The Principal DB(k) Fact Sheet

• The Principal Financial Group, the nation's 401(k) leader, and the American Society of Pension Actuaries (ASPPA) have developed a new approach to help American workers save for retirement by combining the best features of defined benefit (pension) plans and defined contribution [401(k)] plans into one plan--a DB(k).
• Employer contributions to the plan would be tax-deductible. Employee contributions would be tax-deferred.
• Advantages to employers include simpler administration and reduced costs (versus sponsoring separate defined benefit and defined contribution plans) thus making the DB(k) especially attractive to growing businesses (500 employees and fewer). Administrative advantages in the concept would include:
  • One plan document
  • One IRS filing fee, if applicable
  • One ERISA audit, if applicable
  • One form 5500 annual report
• Advantages to employees are the opportunity to have a fixed, dependable source of income at retirement--the defined benefit--as well as the chance to add their own tax-deferred contributions--the 401(k).
  • Employees would receive one plan statement so they will know exactly what their benefits will be at retirement.
• Employers could choose to allow employees' past service to apply in the plan.
• The unique make-up of the DB(k) plan would require changes in the laws governing retirement plans.

Current status of the DB(k)
Representatives Rob Andrews (D-NJ) and Jim Nussle (R-Iowa) have introduced bipartisan legislation, the Small Employer Defined Benefit Expansion Act, which would enable creation of the DB(k). The House bill mirrors provisions to create the DB(k) that are contained in the bipartisan National Employee Savings and Trust Equity Guarantee (NESTEG) bill introduced last summer by Senators Charles Grassley (R-Iowa) and Max Baucus (D-Montana). The Principal will continue to take a leadership position in promoting the DB(k) to members of Congress.

For additional information or to arrange an interview with an expert from The Principal, please contact Susan Houser, 515.248.2268, houser.susan@principal.com or Terri Shell, 515.283.8858, shell.terri@principal.com.

Have a question? Don't hesitate to call us at 1.800.986.3343

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