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Critical Issues for Defined Benefit Plan Sponsors (3:00 Panel) Brigen L. Winters Groom Law Group October 19, 2006.

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Presentation on theme: "Critical Issues for Defined Benefit Plan Sponsors (3:00 Panel) Brigen L. Winters Groom Law Group October 19, 2006."— Presentation transcript:

1 Critical Issues for Defined Benefit Plan Sponsors (3:00 Panel) Brigen L. Winters Groom Law Group October 19, 2006

2 2 Credit Balances Carryover and pre-funding balances permitted  May offset MRCs if 80% or more funded for preceding year (with pre-funding balance subtracted from assets) Subtract all credit balances from assets for:  Determining “shortfall”  Benefit restrictions  At-risk rules  4010 filings and certain disclosure rules  Section 420 transfer rules

3 3 Credit Balances Waiver of credit balances  Sponsor may voluntarily waive  Required waiver, if necessary, to avoid certain benefit restrictions if collectively bargained plan  Note, benefit restrictions, e.g., required freeze, may breach CBA  Required waiver, if necessary, to avoid lump sum restrictions, applicable to all plans with lump sums.

4 4 Transition to New Funding Rules Phase-in of funding target  2008 – 92%  2009 – 94%  2010 – 96%  2011 – 100% Key issues regarding phase-in  Not subject to DRC in 2007  Meet applicable threshold each year  Subtraction of credit balances generally not required

5 5 Transition to New Funding Rules If qualify for and funded to applicable threshold:  Not required to subtract credit balances in determining “shortfall”  Avoid benefit restrictions  (Note, at-risk rules could still apply) If do not qualify for or not funded to applicable threshold:  100 funding target immediately  Reduction of assets by credit balances in determining shortfall and whether benefit restrictions apply

6 6 Transition to New Funding Rules Importance of 2007 funding status  Whether or not DRC affects eligibility for phase-in  Look-back rules for at-risk status for 2008  Prior year “presumption rule” for benefit restrictions for 2008  Treasury to prescribe methods of estimation for 2007  May need credit balance waiver rules for 2007


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