The PPA's Influence on Corporate Defined Benefit Plans

Since the end of 2004, more large pension plans terminated, leading the Bush Administration and Congress to move forward on the legislative changes included in the Pension Protection Act of 2006. Under the PPA, a plan sponsor's minimum contribution will be based on the plan's target normal...

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Bibliographic Details
Published inThe Planner Vol. 22; no. 2; p. 1
Main Author Gray, R Michael
Format Trade Publication Article
LanguageEnglish
Published New York American Institute of Certified Public Accountants 01.03.2007
Subjects
Defined benefit plans
Lump sum distributions
Pension Protection Act 2006-US
United States > US
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Summary:Since the end of 2004, more large pension plans terminated, leading the Bush Administration and Congress to move forward on the legislative changes included in the Pension Protection Act of 2006. Under the PPA, a plan sponsor's minimum contribution will be based on the plan's target normal cost and the difference between its funding target and the value of its assets. If the plan's assets are less than the funding target, the plan has an unfunded liability. The PPA introduces the concept of at risk plans to prevent further deteriorations of underfunded plans. While provisions of the PPA could lead to increased contributions and potentially healthier plans, they also could lead to a large number of frozen or closed defined benefit plans and impair the establishment of new plans. In addition, they could prevent many employees from taking lump sum distributions directed to IRA rollovers.
ISSN:0895-3570