PA Pension Planners


The Pension Protection Act of 2006

PPA2006 was signed into law by President George W. Bush on August 17, 2006. A brief summary prepared by Sungard, Inc.

The bill makes sweeping changes to the defined benefit funding requirements. In addition, there are significant changes affecting all profit sharing and 401(k) plans. Highlights of some of the more important provisions included in the bill:

EGTRRA Permanency
Perhaps the most important aspect of the bill is to make permanent the beneficial changes previously enacted as part of EGTRRA. For example, the higher contribution limits for 401(k) plans, catch-up contributions for 50 year olds, higher deduction limits for profit sharing plan contributions, and the “Roth” option for 401(k) contributions were all part of EGTRRA and would have otherwise expired in 2011, but for the new bill.

Defined Benefit Plan Funding
Many changes were made in how employers who sponsor defined benefit plans will go about determining their minimum contribution obligation. Generally, employers who sponsor non-multiemployer plans will be obligated to contribute the normal cost for the year plus amortize funding shortfalls (below 100% of a plan’s liabilities) over a 7-year period. This new rule takes effect in 2008 and the current rules remain in place for 2006 and 2007. There are also a number of transitional rules and exceptions included in the bill (including special rules for multiemployer plans).

401(k) Plans
There are numerous changes that will impact 401(k) plans. Some of the more popular include:

Automatic Enrollment 401(k) Plans
The bill makes a number of changes that are intended to make 401(k) plans which provide for automatic enrollment more attractive to plan sponsors. Among these changes:

Other Changes
H.R. 4 makes a number of other changes. They include:

The DOL will electronically post 5500s on their Web site beginning in 2008. Additionally, employers will be required to post 5500 on their own Intranet sites available for employees.