The many provisions of the Pension Protection Act of 2006 have various effective dates.  Use the following checklist to make sure your plan is prepared for some of the major changes that were generally effective on January 1, 2007.

• Vesting – All employer contributions made for plan years beginning in 2007 and after, not just matching contributions, must vest on a 3-year cliff or 6-year graded schedule.
• Automatic enrollment – ERISA overrides any state law restricting or prohibiting automatic enrollment (This was effective in August, 2006).
• Benefit Statements – Participants in plans in which participants direct investments must receive a benefit statement every quarter.
• Default investments – ERISA Section 404(c) relief is available if the plan’s default fund follows Department of Labor guidelines and participants receive an annual explanatory notice.
• Diversification out of publicly-traded employer stock – Participants must be permitted to diversify their own contributions immediately, and employer contributions after completing three years of service.
•  3-year phase-in for existing dollars for employees born after 1950.
• 401(k) hardship withdrawal – These are permitted for expenses of the participant’s beneficiary under the plan in the same circumstances as for a spouse or a dependent for tax purposes (pending issuance of IRS rules).
• IRA rollover – A designated non-spouse beneficiary may transfer a death benefit payment to an IRA.

And keep in mind these changes, which are generally effective on January 1, 2008:

• Automatic enrollment – Plan is exempt from ADP and ACP tests and top-heavy rules if safe harbor provisions are satisfied.
• Fidelity bond – The maximum fiduciary bond amount rises to $1,000,000 from $500,000 for plans that hold employer stock.
• Rollover to Roth IRA – Direct rollovers to Roth IRAs are permitted if income limit is met.  Income tax applies, but not the penalty tax for early withdrawal.

   
  
   

This is not an all-inclusive list, and effective dates may differ for certain plans.  Consult your plan’s legal counsel regarding these and other Pension Protection Act requirements that may affect your plan, and the date(s) that they may apply to your plan.