PPA Tidbits


 On the ABA Joint Committee on Employee Benefits teleconference last Thursday, Bill Bortz from Treasury cleared up some issues that have been creating uncertainty under the newly-enacted Pension Protection Act of 2006:

  • Bill said the restrictions on funding executive benefits when the defined benefit plan is underfunded won't be effective until the funding rules become effective in 2008 or later. The restrictions resulting from the employer's bankruptcy, however, are effective immediately.
  • On faster vesting for cash balance plans, he confirmed it only applies to the cash balance portion of the plan, not to traditional benefits that are grandfathered or benefits for participants in the plan that only have traditional benefits.
  • On how the 2-year averaging works for calculating the funding interest rate under the new rules, he said it was a simple average not a weighted average as under current law.

I've attempted to summarize the new funding rules and related benefits restrictions in one page. Certainly not all you'll need by 2008 when these rules become effective, but hopefully enough to get you started. BNA has established a Pension Protection Act Center with materials from a number of sources to help you come to grips with the new Act.

-- Nell Hennessy
nell.hennessy@fiduciarycounselors.com
202-558-5141