Pension Protection Act Guide - January 2009 - (Page 2)

Multiple Plan Types SpEcIfIc poINtS Egtrra ruLES Economic Growth and Tax Relief Reconciliation Act (EGTRRA) Permanence Immediately EGTRRA made significant changes to retirement plans in 2001 that were scheduled to expire in 2010. These included changes to: • Elective deferral limit • §415 limit on contributions • Employer deduction limit • Catch-up contributions for participants age 50 or older • Expanded rollover opportunities • Roth contributions • Saver’s credit • S corporation Employee Stock ownership Plan (ESoP) antiabuse rules • Indexing of traditional IRA deduction limits • Indexing of income limits for Roth IRAs Saver’s Credit for Low- and ModerateIncome Workers Immediately Inflation indexing begins in 2007 taxable year The saver’s credit for IRA contributions or elective deferral contributions to 401(k), 403(b), or governmental 457(b) plan was to expire after the 2006 tax year. The maximum tax credit is $1,000. The amount available for credit is tied to the individual’s (nonindexed) adjusted gross income (AGI). Deduction Limits – Combined Plan Limits for taxable years beginning on or after January 1, 2006 (certain provisions not effective until January 1, 2008) Combined deduction limit for a DB and DC plan is the greater of the following: 25% of participants’ compensation or the minimum funding requirement under the defined benefit plan (or if the Deficit Reduction rules apply, the amount needed to bring the plan to 100% of the current liability). for 2006 and 2007, employers can deduct a contribution to a DC plan up to 6% of participants’ compensation, regardless of the contribution to the DB plan. Beginning in 2008, contributions to a DB plan covered by the PBGC are not taken into account in determining the combined plan limit. • Congress has now stopped penalizing employers who maintain both DB and DC plans. Note: If you have combined DB and DC plans with us, we can help you take advantage of this opportunity. If not, we can help you enhance your retirement program by adding another type of plan. EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you Makes the specified EGTRRA provisions permanent. • Increases in deduction, deferral, and contribution limits continue to make tax-qualified plans and IRAs a taxeffective choice for retirement savings opportunities. • Increases in limits can mean more opportunities for enhanced employee involvement and cost sharing for their retirement benefits. • Consider adding Roth contributions to your DC plan. • Now is the time to evaluate plan goals and design. Do employees understand and appreciate what you are providing them? Are they taking full advantage of the opportunities given them? Note: We can help you understand the impact of these changes and design a retirement program to help meet your goals. Makes permanent the saver’s credit, and beginning in 2007, the AGI levels eligible for the credit are indexed. • Communicating this tax benefit to lower-income employees may encourage them to save for their retirement. Note: We can help you update communication announcing this feature’s permanency and the AGI levels that may apply to eligible participants. 2

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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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