1.
How to Put EGTRRA Into Play
An
Educational
Seminar
Presented By
November 28, 2001

2.
A
L
L
General Statements
• All plans affected.
• Optional Provisions vs. Mandatory Provisions
P
L
A
N
S
• Automatic Provisions vs. Provisions Requiring
Amendment

3.
A
L
L
P
L
A
N
S
Effective Dates (General)
• Defined Contribution (DC) Plans
 Most provisions are effective for the first plan year
beginning on or after January 1, 2002.
• Defined Benefit (DB) Plans
 Most provisions are effective for the first limitation
year ending on or after December 31, 2001.

4.
A
L
L
P
L
A
N
S
Plan Amendments
• IRS Sample Amendment
 Sample language to amend plans for EGTRRA
provisions.
 Cannot be used “off the shelf.”
 Must be reviewed to ensure consistency between
existing document and amendment.

5.
A
L
L
Plan Amendments
• Deadlines
P
 “Good Faith Amendment” by the end of the first
plan year for which it is effective (December 31, 2002
for calendar year plans).
L
 If amendment will cut back a benefit, it must be
adopted prior to the plan year in which it is effective.
A
 Full amendment and restatement by the end of the
2005 plan year.
N
S
 Does not affect GUST restatements.

6.
D
Timing
B
P
L
A
N
S
• Effective date of defined benefit
changes:
 Plan years beginning after 1/1/2001.
• Change of plan valuation date:
 Up to one year prior to the beginning of the plan
year.
 At the election of the employer.
 Not available to underfunded plans.

7.
D
Top-Heavy
B
• No top-heavy minimum for frozen plans:
P
L
A
N
S
Old Law
New Law
Top-heavy benefits
continue to accrue for
non-key employees in
frozen plans.
No accrual of topheavy benefits in
frozen plans for nonkey employees.

8.
D
B
Full Funding Limit
• Full funding limit changes:
Old Law
P
L
A
N
S
Current liability full
funding limits determined
Maximum Deduction Rule;
this could result in nondeductible contributions.
New Law
•New deductibility phase-in
accelerated to 2003, and then
repealed;
•Small plans with 100
participants or less allowed to
fund up to unfunded current
liability if covered by PBGC
insurance program;
•Terminating plans allowed to
fund enough to make plan
sufficient to pay benefits.

9.
D
B
P
L
A
N
S
Excise Tax
• 10% excise tax does not apply to DB plans:
Old Law
New Law
10% excise tax on nondeductible contributions.
Repeal of excise tax
assessed on DB plan
contributions.

10.
D
B
Excise Tax
• Amendment Notices:
P
Old Law
New Law
L
No excise tax assessed if
proper notice not given.
If proper notice not
given, a severe excise
tax will be assessed.
A
N
S

11.
D
Assumptions
B
Participant #1
Participant #2
$250,000
$40,000
L
Age
52
35
A
NRD
62
62
N
SSRA
66
67
S
NRB Formula
P
Compensation
Lesser of DB dollar limit or
100% of compensation

12.
D
B
Dollar Limits
Old Law
Plan
Annual Benefit at NRA
Retirement benefits reduced
for Plan Normal Retirement
Age (NRA) less than 65 and
Social Security Retirement
Ages.
NRA
Social Security Retirement Age
L
A
New Law
N
No reduction of retirement
benefits from age 62 to 65
for Social Security
Retirement Ages.
S
66
67
62
112,000
105,000
98,000
63
121,333
112,000
105,000
64
130,667
121,333
112,000
65
P
65
140,000
130,667
121,333
Plan
NRA
Annual
Benefit
62
160,000
63
160,000
64
160,000
65
160,000

13.
D
Annual Normal Retirement Benefit
B
Participant #1
Participant #2
$250,000
$40,000
Age
52
35
NRD
62
62
SSNRD
66
67
100% Compensation
$250,000
$40,000
DB Dollar Limit
105,000
98,000
Actual
105,000
40,000
100% Compensation
$250,000
$40,000
DB Dollar Limit
160,000
160,000
Actual
160,000
40,000
Compensation
P
L
A
Old Law:
New Law:
N
S

14.
D
Annual Contributions
B
Participant #1
Participant #2
$250,000
$40,000
Age
52
35
NRD
62
62
SSNRD
66
67
$105,000
$40,000
$145,000
97,208
8,082
105,290
Retirement Benefit
$160,000
$40,000
$200,000
Contribution
148,126
8,082
156,208
Compensation
P
L
A
N
S
Total
Old Law:
Retirement Benefit
Contribution
New Law:

15.
D
Assumptions
C
P
L
A
N
S
Participant
#1
Compensation
Age
Deferrals
Match
Profit Sharing
Participant
#2
$250,000
52
10%
50%
15%
$ 40,000
35
10%
50%
15%

16.
D
Compensation
C
P
L
A
Compensation
Age
Deferrals
Match
Profit Sharing
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$170,000
$200,000
$220,000*
N
S
*Projected limitation due to indexing.
Participant
#2
$ 40,000
35
10%
50%
10%
$ 40,000
$ 40,000
$ 40,000
Total
$290,000
$210,000
$240,000
$260,000

