For Your Benefit – Savitz Fall 2009 Newsletter
Return to Newsletter
PPA Required Amendments for Defined Benefit Plans
Defined contribution plans are not alone in facing a significant amendment deadline in the coming months.
When the Pension Protection Act of 2006 was passed, Section 1107 of the Act allowed plan sponsors until
the last day of the first plan year beginning on or after January 1, 2009 to formally amend their plans
to comply with the various requirements of PPA. (Governmental plans are allowed until the end of the
2011 plan year to adopt their required PPA amendments.) During the period after the effective date
and before the amendment date, plans were required to operate in compliance with the requirements of PPA.
Several other pieces of legislation passed in the last few years — many of which also apply to defined
contribution plans, as noted in the previous article — are being included in the so-called "PPA
Amendments" for many defined benefit plans to ensure that all required amendments are captured timely.
Among these are amendments required by the Pension Funding Equity Act of 2004 (PFEA), the Heroes Earnings
Assistance and Relief Tax Act of 2008 (HEART Act), and the Worker, Retiree and Employer Recovery Act of
2008 (WRERA).
Among the items that may be included in the PPA amendment are:
- Benefit restrictions applicable for underfunded plans,
- Mandated minimum lump sum assumptions,
- Qualified Optional Survivor Annuity (QOSA) requirements,
- Allowable extension of the QJSA notice period to up to 180 days before commencement,
- Changes to direct rollover requirements for Roth IRAs, after-tax contributions, and beneficiary distributions,
- Technical changes to comply with the final IRC Section 401(a)(9) minimum distribution requirement regulations,
- Interest and mortality assumptions applicable to Section 415 limits,
- Adjustments to the provisions applicable to lump sum restrictions for the top 25 HCEs, and
- Optional and mandatory HEART Act provisions relating to death and disability benefits.
Many of these provisions are mandatory and do not require plan sponsor election or decisions. Where plans
have been operationally compliant with these requirements, the amendments are merely a means of formalizing
the current practice already in place. Other amendments may require further decisions on the part of plan
sponsors before amendments can be finalized.
The consequences of failing to adopt timely PPA amendments can be severe, ranging from monetary penalties
to possible plan disqualification. Plan sponsors who have not already done so should contact their plan
document preparer to ensure that all amendments are being prepared for timely adoption prior to the end of
the 2009 plan year.
Next Article