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13 Cards in this Set
- Front
- Back
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Vesting |
Nonforfeitable right of interest which an employee participant acquires in a pension fund. -May vest immediately or after a specified age or period of service (or combination of both) is attained |
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Funding |
Accumulation of sufficient assets in pension plan to assure availability of funds for payment of benefits due to employees as such obligations arise |
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Tax expenditure |
Represents revenue that the government does not collect in form of income taxes because an economic activity receives preferential treatment under the Internal Revenue Code |
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3-Legged Stool of Retirement Income |
1. Social Security 2. Pension 3. Personal Savings |
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Net Worth |
The difference between a household's total assets and total liabilities |
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DC |
Defined Contribution Plan: Employee bears the greatest risk. -Like savings account maintained by employer on behalf of participants -Often employer matches all or part of employee contribution -At retirement often balance is lump sum -At retirement balance is sum of participant contributions plus interest, dividends, capital gains or losses |
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Betrayal Without Remedy |
ERISA preempts state law, but statute may not supply a substitute federal law or remedy |
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DB |
Defined Benefit Plan: "traditional pension" Employer bears greatest risk. -Required by federal law to offer plan participants a retirement in form of lifetime annuity -Based on length of service and annual salary -Usually funded solely by employer contributions plus investment earnings |
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State v. Monsanto |
Precipitated ERISA -Missouri Insurance Commissioner successfully argued self-insured plans are insurance |
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Inland Steel v. NLRB |
Pension benefits mandatory part of collective bargaining |
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Suggs v. Pan American Life Insurance Company |
Betrayal without remedy. "Either Congress is incapable of writing legislation to accomplish what they plainly say is their intent, or the Courts lack the ability to interpret the statute to do what Congress plainly say it intended to do, or both, or a mixture. In any event, the system fails." |
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Internal Revenue Code (notes) |
-Limited safeguards for security of anticipated benefit rights in private plans since its primary functions are designed to produce revenue and prevent evasion of tax obligations. -Enforcement capability solely to allow various tax advantages to accrue to employers who establish and maintain pension plans which can qualify for such benefit privileges |
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To attain "qualified status" under the Code (for tax exemption on earnings) plan must be for:
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-exclusive benefit of participants -purpose of distributing the corpus or income to the participant -established in a manner to make impossible for employer to use or divert funds before satisfying plan liabilities -no discrimination in favor of officers, stockholders, HCE or supervisors. |
