ERISA, of course, requires adherence to a host of deadlines, and the failure to meet some of them can have serious consequences for a retirement plan sponsor. Here’s a new batch of such deadlines added by the Pension Protection Act of 2006 (PPA) that could affect defined benefit pension plans for 2008 calendar year plans.
The PPA provides benefit accrual and payment restrictions for underfunded pension plans. I’ll neatly bypass the technical stuff because the point is that timing is everything with respect to when the actuarial valuation is performed. If it’s not done "timely", even a well funded pension plan can be swept under these restrictions.
For example, if the actuarial valuation of a pension plan is not performed before October 1 for a calendar year plan, then the plan is presumed to be less than 60% funded -regardless of actual funded status – and the most severe benefit restrictions would apply.
There are a number of administrative practices that a plan sponsor can do to avoid such adverse consequences. But everyone involved – the plan sponsor and advisors – have to stay in the moment.
Hat tip to Ron Willour, Enrolled Actuary, owner of Indianapolis-based Omega Retirement Plans, Inc.
Picture by Chris Garrett on his DSLR Blog, Adventures in Digital Photography.