House passes Pension Protection Technical Corrections Act

House passes Pension Protection Technical Corrections Act final action delayed till after recess

Mike Habib, EA

The House passed the “Pension Protection Technical Corrections Act of 2007” (H.R. 3361) by voice vote on Mar. 12, 2008. The bill would make technical corrections to the Pension Protection Act of 2006 (PPA). The Senate had passed their version of the “Pension Protection Technical Correction Act of 2007” (S. 1974), by unanimous consent on Dec. 19, 2007. Differences between the House and Senate versions will have to be worked out in conference, after Congress returns from its upcoming two-week recess, sources told RIA.

“There is one item, called smoothing, that we viewed as a particularly important technical correction but is not included in this bill because one of the parties to the process said it was not technical,” said Paul Ryan (R-WI) in remarks on the House floor. “The Senate-passed bill included smoothing,” Ryan added.

“I believe plans will freeze and workers will lose their pensions because asset smoothing is not addressed on the suspension calendar before we go out, before this critical April 15 deadline for pension funding,” said Earl Pomeroy (D-ND).

According to a description of the bill provided by the House Ways and Means Committee, the bill would address the funding status of single-employer plans and multiemployer plans, interest rates, Pension Benefit Guaranty Corporation (PBGC), disclosure, prohibited transactions, benefit accrual standards, revenue, and increase in pension plan diversification. Specifically, the bill would include provisions on:

  • the prohibition on increases in benefits while a waiver is in effect (ERISA § 302(c)(7)(A),Code Sec. 412(c)(7)(A));
  • minimum funding standards (ERISA § 302(d)(1), Code Sec. 412(d)(1));
  • the determination of target normal cost (ERISA § 303(b), (i), Code Sec. 430(b), (i));
  • the determination of at-risk status (ERISA § 303(i)(4)(B), Code Sec. 430(i)(4)(B));
  • quarterly contributions (ERISA § 303(j)(3), Code Sec. 430(j)(3));
  • the definition of “prohibited payment” (ERISA § 206(g)(3)(E), Code Sec. 436(d)(5));
  • small plans (ERISA § 206(g)(10), Code Sec. 436(k));
  • the notice requirement for single employer plans (PPA §103(b), ERISA § 101(j));
  • the definition of “single employer plan” (Code Sec. 436(l));
  • the restrictions on funding of nonqualified deferred compensation plans by employers maintaining underfunded or terminated single-employer plans (PPA §116, Code Sec. 409A(b)(3)(A)(ii));
  • the shortfall funding method (PPA §201(b));
  • multiemployer plan notice requirements (ERISA § 305(b)(3)(D), (e)(8)(C), Code Sec. 432(b)(3)(D), (e)(8)(C));
  • implementation and enforcement of the default schedule (ERISA § 305(c)(7), (e)(3)(C), Code Sec. 432(c)(7), (e)(3)(C));
  • the restriction on payment of lump sums while a plan is in critical status (ERISA § 305(f)(2)(A), Code Sec. 432(F)(2)(A));
  • a definition of the term “plan sponsor” (Code Sec. 432(i)(9));
  • the excise tax on trustees for failure to adopt a timely rehabilitation plan (Code Sec. 4971(g)(4));
  • the effective date of the excise tax provisions (PPA §212(c));
  • the extension of the replacement of the 30-year Treasury Rates (PPA §301);
  • the interest rate assumption for determination of lump-sum distributions (PPA § 302, Code Sec. 415(b)(2)(E));
  • plans covered by the missing participant program (ERISA § 4050(d));
  • defined benefit funding notice and disclosure of withdrawal liability (PPA §501, ERISA § 101(f));
  • access to multiemployer pension plan information (PPA §502, ERISA § 101(k), (l), ERISA § 4221(e));
  • disclosure of termination information to plan participants (PPA § 506, ERISA § 4041, ERISA § 4042);
  • periodic pension benefit statements (PPA §508, ERISA § 209(a));
  • notice to participants or beneficiaries of blackout periods (PPA §509, ERISA § 101(i)(8)(B));
  • prohibited transaction rules relating to financial investments (PPA §611, ERISA § 408(b)(18)(C), Code Sec. 4975(d)(21)(C));
  • preservation of capital (ERISA § 204(b)(5)(B)(i)(II), Code Sec. 411(b)(5)(B)(i)(II));
  • application of present-value rules (ERISA § 203(f)(1)(B), Code Sec. 411(a)(13)(A)(ii));
  • the effective date of PPA §701(e);
  • an increase in the deduction limit for single-employer plans (Code Sec. 404);
  • updating deduction rules for combination of plans (Code Sec. 404(a)(7));
  • allowing direct rollovers from retirement plans to Roth IRAs (Code Sec. 408A(c)(3)(B), Code Sec. 408A(d)(3)(B));
  • allowing rollovers by nonspouse beneficiaries of certain retirement plan distributions (Code Sec. 402(c)(11), Code Sec. 402(f)(2)(A));
  • the use of excess pension assets for future retiree health benefits and collectively bargained retiree health benefits (Code Sec. 420);
  • distributions from governmental retirement plans for health and long-term care insurance for public safety officers (PPA §845, Code Sec. 402(l));
  • annuities to surviving spouses and dependent children of special trial judges (Code Sec. 3121(b)(5)(E), and Social Security Act sec. 210(a)(5)(E));
  • provisions for recall (Code Sec. 7443B);
  • requiring defined contribution plans to provide employees with the freedom to invest their plan assets (PPA §901, Code Sec. 401(a)(35)(E));
  • increasing participation through automatic contribution arrangements (PPA §902, Code Sec. 414(w));
  • the treatment of eligible combined defined benefit plans and qualified cash or deferred arrangements (PPA §903, Code Sec. 414(x)(1), ERISA § 210(e));
  • extension of tier II railroad retirement benefits to surviving former spouses (PPA §1003); and
  • no reduction in unemployment compensation as a result of pension rollovers (PPA §1105).
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