Pension Protection Act Guide - January 2009 - (Page 15)

Pension Protection Act Guide – Defined Benefit (DB) Plans SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you muLtIEmpLoyEr pLaNS Multiemployer Plans – funding and Deductions for plan years beginning on or after January 1, 2008 (except where noted) Generally, multiemployer DB plans follow similar funding rules as single employer DB plans DB plan deduction increased to allow a contribution up to 150% of the current liability (140% for multiemployer plans). Effective for plan years beginning on or after January 1, 2006. funding rules for multiemployer plans are retained, but the amortization periods for plan changes are shortened from 30 years to 15 years. Short-term benefits like 13th checks must be fully funded to be paid out. Multiemployer plans meeting certain requirements can get a five-year extension. • If you intend to make plan changes, the amortization period cannot exceed 15 years. • Increases funding deduction. • The funded status of the plan affects the ability to provide 13th checks. Multiemployer Plans – funding Problems for plan years beginning on or after January 1, 2008 Multiemployer pension plans that experience financial difficulty may apply for up to a 10-year extension of amortization periods. No specific law addressing critical or endangered plan status. however, additional funding rules could apply to pension plans that are insolvent or in reorganization New rules are associated with multiemployer plans categorized as endangered, seriously endangered, or in critical status. The provision attempts to address some of the most underfunded and troubled multiemployer plans. Plans must review a projection of financial status annually. If problems appear, employers and unions must take certain actions to correct problems. These include notices to all participants and employers and developing a plan addressing benefits and contributions to reduce underfunding. for critical status plans, this includes required additional contributions and potentially a temporary freeze on benefit improvements. • We will help you determine if your multiemployer plan is categorized as a special status plan. If so, we will discuss additional details and requirements associated with the provision. Multiemployer Plans – Withdrawal Liability for plan years beginning on or after January 1, 2008 Generally upon withdrawal from a multiemployer pension plan, an adopting employer is required to fund its share of any unvested benefits. Many special rules and exceptions apply, depending on actual facts and circumstances. Withdrawal liability rules are changed. Repeals the limitation on withdrawal liability of insolvent employers and updates the rules to use the net worth of a company. Addresses rules associated with contracting work. • This may have an impact on certain situations. As needed, we will help you determine if this has (or will have) any impact on any companies in your multiemployer plan. Multiemployer Plans – Disclosures for plan years beginning on or after January 1, 2007 Annual funding notices for multiemployer pension plans are required to be provided to all participants, union representatives, contributing employers, and the PBGC, including various benefit and financial information. Notice and disclosure requirements are changed or expanded. This should make information about the status of the plan more easily available for all companies. Notices must be given by 120 days after the plan year-end. • If you are a multiemployer plan, this will most likely require you and other companies to provide additional information in both the required notices and disclosures. Note: For funding issues, please consult with your plan actuary or actuarial analyst. They can assist you if you need more detailed information specific to your plan, including projections or forecasting related to both the near-term or long-term impact of the funding on your plan. If any of the items noted above involve services we provide to you, we will automatically follow through with the necessary changes. for example, if your plan document needs to be updated within a specified time, we will contact you and make sure your document is updated in a timely fashion. 15

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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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