CEBS RPA 1 (New Curriculum) Directing Retirement Plans 1: Assignment 1

What is the basic law that governs employee benefit plans? - Answer- ERISA (Employee Retirement Income Security Act) - 1974 What is the name of the law that created parity between corporate and self-employed retirement plans? - Answer- TEFRA (Tax Equity and Fiscal Responsibility Act) - 1992 This act established PBGC? - Answer- ERISA (Employee Retirement Income Security Act) - 1974 Which act/law created QDROS? - Answer- REA (Retirement Equity Act) - 1984 Which act/law created the concept of "Top Heavy"? - Answer- TEFRA (Tax Equity and Fiscal Responsibility Act) - 1992 Which act/law created excise tax on defined benefit plan reversion of excess assets to plan sponsor? - Answer- OBRA (Omnibus Budget Reconciliation Act) - 1993 Which act/law created SIMPLE Plans? - Answer- Small Business Protection Act - 1996 Which law/act created catch-up contributions for 401(k) plans? - Answer- EGTRRA (Economic Growth and Tax Relief Reconciliation Act) - 2001 Which law/act established means to convert regular 401(k)accounts to Roth accounts? - Answer- American Taxpayer Relief Act - 2013 Define PBGC - Answer- Pension Benefit Guaranty Corporation (Single-employer plan termination insurance) - Federal governmental agency created under Title IV of ERISA. Purpose is to encourage the continuation and maintenance of voluntary private pension plans for participants, provide for timely/uninterrupted payment of pension benefits and beneficiaries under all insures plans & maintain premiums at lowest level consistent with carrying out statutory obligations. Define QDRO - Answer- Qualified Domestic Relations Order - a domestic relations order that satisfies all of the following requirements: 1. Creates/recognizes the existence of an alternate payee's (spouse, former spouse, child or other dependent) right to, or assign to an alternate payee the right to receive all or a portion of the benefit payable with respect to a participant under the plan 2. It must clearly specify certain facts about the participant's benefits (name, last known mailing address of participant and each alternate payee covered by the order; the amount/percent of the participant's benefits to be paid by the plan, or the manner in which such amount is to be determined; the number of payments/periods to which such an order applies; and each plan to which such an order applies 3. It must not alter the amount/form of benefits. QDRO cannot require the plan to provide (a) any type or form or benefit/option, not otherwise provided under the plan; (b) (Actuarially increased benefits; or (c) payment of benefits to an alternate payee when such benefits are already required to be paid to another alternate payee under another order previously determined to be a QDRO What is a SIMPLE plan? - Answer- Savings Incentive Match Plans for Employees - the intent of these plans is to create retirement savings vehicle for small employes that is not subject to complex rules associated with qualified plans (i.e. nondiscim req's and top-heavy rules) Who is eligible for SIMPLE plans? - Answer- Employers with 100 or fewer employees who received at least $5k in comp from the employer, in the preceding year. How much may an employee contribute to a SIMPLE plan? - Answer- Employees may contribute up to $12,500 per year in 2017 and requires employers to make matching contributions What three things make up the Tripod of economic security/three-legged stool? - Answer- Risk is met through one or more of the following: 1. personal savings (including individual insurance and annuities) 2. employer-sponsored retirement plans (private plans) 3. social insurance programs What are the basic economic problems facing the aged include what? - Answer- 1. The desire of aged individuals to maintain, to a high degree, their preretirement standard of living in their retirement years 2. The declining employment opportunities available to the aged 3. The relatively low individual savings of the aged b/c of higher income taxes, increased consumption patterns, inflation pressured in the recent past and other factors 4. The improvement in longevity experienced in the 20th century. Do an individual's financial needs decrease after retirement? Is this a valid assumption? - Answer- Somewhat. The retiree doesn't have dependents and homes/furnishings/possessions have usually been paid off. But the decrease is overstated because ones standard of living does not significantly change after retirement. Increasingly, retirees are more active (social, travel, recreational activities) and urbanization, geographic mobility, demographics and changing culture minimizes parents moving in with kids. Why is there such a low labor force participation rate among the elderly? - Answer- 1. Many older workers want to retire and voluntarily do so 2. Many are not physically able to perform work duties as efficiently as they could at younger ages 3. Industrial/technological advances operate to the disadvantage of older persons