Automatic Enrollment and Other Need-To-Know Provisions of the Pension Protection Act of 2006
Tax Exempt and Government Entities Employee Plans 2007 IRS Nationwide Tax Forum
Pension Protection Act of 2006
• Signed into Law on 8/17/06
– Numerous effective dates
• Funding Changes • Defined Benefit Plans • Automatic Enrollment
Automatic Enrollment
• IRS Approved in Rev Rul 98-30 • PPA Protects Auto Enrollment Plans Against State Wage Laws • Fiduciary Relief for Default Investments
Automatic Enrollment
• Optional Nondiscrimination Safe Harbor Available in 2008
– Required:
• • • • Notification Default contributions Matching or non-elective contributions Vesting after 2 years of service
EGTRRA Permanent
• Increased Limits
– – – – Elective deferrals Catch-up contributions Compensation limits Deductible contributions to profitsharing plans – 415 limits
• Saver’s Credit
EGTRRA Permanent
• Designated Roth Accounts for 401(k) and 403(b) Plans
– After-tax contributions – Separate account – Qualified distributions excludable from gross income
Distributions
• • • • • • Notice and Consent Qualified Charitable Contributions Hardships Reservists In-Service Distributions Rollovers to Nonspouse Beneficiary
Diversification
• PPA Added Code §401(a)(35) • Applies to DC Plans (Other Than Certain ESOPs) • Requires Participants’ Right to Divest ER Securities in Account • Guidance in Notice 2006-107
Miscellaneous Provisions
• Direct Deposit of Tax Refunds • Vesting • Prohibited Transactions
– Exemption for provision of investment advice – Rules relating to financial investments – Correction period for certain transactions involving securities and commodities
Voluntary Correction
• Administrative Policy Since 1991, Now Law • What if a Mistake is Made?
– Self-Correction Program – Voluntary Correction Program – Audit Closing Agreement Program
What to Look for in the Future
• DB (k) • Form 5500 Filing • Plan Amendments
Retirement Plan Assistance
• www.irs.gov/ep
– Includes page dedicated to PPA
• (877) 829-5500
– Customer Account Services
• RetirementPlanQuestions@irs.gov • Newsletters