HomeMy WebLinkAboutDocumentation_Pension General_Tab 28_05/04/2009THE LAW OFFICES OF
PERRY ~ JENSEN, LLC
ANN I"I. PERRY
aperry@perryjensenlaw.com
MEMORANDUM
To: Board of Trustees
Tequesta General Employees Pension Plan
From: Bonni S. Jensen
LAW OFFICES OF PERR &JENSEN, LLC
BONNI SPATARA JENSEN
bsjensen@penyjensenlaw.com
Subject: Worker, Retiree, and Employer Recovery Act of 2008 (H.R. 7327)
Date: April, 2009
In December of 2008, Congress passed an emergency package of pension relief
provisions and pension related technical corrections known as "The Worker, Retiree,
and Employer Recovery Act of 2008." It was signed by the President on December 23,
2008.
Below are some important changes for your pension plan:
Market Rates of Interest
This new law allows governmental plans to credit interest at a rate of
interest set by federal, state or local law even if it exceeds the "market rate of
in#erest.
$3, 000 Health insurance exclusion for Public Safety Officers
The law includes self-funded health insurance programs in the current
$3,000 exclusion from income for public safety officers who have their health
insurance premiums deducted and paid by their pension plan.
Required Minimum Distribufians
The new law suspends required minimum distributions (generally
distributions at 70 '/z) from qualified retirement accounts for 2009 (however, the
law does not apply to minimum distributions for 2008). The new law also allows
the beneficiaries not to receive distributions in 2009 for the purpose of beginning
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Board of Trustees
Worker, Retiree and Employer Recovery Act of 2008
April, 2009
Page 2 of 3
the 5 year distribution cycle on distributions received by beneficiaries after the
death of an account holder.
Non-Spouse Rollovers
For plan years beginning after 12/31/09, qualified plans must permit non-
spouse rollovers. This law clarifies that until then they are permitted.
Additionally, the law made some changes and corrections to the private sector.
Below is a summary of some of the changes.
PPA 2006 changes
Single Employer Plans
For Single Employer Private Sector Plans, the law has eased funding
rules allowing plans that fall below the target funding to make subsequent
contributions up to the funding percentage (92% for 2008 and 94% for 2009)
rather than to the 100% amount required under the PPA.
The new law clarifies the use of smoothing to allow recognition of
unexpected assets gains and losses over a 24-month period.
Plans would now be able to look "back" to the previous plan year for the
adjusted funding target attainment percentage rather than the current years
AFTAP. If the plan's funding level falls below 60%, it is generally not permitted
for any distributions of accelerated benefits. The new iaw permits lump sum
payments of $5,000 or less without participant consent, even if the plan is
otherwise prohibited from paying lump sums.
Multi-Employer Plans
The new law relaxes some funding restrictions to help multi-employer
plans during this economic downturn. Specifically, the new law provides a 3 year
extension from 10 to 13 years, of current funding improvement and rehabilitation
period for plans in critical or endangered status for 2008 or 2009.
At-Risk Plans
The law applies the 2008 transition rule for determining at-risk status to
both the 70% and 80% prongs of the 2 tiered determination for plans with more
than 500 participants.
Board of Trustees
Worker, Retiree and Employer Recovery Act of 2008
April, 2009
Page 3 of 3
Small Plans
A sma0 plan is defined as 100 or fewer participants. The act authorizes
the establishment of special rules regarding plans that have an alternative
valuation date for purposes of quarterly contributions and application of benefit
restrictions.
Hybrid Plans
A hybrid is defined as a defined benefit plan that combines elements of
the DB plan with elements of the DC (defined contribution) plan. The new law
changes the vesting rules for hybrid plans, as well as interest crediting rules and
requirements.
Automatic Enrollment
This simply clarifies the permissible withdrawal rules with regard to
Defined Benefit plans.
Combined Plan Deduction Limit
Modifies the deduction limit for employers that maintain one or more DC
plans and one or more DB plans.
Plan Expenses
Defines plan expenses expected to be paid out of plan assets to be
included in calculating the plan's normal cost.
If you have any questions or would like to discuss any part of this in more detail,
please feel free to let me know.
BSJ/adt
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