Introductory Information About New Type of Retirement Plan - the DB(k)

The Pension Protection Act of 2006 added Code Section 414(x) effective for 2010. The type of plan added by PPA of 2006 is called a DB(k) or "eligible combination plan".


The DB(k) melds a 401(k) savings plan with a small Defined Benefit promise. It contains:

(1) A defined benefit equal to 1% of final average pay for each year of the employee's service, with up to 20 years of service counted - so somebody with 20 years of service could earn a 20% of pay retirement benefit;

(2) An automatice enrollment feature for the 401(k) portion. Unless an employee specifically opts out or changes the contribution level, 4% of pay is automatically set as the employee's level of salary deferrals;

(3) An employer match of at least 50% of employee contributions, with a maximum required match of 2% of pay.

As you can see, the new DB(k) is very defined and lacks a certain amount of flexibility, but it might be attractive to certain employers. However, the IRS is just now asking for comments from the pension industry as to these types of plans to help them write the rules pertaining to them. I would guess that regulations will not be published any time soon and therefore none of the retirement plan documents providers will be able to develop plan language to implement these plans until a few months after the regulations are published. So, it might be 2011 before these plans can actually start being utilized.

We will keep you informed about the DB(k) option as it develops.