Critical Issues for Defined Benefit Plan Sponsors (3:00 Panel)

1. Critical Issues for Defined Benefit Plan Sponsors(3:00 Panel) Brigen L. Winters Groom Law Group October 19, 2006

2. Credit Balances • Carryover and pre-funding balances permitted • May offset MRCs if 80% or more funded for preceding year (with pre-funding balance subtracted from assets) • Subtract all credit balances from assets for: • Determining “shortfall” • Benefit restrictions • At-risk rules • 4010 filings and certain disclosure rules • Section 420 transfer rules

3. Credit Balances • Waiver of credit balances • Sponsor may voluntarily waive • Required waiver, if necessary, to avoid certain benefit restrictions if collectively bargained plan • Note, benefit restrictions, e.g., required freeze, may breach CBA • Required waiver, if necessary, to avoid lump sum restrictions, applicable to all plans with lump sums.

4. Transition to New Funding Rules • Phase-in of funding target • 2008 – 92% • 2009 – 94% • 2010 – 96% • 2011 – 100% • Key issues regarding phase-in • Not subject to DRC in 2007 • Meet applicable threshold each year • Subtraction of credit balances generally not required

5. Transition to New Funding Rules • If qualify for and funded to applicable threshold: • Not required to subtract credit balances in determining “shortfall” • Avoid benefit restrictions • (Note, at-risk rules could still apply) • If do not qualify for or not funded to applicable threshold: • 100 funding target immediately • Reduction of assets by credit balances in determining shortfall and whether benefit restrictions apply

6. Transition to New Funding Rules • Importance of 2007 funding status • Whether or not DRC affects eligibility for phase-in • Look-back rules for at-risk status for 2008 • Prior year “presumption rule” for benefit restrictions for 2008 • Treasury to prescribe methods of estimation for 2007 • May need credit balance waiver rules for 2007