DB(k) Plan (Defined Benefit Plan with Elective Deferrals). The DB(K) Plan. The DB(k) is an “eligible combined plan” that will permit a defined benefit plan to accept 401(k) elective deferrals. Eligibility for this type of plan is limited to employers with no more than 500 employees.

Contributions and Vesting. The 401(k) component of the combined plan must provide for a 4% of pay automatic enrollment with a fully vested 50% match on the first 4% of compensation deferred. No annual increase of the automatic enrollment deferral percentage will be applicable to these plans. The DB component must either provide a 1% of final average pay formula for up to 20 years of service or use a cash balance design. Employer non-elective contributions also would be allowed. All employer derived benefits under the DB component and the non-elective contribution under the DC would have to fully vest within three years. Uniform provision of contributions and benefits is required. Permitted disparity may not be used. The plan satisfies the top heavy rules.

Testing. The nondiscrimination rules are satisfied by the 4% automatic deferral and the 50% match amounts on the first 4% contributed. Amounts deferred or matched above those minimums will be subject to ADP/ACP testing.

Timing. The DB(K) plan design may be adopted for plan years beginning in 2010, which coincidently is the first year in which employers will be required to execute the EGTRRA restatement of pre-approved defined benefit plan documents. Currently, preapproved defined benefit plans are to be submitted for EGTRRA review by January 31, 2008. It is anticipated that the IRS will complete their review of these documents by 2010. Whether DB plan documents with DB(K) provisions may be submitted for approval as part of the EGTRRA document will depend on the content of the IRS's cumulative list for 2006. If DB(K) is included, then we will include them in our submission to be made by January 31, 2008. Preliminary discussions with the IRS indicate that the DB(k) will be included in the 2006 cumulative list.

Notice Requirement. A notice must be provided within a reasonable time before the beginning of the plan year.