Employee Benefits – September 2006

This month’s Employee Benefits Newsletter focuses on the major provisions of the Pension Protection Act of 2006 which was enacted August 17, 2006 (the "PPA"). Most of the publicity and many of the provisions of the PPA involve defined benefit plan funding and related issues. Pension plan actuaries have prepared their own detailed summaries of these very technical provisions. Our summary describes other key provisions of the PPA.

Faster vesting for defined contribution plans

. Since 2002, matching contributions have been subject to a faster vesting schedule than required for other employer contributions in defined contribution plans. Under the PPA, all employer contributions for plan years beginning on or after the effective date will be subject to the faster schedule. As a result, contributions for future years (but not necessarily existing account balances) must vest at least as fast as the "cliff" vesting requirement of three years or as the 20% schedule over two through six years.