Pension Protection Act Guide - January 2009 - (Page 3)

Pension Protection Act Guide – Multiple Plan Types SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you partIcIpaNt NotIcES/commuNIcatIoN Notice and Consent for notices distributed in plan years beginning after December 31, 2006. Notice of distribution options and required consents generally must be provided and obtained within 90 days prior to the commencement of a distribution or the annuity starting date. Benefit statements with account balance and vesting information must be given to participants and beneficiaries upon request, but no more frequently than once every year. The 90-day period is extended to 180 days. This applies to the 402(f) rollover notice, 411(a)(11) general consent rules, and the 417 QJSA notice. Plans are not required to make this change. Notices must be updated to include a description of the consequences of not deferring receipt of a distribution. DC plans — quarterly benefit statements must be provided to participants and beneficiaries in a qualified plan or Employee Retirement Income Security Act (ERISA) 403(b) plan who have the right to diversify investments; otherwise, only annual statements must be provided. Benefit statements must provide additional information relating to investment risk, for example, of the risk of holding more than 20 percent in a single investment. DB plans — participants must receive a benefit statement at least every three years (and upon request). An alternative option is to provide annual notice of the availability of a benefit statement. And the ways in which the participant may obtain it. • You now will have more time to provide notices and obtain consent forms from participants. • We assume most plan sponsors will want to change to 180 days and we have updated our forms accordingly. Additional guidance in the form of final regulations is expected. Benefit Statements for plan years beginning on or after January 1, 2007 (delayed for collectively bargained plans) • Benefit statements provided by The Principal® have been updated to reflect this legislation in good faith. The Department of Labor (DoL) is expected to release guidance on necessary wording. • Benefit statements may be delivered in written, electronic, or other appropriate form that is reasonably accessible to the participant, beneficiary or alternate payee. • We will work with you to make necessary adjustments to your statements. Note: The DoL was directed to issue model benefit statements. We will continue to monitor the guidance. wIthDrawaLS/DIStrIbutIoNS/roLLovErS Distributions to Active Duty Reservists Retroactive to 2001 Withdrawals prior to age 59 1⁄2 (age 55 if separated from service), death or disability generally are subject to a 10 percent early withdrawal penalty. Reservists called to active duty since 9/11/01 are permitted to take a qualified reservist distribution without a 10% early withdrawal penalty. Qualified reservist distribution is any distribution to an individual if: • such distribution is from an IRA, or from amounts attributable to elective deferrals under a 401(k) or 403(b) plan or certain similar arrangements; • such individual was ordered or called to active duty for a period in excess of 179 days; and • such distribution is made during the period beginning on the date of such order or call and ending at the close of the active duty period. Amounts withdrawn may be repaid to an IRA within two years from the date the reservists’ active duty ends (by August 16, 2009, if later) without regard to the contribution limits. In addition, PPA allows a qualified reservist distribution as a new type of withdrawal under a 401(k) or 403(b) plan. Plans are not required to allow for qualified reservist distributions. Qualified Joint and Survivor Annuity options for plan years beginning on or after January 1, 2008 (delayed for collectively bargained plans) Generally, DB and money purchase plans are required to provide benefits in the form of a qualified joint and survivor annuity. The annuity benefit provided to the surviving spouse can not be less than for DB and money purchase plans, participants must be offered new “Qualified optional Survivor Annuity” (QoSA) — a joint annuity with a continuation of either 50% or 75% of the pre-death annuity. A plan must offer a 75% QoSA if it currently has a Qualified Joint and Survivor Annuity (QJSA) with less than 75% continuation, and a 50% QoSA if it • An additional annuity option is required in DB and money purchase plans. Note: We will work with you to help determine if this is applicable to your plan. • Participants ordered or called to active duty may take penalty-free early distributions if permitted by the plan. Reservists should consult with their tax advisor if amounts were previously subject to a 10% penalty excise tax. • We have updated our distribution request communication and our taxation procedures to help participants take advantage of the new rules as applicable. • 401(k) and 403(b) plans are permitted to allow the new type of distribution. This provision, which was set to expire on December 31, 2007, was made permanent by the passage of the heroes Earnings Assistance and Relief Tax (heart) Act of 2008. 3

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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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