Newsletter Vol. 1, No. 1 September 1997

The Act includes the following provisions affecting pension and other qualified plans:

• Treasury is directed to adopt regulations providing that a plan accepting a direct rollover from another plan need not require a determination lefler from the sending plan, effective for rollovers after 1997.
  
  
• The provisions of the Code and ERISA barring assignment or alienation of plan benefits are modified to permit certain assignments where the obligation arises from a conviction of a crime involving the plan, a judgment entered in connection with a breech of fiduciary duty regarding the plan, or a settiement agreement between the participant and the Labor Department or the PBCG in connection with a breach of fiduciary duty regarding the plan, effective for orders and agreements on or after August 5, 1997.
  
• The dollar limit on involuntary cash-outs is raised from $3,500 to $5,000, effective for plan years beginning after 1997.
  
• Employers are relieved from filing copies of summary plan descriptions and summaries of material modifications with the Labor Department (but they must be provided upon request), effective after August 5, 1997.
  
• The Treasury and Labor Departments are directed to issue guidance to interpret the notice, election, consent, disclosure and other requirements (and related record keeping requirements) under the Code and ERISA relating to retirement plans to the use of e mall, voice response systems, computers and other new technologies, and to permit paperless transactions, to be issued no later than December 31, 1998.
  
• The initial level excise tax on prohibited transactions in increased from 10% to 15%, effective for transactions occurring after August 5, 1996.
  
• The full funding limit for deferred benefit plans, enforced with a 10% excise tax, is increased gradually beginning in 1999 and thereafter, and a longer amoritization period is provided.
  
• An exception is added to the 10% excise tax on non deductible contributions to exempt situations where the non-deductible amount is attributable to 401(k) deferrals and matching contributions, effective after 1997.
  
• The employer securities and real property exceptions in the prohibited transaction rules are modified to generally bar mandatory investment in such employer property of a participant's 401(k) deferrals (and earnings), effective after 1998. The exceptions include voluntary investment and ESOPs.
  
• Contributions limits, reporting and notification requirements, an exception for 401(k) SIMPLE plans from the top heavy rules and other legislation was adopted for SIMPLE plans, generally effective after 1996.
  
• The basis recovery rules, applicable to contributory pension plans, are modified to provide simplified rules for joint and survivor annuity purposes, effective for annuity starting dates after 1997.
  
• All 401 and 403(b) plans maintained by state and local government units and their agencies and instrumentalities (but not those maintained by the federal government and its agencies and instrumentalities) are exempted from all non discrimination requirements (except for the limit on compensation) and deemed to be in compliance with such requirements for all past periods.
  
• The date whereby plan amendments must be adopted to bring plans into compliance with the 1997 legislation is the first day of the first plan year beginning on or after January 1, 1999, provided that the plan is operated in compliance with the Act in the meantime.

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