous about the repercussions of employees saying they were forced to participate against their will. The new law should end those worries.