The Pension Protection Act of 2006 ("Act") was enacted into law on August 17, 2006. Many of the provisions of the Act became effective on the date of enactment or will become effective on January 1, 2007, with respect to calendar-year plans. While plan amendments for calendar-year plans are not required prior to December 31, 2009, good faith compliance is now, or will shortly become, required.

      1.       Cash Balance Plans.    Cash balance plans will not be deemed age discriminatory if benefits are fully vested after three years of service and interest credits do not exceed a market rate of return. In addition, age discrimination will not exist if a participant's accrued benefit, determined as of any date, would be equal to or greater than that of any similarly situated younger employee who is or could be a participant. A cash balance conversion must provide that, with respect to each individual participant in the plan immediately before the conversion, the participant's accrued benefits after the conversion are not less than an amount that will prevent the "wearaway" of pre-conversion benefits. Thus, all participants must begin accruing benefits as of the conversion date. Lump sum distributions can be made in an amount equal to the present value of the participant's benefit expressed as the balance in his or her hypothetical cash balance account or as an accumulated percentage of the participant's final average earnings. Newly established plans should contain these provisions. Existing cash balance plans resulting from conversions after June 29, 2005, should be operated in compliance with these requirements. The applicability of the requirements to pre-June 29, 2005, conversions has not yet been addressed by the Internal Revenue Service ("IRS").

      2.       Benefit Statements.    Statements are required for plan years beginning after December 31, 2006. Plans with participant directed accounts must provide quarterly statements and all other defined contribution plans must provide annual statements. Defined benefit plans must provide statements every three years. A plan providing participant directed accounts will be required to provide statements for the calendar quarter ending March 31, 2007. The Department of Labor ("DOL") is to issue one or more model benefit statements satisfying this requirement on or before August 17, 2007.

      3.       Diversification Requirements.     Defined contribution plans — other than certain Employee Stock Ownership Plans ("ESOPs") — that hold publicly traded employer securities must comply with diversification requirements effective for plan years beginning after December 31, 2006. Immediate diversification is required with respect to employer securities acquired with employee contributions, and diversification after three years of service is required with respect to employer securities acquired with employer contributions. Employees must receive a notice of their diversification rights within thirty days prior to becoming eligible to diversify. The IRS issued Notice 2006-107 regarding the diversification requirements and containing certain transition guidance, including additional time for plans existing on December 18, 2006, to comply with the requirements through March 30, 2007. The Notice contains a model notice that must be distributed on or before January 1, 2007, for calendar year plans that comply with the requirements as of that date; otherwise, 30 days before the employer implements the new rules.

      4.       Default Investments.    The Act provides protection from fiduciary liability under ERISA § 404(c) with respect to a participant-directed account when amounts are invested by the fiduciary in the absence of participant investment directions. The protection applies if default investments are made in accordance with regulations to be prescribed by the Secretary of Labor that were proposed on September 27, 2006. However, the DOL has informally indicated that these regulations will undergo substantial changes before they become final. The Act requires notice to participants within a reasonable period of time before each plan year.

      5.       Faster Vesting.   Contributions to all defined contribution plans are subject to a faster three-year cliff or two- to six-year graded vesting schedule effective for contributions made for plan years beginning on or after January 1, 2007.

      6.       Hardships.   Regulations to be issued by the Secretary of the Treasury within 180 days of enactment of the Act will permit an event to constitute a hardship under a 401(k) plan with respect to a non-spouse or non-dependent beneficiary if it would constitute a hardship with respect to a participant's spouse or dependent.

      7.       Plan Assets.   Effective with respect to transactions occurring after the date of enactment, the assets of an investment entity will not be treated as plan assets if immediately after the most recent acquisition of any equity interest in the entity less than 25% of the total value of each class of equity interest in the entity is held by "benefit plan investors." This provision codifies a previously issued provision found in DOL regulations, but narrows the definition of benefit plan investors to exclude government and foreign benefit plans. Also excluded are investments made by plan investment advisers and their affiliates.

      8.       Retiree Health Benefits.    Effective on the date of enactment, a defined benefit plan may transfer excess assets to a separate plan account funding future retiree health benefits, as well as retiree health benefits for the current year.

      9.       Nonqualified Plans.    Effective as of the date of enactment, the Act restricts an employer's ability to fund a nonqualified deferred compensation plan for certain high-paid participants during (a) any period in which the employer's defined benefit plan is "at risk" as defined in the Act, (b) any period in which the employer is a debtor in bankruptcy, and (c) the twelve-month period beginning six months before the termination date of a defined benefit plan, if the plan cannot satisfy its benefit liabilities. Funding a nonqualified plan for such employees during a restricted period will trigger the tax, interest and penalty provisions of Internal Revenue Code § 409A.

      10.       Joint and Survivor Notices.     The period for providing distribution notices to participants and spouses in a plan that offers a qualified joint and survivor annuity is extended to no less than 30 days and no more than 180 days (increased from 90 days) before the date of distribution.

      11.       Rollovers.     Effective January 1, 2007, participants may make direct rollovers of after-tax amounts to any retirement plan. In addition, non-spouse beneficiaries are permitted to directly transfer amounts from a qualified plan to an IRA provided that the IRA is subject to the minimum distribution rules. Individuals who are age 70½ or older can roll over on a tax-free basis up to $100,000 of their IRA balance to charities in 2006 and 2007.

      12.       Reservist Distributions.     Distributions made from elective deferrals under a 401(k) plan to military reservists called to active duty between September 11, 2001, and December 30, 2007, for more than 179 days will not be subject to the 10% early withdrawal penalty tax if the distribution is made during the period of active duty.

      13.       In-Service Distributions.    Effective January 1, 2007, in-service distributions may be made to a participant in a defined benefit plan who attains age 62.