Pension Protection Act Guide - January 2009 - (Page 20)

Pension Protection Act Guide – Defined Contribution (DC) Plans SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you wIthDrawaLS/DIStrIbutIoNS/roLLovErS hardship Withdrawals Immediately under a 401(k) or 403(b) plan, participants may be allowed to take a financial hardship withdrawal for medical, tuition and funeral expenses of their spouse or dependents. Similar unforeseeable emergency withdrawals may be allowed under a 457(b) plan or a nonqualified deferred compensation plan subject to Code section 409A. Permits a plan to allow a participant to take a financial hardship or unforeseeable emergency withdrawal for medical, tuition and funeral expenses of their primary beneficiary under the plan. A primary beneficiary means an individual who is named as a beneficiary under the plan and has an unconditional right to all or a portion of the account balance held by the plan on behalf of the participant at the participant’s death. Plans are not required to allow hardship or unforeseeable emergency withdrawals for expenses of a primary beneficiary. • Plans that are permitted to allow hardship and unforeseeable emergency withdrawals typically do allow such withdrawals. If your plan is permitted to allow such withdrawals, you may want to consider adding this new type of withdrawal. Rollovers of After-Tax Contributions for taxable years beginning on or after January 1, 2007 After-tax contributions may be rolled over: • from a qualified plan into a DC plan • from a 403(b) plan to another 403(b) plan if the accepting plan separately accounts for the after-tax portion of the rollover. After-tax contributions may also be rolled over into an IRA. Expands the portability of after-tax contributions by allowing rollovers of after-tax contributions from a qualified plan to another qualified plan (DB or DC) or to a 403(b) plan. • Simplifies the rollover process. • Encourages participants to preserve all qualified plan contributions for retirement. vEStINg Vesting for plan years beginning on or after January 1, 2007 (delayed effective dates may apply for collectively bargained plans and for Employee Stock ownership Plan (ESoP)/ESoP and 401(k) components (KSoPs) with an outstanding exempt loan on September 26, 2005) Employer contributions, other than employer matching contributions, must vest at least as rapidly as under a five-year cliff or a seven-year graded vesting schedule. Employer matching contributions must vest at least as rapidly as a three-year cliff or a six-year graded vesting schedule. Applies the accelerated matching contribution vesting schedule (100% vesting after three years or six-year graded) to all employer contributions. If the plan allows, the faster vesting may apply only to contributions made in plan years beginning on or after January 1, 2007. • By eliminating a second vesting schedule, this may be a simplification for some plans. But it has a cost if forfeitures are used to offset contributions or plan expenses. Note: We will work with you to help determine if a change is needed. mIScELLaNEouS Missing Participants for distributions made after final regulations are prescribed. for DB plans which are covered by PBGC insurance and not multiemployer plans, there is a missing participant program which can be used to distribute assets of missing participants to the PBGC during a plan termination. Extends the PBGC missing participant program to cover multiemployer plans and plans not covered by the PBGC insurance (like DC plans). • Expands the availability of the PBGC missing participant program. • You will eventually be able to utilize this program on an elective basis when terminating your retirement plan. 20

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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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