Pension Protection Act Guide - January 2009 - (Page 17)

Pension Protection Act Guide – Defined Contribution (DC) Plans SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you automatIc ENroLLmENt continued The initial period begins on a participant’s entry date and ends on the last day of the first plan year which begins after such date. Current employees who completed a salary deferral agreement do not need to be included in the automatic enrollment. Minimum employer contributions of either: • nonelective contribution of 3% of compensation for all eligible non-highly compensated employees • matching contribution of 100% of deferrals up to 1% of compensation, plus 50% of deferrals from 1% to 6% (maximum match of 3 1⁄2% of compensation) Additional requirements: • the nonelective or matching contribution must be 100% vested within two years. • each eligible employee must receive a written notice. Notice Requirements for plan years beginning on or after January 1, 2008 under the current 401(k) Safe harbor option, each eligible employee must receive a written notice between 30-90 days before the beginning of each plan year. New participants throughout the year also must be given this notice. To comply with the new Qualified Automatic Contribution Arrangement, plans generally must cover all eligible employees and they must be able to opt-out at any time. • Within a reasonable time before each plan year, notice must be furnished to all eligible employees that explains their opt-out rights, how contributions will be invested if no participant investment direction is given and other specific plan provisions. • After the receipt of notice, the employee must have a reasonable amount of time to make contribution and investment elections before the first contribution is made. • The Qualified Automatic Contribution Arrangement (like the current 401(k) Safe harbor) requires proper notification/communication to employees. Note: We can provide sample language. NoNDIScrImINatIoN tEStINg Corrective Distributions for plan years beginning on or after January 1, 2008 Refunds from failed actual deferral percentage (ADP)* or actual contribution percentage (ACP) tests must include earnings through the date the excess is refunded (“gap period earnings”). * ADP testing n/a to 403(b) plans. In general, refunds paid within 21⁄2 months of the plan year end are taxed in the year originally contributed. Refunds after 21⁄2 months of the plan year end are taxed in the year distributed. Refunds only need to include earnings through the plan year end (no gap period earnings required). All refunds are taxed in the year of distribution. • Elimination of gap period earnings means less complexity. • If we conduct the testing, we will automatically update our systems and procedures in 2008. We also will update communications that accompany the refunds. 17

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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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