17.
D
Salary Deferrals (10%)
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
Actual
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$25,000
$10,500
$11,000
$15,000
Participant
#2
$ 40,000
35
10%
50%
10%
$
$
$
$
4,000
4,000
4,000
4,000
Total
$290,000
$29,000
$14,500
$15,000
$19,000

18.
D
Employer Match (50%)
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
Actual
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$12,500
$ 5,250
$ 5,500
$ 7,500
Participant
#2
$ 40,000
35
10%
50%
10%
$
$
$
$
2,000
2,000
2,000
2,000
Total
$290,000
$14,500
$ 7,250
$ 7,500
$ 9,500

19.
D
Profit Sharing (10%)
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
Actual
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$25,000
$17,000
$20,000
$22,000
Participant
#2
$ 40,000
35
10%
50%
10%
$
$
$
$
4,000
4,000
4,000
4,000
Total
$290,000
$29,000
$21,000
$24,000
$26,000

20.
D
Sub-Total of Contributions
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
Actual
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$62,500
$32,750
$36,500
$44,500
Participant
#2
$ 40,000
35
10%
50%
10%
$10,000
$10,000
$10,000
$10,000
Total
$290,000
$72,500
$42,750
$46,500
$54,500

21.
D
C
Annual Additions Limit
Old Law: Lesser of $35,000 or 25% of compensation.
New Law: Lesser of $40,000 or 100% of compensation.
P
L
A
N
S
2001 Limit
2001 Actual
2001 Excess
Participant
#1
$35,000
$32,750
$0
Participant
#2
$10,000
$10,000
$0
2002 Limit
2002 Actual
2002 Excess
$40,000
$36,500
$0
$40,000
$10,000
$0
2006 Limit
2006 Actual
2006 Excess
$44,000*
$44,500
$500
$40,000
$10,000
$0
*Projected limitation due to indexing.

22.
D
C
Maximum Deductible Contribution
Old Law: 15% of compensation.
New Law: 25% of compensation.
P
L
A
N
S
2001 Limit
2001 Actual
2001 Excess
2002 Limit
2002 Actual
2002 Excess
2006 Limit
2006 Actual
2006 Excess
Participant
#1
Participant
#2
$32,750
$0
$10,000
$0
$29,325
$42,750
$13,425
$10,000
$0
$60,000
$46,500
$0
$10,000
$0
$65,000
$54,000*
$0
$36,500
$0
$44,000*
$0
*Reduced by $500 due to exceeding Annual Additions Limit.
Total

23.
D
Sub-Total Adjusted for Limitations
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
Actual
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$62,500
$21,882
$36,500
$44,000
Participant
#2
$ 40,000
35
10%
50%
10%
$10,000
$ 7,443
$10,000
$10,000
Total
$290,000
$72,500
$29,325
$46,500
$54,000

24.
D
Catch-Up Contributions
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
2001
2002
2006
Participant
#1
$250,000
52
10%
50%
10%
$0
$ 1,000
$ 5,000
Participant
#2
Total
$ 40,000
35
10%
50%
10%
$290,000
$0
$0
$0
$0
$0
$5,000

25.
D
Total Contributions
C
P
L
A
N
S
Compensation
Age
Deferrals
Match
Profit Sharing
2001
2002
2006
Participant
#1
Participant
#2
$ 40,000
35
10%
50%
10%
$290,000
$21,882
$37,500
$49,000
$ 7,443
$10,000
$10,000
$29,325
$47,500
$59,000
$250,000
52
10%
50%
10%
Total

26.
D
C
Distributions
• Hardships:
Old Law
New Law
P
•Eligible for rollover;
•Not eligible for rollover;
L
•12 month contribution
suspension;
•6 month contribution
suspension;
A
•10% penalty for early
withdrawal.
•10% penalty for early
withdrawal.
N
S

27.
D
C
Distributions
• Involuntary Cash-Outs:
Old Law
P
L
New Law
•Entire vested account
balance (accrued benefit)
considered for $5,000
limit.
•Rollover account excluded
for $5,000 limit.
Deferrals
$3,000
Match
$1,500
N
Rollover
$1,000
Total
$5,500
S
Not eligible for
involuntary cash-out.
A
Deferrals
$3,000
Match
$1,500
Rollover
Ignored
Total
$4,500
Eligible for involuntary
cash-out.

28.
D
C
P
L
A
N
S
Distributions
• Rollovers:
Old Law
New Law
Only permitted within
like plan types:
Permitted between
different plan types:
•Qualified plan to
qualified plan
•Qualified plan
•403(b) to 403(b)
•403(b)
•457
•IRA

29.
M
I
S
C
E
L
L
A
N
E
O
U
S
Tax Credits for Low Income Savers
Old Law
New Law
No tax credit for low and
moderate income savers.
•50% tax credit for
contributions up to $2,000 to
IRA, 401(k), 403(b),
SIMPLE, SEP or 457 plans;
•Full credit available to joint
filers with adjustable gross
income (AGI) under
$30,000 and phased out for
AGI over $50,000;
•Effective in 2002;
•Expires in 2006.