Pending Legislation Will Likely Impact All Retirement Plans

Upcoming, inevitable legislation — the House passed its version on Friday, July 28; the Senate will undoubtedly pass its version shortly — will have a significant impact on the funding of defined-benefit plans for the 2006 plan year. A separate Financial Accounting Standards Board exposure draft will have dramatic changes in how defined benefit plan liabilities are reflected on employers balance sheets. Defined contribution plans, such as 401(k) plans, will be impacted in how outside consultants can provide investment advice.

A conference committee is working out the differences between the Senate and House versions of the legislation with the hope of completing the task in August 2006. However, while the House has acted, the Senate has some significant issues to resolve.

Required Action

Employers with defined-benefit plans should have their plans reviewed by their actuary, accountant, and investment advisor to determine the preliminary impact of the likely changes. Employers with defined contribution plans should consult their investment advisors on the impact of providing independent investment education to their employees.

Plante & Moran Can Help

Plante & Moran is available to consult on plan design opportunities to mitigate some of the potentially negative impacts of these new rules. We will be providing more guidance as the new rules are finalized.