Module 1 - Private Retirement Plans - Background

Question 1

Annuities

Answer 1

a contract with an insurance company whereby the insurance company pays an income for a specific time period, such as a number of years or for life, in exchange for an initial cash payment

Question 2

Tripod of economic security

Answer 2

personal savings, employer-sponsored retirement plans, and social insurance programs

Question 3

Reverse annuity

Answer 3

the homeowner receives a lifetime monthly income in exchange for the title to the home at the homeowner’s death

Question 4

Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001

Answer 4

limits on allowable retirement plan contributions were increased

Question 5

Pension Protection Act (PPA) of 2006

Answer 5

made the expanded contribution limits from EGTRRA permanent

Question 6

Longevity

Answer 6

life expectancy

Question 7

Demography

Answer 7

the study of births, deaths, income, and disease which illustrate the changing population

Question 8

Superannuated

Answer 8

obsolete through age or new technological or intellectual developments

Question 9

Wage stabilization program

Answer 9

employers competing for labor could not offer the inducement of higher wages, therefore the War Labor Board permitted the establishment of employee benefit programs

Question 10

Human Depreciation Concept

Answer 10

the rationale of private retirement plans - employers had an obligation to pay for an employee’s retirement after years and years of service because of the process of aging

Question 11

Deferred Wage Concept

Answer 11

views a retirement plan benefit as part of a wage package that is composed of cash wages and other employee benefits

Question 12

Employee Retirement Income Security Act (ERISA) of 1974

Answer 12

created after many years of discussion and debate concerning reform of the private retirement system, affects virtually all aspects of corporate and self employed retirement plans

Question 13

Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982

Answer 13

reduced the maximum limits of retirement plan benefits and contributions, brought about parity between corporate plans and plans for self-employed persons, introduced restrictions on top heavy plans, and provided for federal income tax withholding on retirement and annuity payments

Question 14

Tax Reform Act (TRA ‘86) of 1986

Answer 14

imposed new coverage tests and accelerated vesting requirements for qualified plans, changed integration between plans and social security, lowered limits for benefits before age 65, changed timing and taxes for plan distributions, and terminated IRA deductions for many qualified plan participants

Question 15

Small Business Job Protection Act of 1996

Answer 15

creation of the savings incentive match plans for EEs (SIMPLE plans), simple definition of HCEs, simple nondiscrimination tested procedures, testing safe harbors, repear of family aggregation rules, change in definition of compensation for limitations, change in distribution rules, increase in max tax deductible contribution for spousal IRAs, and provisions for tax exempt entities

Question 16

Taxpayer Relief Act of 1997

Answer 16

tax portion of the budget legislation affecting retirement and employee bneefit plans

Question 17

Job Creation and Worker Assistance Act of 2002

Answer 17

increased the interest rate range for computing a defined benefit plan’s current liability, specified deduction limits, clarified rollover and post tax contributions, and conformed the percentage of compensation for allowable contributions to simplified employee pensions