Pension Protection Act Guide - January 2009 - (Page 12)

Pension Protection Act Guide – Defined Benefit (DB) Plans SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you rEportINg, DIScLoSurE, aND NotIcE rEquIrEmENtS Disclosures for plan years beginning on or after January 1, 2008 Plan participants and beneficiaries must be provided with a summary annual report (SAR). The SAR contains basic information about the plan’s financial condition and activities. The SAR must be provided within 2 months after the due date of the annual report. Section 4011 Notice — certain underfunded plans are currently required to provide this notice to plan participants and beneficiaries. Repeals the SAR and Section 4011 Notice for DB plans. The new notice requires a number of new disclosures (including but not limited to): • Annual DB funding notice (similar to the current multiemployer funding notice). The notice is due 120 days after the end of the plan year for single-employer plans with more than 100 participants. Small plans can furnish the notice at the time the form 5500 is filed. • Provide the PBGC with information currently required under Section 4010 if the plan’s funding percentage was less than 80% for the preceding year until 2010, this notice is only required if the fund shortfall exceeds $15 million. • This requires that additional information be disclosed to your plan participants and beneficiaries. • We will inform you of the new disclosure requirements and provide you with the necessary information and forms. Electronic Display Plan years beginning on or after December 31, 2007 The annual form 5500 and related schedules are open for public inspection. A plan sponsor is allowed to file either electronically or on paper. Beginning with your 2009 plan year (filing prepared in 2010), your form 5500 must be filed electronically. • We currently file a large number of form 5500 filings in an electronic format with the DoL. We will continue to provide this service to our clients. mIScELLaNEouS chaNgES 415 Limit Changes Limitation years beginning on or after January 1, 2006 In calculating the three-year highest average compensation, only compensation earned with the employer while the employee is an active participant can be considered. States what interest rate and mortality table is used to normalize a lump sum back to straight life for purposes of testing 415. Reverses the rule in proposed IRS regulations on 415 limits. Keeps the current rule that allows average compensation that is used to determine the 415 limits to include years of service during which an employee is not a participant in the plan. for church plans, the compensation limit only applies to highly compensated employees. Changes which interest rate is used (greatest of) to limit any form of benefit subject to 417(e)(3). • We will apply the new rules to the annual 415 limits testing. Lump Sum Distributions Plan years beginning on or after January 1, 2008 The minimum lump sum distribution value is calculated using the 30-year Treasury rate (Code Section 417(e)) and the 1994 GAR mortality table. Replaces the current 30-year Treasury rate used to calculate minimum lump sum benefits, and certain other optional forms, with interest rates derived from a modified yield curve. • Treasury developed the mortality table, and it will be based on the same table underlying the measurement of funding liabilities. • The new interest rates are phased in over five years (20% per year) beginning in 2008. • The change in the interest rate will likely decrease the lump sum distribution payable to many of the plan participants. The phase-in of this change over a five-year period is intended to make this change gradually. • The new PPA mortality table could potentially increase the lump sum distribution payable to a plan participant. 12

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Pension Protection Act Guide - January 2009 Contents Multiple Plan Types Defined Benefit (DB) Plans Defined Contribution (DC) Plans Employer Securities Nonqualified Individual Investors

Pension Protection Act Guide - January 2009

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