COLLECTED WISDOM™ On DB(k) Plans

Beginning in 2010, an employer may adopt an "eligible combined plan." Consisting of a defined benefit plan and a 401k plan held in a single trust, using one plan document, one summary plan description, one Form 5500, and one audit (if required). The DB(k) plan may be used only by employers with no more than 500 employees.

The DB(k) would be deemed NOT top-heavy or subject to non-discrimination testing where it meets specific safe harbor formulas for both the DB and the 401k elements of the plan. The DB component is either a 1% of final average pay formula for up to 20 years of service, or a cash balance formula that increases with the participant's age. The 401k component must provide automatic enrollment and a fully vested 50% match on the first 4% of deferred pay.

Some source material (although there isn't much being published about them at this point):

The DB(k): Pension of the Future

DB(k) Rules

DB(k) Plans to Offer Opportunity in 2010

Sec. 903 of the PPA Which Deals With DB(k) Plans

DB(k): New Pension Option For Small Biz - Summary: Small businesses will get a new retirement savings option in 2010 -- the DB(k). Adoption is expected to be slowed, however, by the sluggish economy and missing regulatory details. Located at: Financial Advisor Magazine, November 2009. Click on headline to read full article.

Defined Benefit 401ks Set to Make Their Debut - Summary: Why haven't you heard more about the DB/401k? The authority for this new plan, which becomes available on Jan. 1, 2010, was buried deep within the massive Pension Protection Act of 2006. But interest in DB/401ks is expected to heat up during the coming year. Located at: Accountingweb.com, October 2009. Click on headline for full article.

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