Newsletter Articles

One of the more complicated and confusing parts of qualified plan design and administration is determining the proper definition of compensation. It’s complicated for a number of reasons. First, the term is used in many contexts.

Qualified retirement plans are funded by contributions from employers and/or employees. These contributions are subject to a number of annual limitations. In defined benefit plans, some of the limits are based on the maximum benefit that can be provided at retirement. Adherence to these limitations is important since the qualification of the plan is at stake.

An annual report, Form 5500, is required to be filed with the Department of Labor (DOL) for almost all retirement plans. The report provides basic information about the plan, the plan sponsor, participation and financial information, in addition to certain plan activities.

The Pension Protection Act of 2006 (PPA) changed many of the rules affecting defined benefit and cash balance plans. Recent regulations have helped to make such plans more stable, and consequently more attractive to plan sponsors. New design opportunities now exist for these plans, individually and in combination with defined contribution plans. What follows is an overview of the new provisions along with some plan design illustrations.

Driven by an interest in attracting talented personnel and a natural aversion to the financial risks attached to traditional defined benefit pension plans, employers have embraced 401(k) plans, making them the dominant retirement savings vehicle in the United States. In the past ten years alone, participation has more than doubled.

It’s that time of year again… when retirement plan sponsors need to give their plans the administrative equivalent of an annual physical exam. There are new limitations to consider as well as recurring compliance deadlines and fiduciary responsibilities. All of these matters have become a bit more complicated by the passage of the Pension Protection Act of 2006.

On August 17, President Bush signed the Pension Protection Act of 2006 (PPA) into law. The new law, heralded by many as the most important change to the rules governing retirement benefits since the passage of the Employee Retirement Income Security Act of 1974 (ERISA), aims to increase employee participation in 401(k) and other defined contribution plans by explicitly allowing for the automatic enrollment of employees. It also provides a safe harbor for plan sponsors and other fiduciaries who invest automatically enrolled participants’ contributions in a qualified default investment alternative.

On August 17, 2006, President Bush signed into law the most widespread retirement plan changes of the past five years. One goal of the Pension Protection Act of 2006 (“PPA”) is to strengthen ailing defined benefit pension plans, whose funding deficiencies and distress terminations have left the federal Pension Benefit Guaranty Corporation with a large deficit. But the Act goes much further, impacting defined contribution plans as well. What follows is an overview of the most relevant portions of the new law.

A major business trend in the American workplace is the hiring of part-time, seasonal or temporary employees (collectively referred to in this newsletter as “part-time employees”). Employers believe the advantages to using this alternative workforce include lower wages and significant savings in terms of not providing employee benefits to these individuals.

In an ideal world, we would all contribute as much money as possible to our retirement plans and allow it to grow until we were ready to retire. We could then enjoy our twilight years with comfort and security, be it traveling the world or relaxing by the pool.