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PBGC Issues Final Rule Fixing the Termination Date when Sponsor is in Bankruptcy

The Pension Benefit Guaranty Corporation published a final rule effective July 14, 2011, to implement a change to the benefits PBGC pays. Under the Pension Protection Act of 2006, when an underfunded pension plan terminates during the bankruptcy of the plan sponsor, the date that the sponsor’s bankruptcy petition was filed is treated as the plan’s termination date for purposes of determining (1) the amount of benefits PBGC guarantees, and (2) the amount of benefits in priority category 3 in the asset allocation. The change applies if the bankruptcy petition was filed on or after September 16, 2006. A copy can be found here.

Bipartisan Bill Introduced in Senate to Reduce “Leakage” from 401(k) Plans

Bipartisan legislation was recently introduced to the U.S. Senate by Senators Herb Kohl (D-WI) and Mike Enzi (R-WY) to reduce leakage (or loss from retirement savings) from 401(k) plans. The bill, referred to as the “Savings Enhancement by Alleviating Leaking in 401(k) Savings Act of 2011,” if enacted would (1) extend the time employees have to repay plan loans; (2) reduce the overall number of loans taken to three at one time; (3) allow participants to continue making additional contributions during the six-month period following a hardship withdrawal; and (4) ban 401(k) debit cards. The bill is currently in committee, and its prospects are unclear. A copy of the bill can be found here.

June 2011