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Some Lessor Provisions of the Pension Protection Act of 2006

The media reporting around the defined contribution provisions in the Pension Protection Act of 2006 has focused on just a few key issues: advice, automatic enrollment and EGTRRA permanence. But there are over 30 other provisions. Here are a few highlights on other sections of the bill as described in the Profit Sharing/401k Council of America document "Pension Protection Act of 2006 - Description of DC Provisions."

Section 410 -- Missing Participants: In addition to existing options or requirements, terminating individual account and profit sharing plans may transfer unclaimed benefits to the PBGC in accordance with ERISA section 4050. Effective for distributions made after final regulations. Effective for distributions made after final regulations.

Section 504 -- Electronic Display of Annual Report Information: (This infomation revised on November 16, 2006.) ERISA section 104(b) is amended to require that "identification and basic plan information and actuarial information included in the annual report" be filed in electronic format that accommodates display on the Internet. The DOL will establish a web site to display the required information within 90 days of the filing date. The information must also be displayed on sponsors Intranet sites maintained to communicate with employees and not the public, if such site exists. Effective for plan years beginning after December 31, 2007.

Section 507 -- Notice of Freedom to Divest Employer Securities and Real Property: Creates new ERISA section 101(l) that requires that an individual be notified of their right to diversify company stock not later than 30 days before the first date they are eligible to do so for any type of contribution (i.e., elective deferrals and employer contributions). The notice must describe the importance of diversifying the investment of retirement assets. Effective for plan years beginning after December 31, 2006.

Section 624 -- Treatment of Investment of Assets by Plans Where a Participant Fails to Exercise Investment Election: New ERISA 404(c)(5) provides that, for purposes of 404(c)(1), a participant in an individual account plan meeting certain notice requirements shall be treated as exercising control over the assets with respect to contributions and earnings that, absent investment direction from the participant, are invested in accordance with regulations prescribed by the Secretary of Labor. The notice must follow the existing 401k safe harbor rules relating to notices being accurate, comprehensive, and written in an understandable manner. Effective for plan years beginning after December 31, 2006. Final regulations shall be issued within six months of enactment.

Section 812 -- Saver's Credit: The Saver's Credit, that is scheduled to expire at the end of 2006, is made permanent.

Section 826 -- Modifications of Rules Governing Hardships and Unforeseen Financial Emergencies: The Secretary of Treasury is directed, within 180 days of enactment, to modify the hardship distribution rules to provide that if an event would constitute a hardship under the plan if it occurred with respect to the participant's spouse or dependent, it will also constitute a hardship if the event occurs to a beneficiary under the plan with respect to the participant. Applicable to 401k, 403b, 409A, and 457 arrangements.

Section 1103 -- Reporting Simplification: Instructs the Secretaries of Labor and Treasury to develop a simpler annual filing requirement for plans with less than 25 employees for plan years beginning after December 31, 2006. Also provides that one-participant plans with assets less than $250,000 do not have to file an annual report, effective for plan years beginning on or after January 1, 2007.

Rick Meigs, President, 401khelpcenter.com, LLC

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