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ARTICLE · 21 DECEMBER 2006

Pension Protection Act Of 2006: Changes For Defined Contribution Plans

The Pension Protection Act of 2006 ("PPA"), which was signed into law on August 17, 2006, made many significant changes to laws affecting defined contribution plans. This Client Alert briefly describes the PPA changes applicable to defined contribution plans that plan sponsors should consider now for implementation in 2007.

United StatesEmployment and HR

Article by Rick Arenburg, Armin Brecher , Paul Concannon, Ed Emerson, Cass Hollis , Chris Rylands, Steve Schaffer and Stacey Stewart

The Pension Protection Act of 2006 ("PPA"), which was signed into law on August 17, 2006, made many significant changes to laws affecting defined contribution plans. This Client Alert briefly describes the PPA changes applicable to defined contribution plans that plan sponsors should consider now for implementation in 2007.

Accelerated Vesting

. Employer contributions for plan years beginning after 2006 must vest at least as rapidly as either a threeyear cliff vesting schedule (100% vested after three years of service) or a six-year graded vesting schedule (20% vesting for each year of service beginning with the second year of service). These vesting schedules are already required for employer matching contributions. Special rules apply to collectively bargained plans and to leveraged employee stock ownership plans ("ESOPs") that have an outstanding

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