Pension Protection Act Guide - January 2009 - (Page 4)

Pension Protection Act Guide – Multiple Plan Types SpEcIfIc poINtS EffEctIvE DatE currENt Law pENSIoN protEctIoN act what It mEaNS to you wIthDrawaLS/DIStrIbutIoNS/roLLovErS continued 50% of the lifetime annuity. Transfer by Nonspouse Beneficiary Effective for distributions on or after January 1, 2007 Currently only a spouse can roll over his or her death benefit from a qualified, 403(b), or governmental 457(b) plan to an IRA. Distributions for nonspouse beneficiaries must begin prior to 12/31 of the year following the participant’s death and be paid over the beneficiaries’ lifetime or paid out entirely within five years. Direct Rollover to Roth IRA Effective for distributions on or after January 1, 2008 Plan distributions from a qualified plan, 403(b), or governmental 457(b) plan may not be rolled over to a Roth IRA, but may be rolled over into a traditional IRA. Allows plan distributions to be rolled over directly to a Roth IRA. The participant must pay tax on the taxable portion at the time of rollover. These rollovers are subject to the Roth conversion rules (maximum $100,000 modified adjusted gross income). has only a QJSA equal to or greater than 75%. Benefits received by a nonspouse beneficiary may be directly transferred to an IRA from a qualified, 403(b), or governmental 457(b) plan. The IRA is treated as an inherited IRA and must follow the minimum distribution rules of an inherited IRA. • By expanding the group of individuals who can make rollovers to IRAs, this new rule will likely increase the number of rollover distribution requests. • Minimum distribution rules of an inherited IRA require distributions in the year following the year the IRA is established and each year thereafter. • Simplifies the rollover process by allowing a participant to roll over directly to a Roth IRA rather than using a traditional IRA as a conduit. Note: We have updated our participant communication pieces to help keep your participants fully informed. The Worker, Retiree, and Employer Recover Act of 2008 clarifies that the modified adjusted gross income limitation does not apply to rollovers to Roth RIA’s of designated Roth contributions from 401(k) or 403(b) plans. govErNmENtaL ruLES Governmental Plans August 17, 2006 Qualified retirement plans maintained by a state or local government (including plans with cash or deferred arrangements) are exempt from the nondiscrimination and minimum participation requirements. other governmental employers are subject to these requirements. Distributions from qualified retirement plans under 401(a), a qualified annuity plan under 403(a), a tax-sheltered annuity under 403(b), an eligible governmental 457(b), and individual retirement account (IRA) are generally included in income for the year distributed. Additionally, a distribution from a qualified retirement or annuity plan, or an IRA received before death, disability, or the attainment of age 59 1⁄2 is generally subject to a 10% early Exempts all governmental plans from the 401(a)(4) and 401(a)(26) nondiscrimination testing (currently, only state and local governmental plans are exempt). This will affect all plan years beginning after enactment. The Internal Revenue Service issued proposed regulations allowing governmental plans to rely on a goodfaith interpretation of the law to comply with the required minimum distribution rules. Permits retired or disabled public safety officers to elect tax-free distributions from a governmental retirement plan to pay for health and long-term care insurance (annual limit is $3,000; applies to officers; applies only to direct payments from the retirement plan to the insurance company). In order to use this provision it must be permitted by the employer and the officer must make an election with respect to any taxable year. Note: The Worker, Retiree, and Employer Recovery Act amended this tax-free distribution to allow it to also apply to self-funded plans. • This may exempt you from performing certain nondiscrimination testing. If you are a governmental entity, we will work with you to determine the impact on your plan. • We will help you provide communication to affected participants, as this allows a tax-free distribution for certain employees. • We will keep you apprised of any additional guidance. 4

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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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