LETTERS & NUMBERS

The following is a general list of common retirement terms, letters, and numbers associated with retirement plan design, implementation and administration.

This page contains general material for informational purposes only and does not constitute the rendering of legal, tax, investment or accounting advice.

Source: DOL and IRS Publications

408(b)(2) Disclosures

These disclosures, enforced as of July 2012, are intended to give plan fiduciaries sufficient information concerning the services provided by the plan’s vendors, and the fees charged for those services. If these disclosures are not provided, the relationship will be a “prohibited transaction” under ERISA.


410(b) Coverage Test

A test to demonstrate that a qualified retirement plan provides benefits to at least 70% of a plan sponsor’s non-highly compensated participants.


415(c) Annual Addition Limit

A limit imposed on the total amount of contributions made to a participant in the plan year.


Form 1099-R

An IRS form that must be issued by plan custodians/trustees for distributions that occur from an IRA, qualified retirement plan, 403(b) plan or 457(b) plan.


Form 1096

An IRS form that is a one-page compilation showing the totals for all 1099-R forms submitted by an employer for payments made during the year.


Form 945

An IRS form to report withheld federal income tax from non-payroll payments, including distributions from tax-favored retirement plans such as 401(k), 403(b), governmental section 457(b), and annuities.


Form 5500

An IRS form used to report information concerning employee benefit plans subject to ERISA regulations that must be filed for each plan every year by the administrator or sponsor of the plan.


Form 5500-SF

An IRS short form annual return/report of small employee benefit plans for fewer than 100 participants.


Form 5500-EZ

An IRS annual return of one-participant (owners and their spouses) retirement plans.


Form 8955-SSA

The Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefit is required for pension and profit sharing plans in which there were terminated participants who separated from service with a vested future benefit.


Form 5558

The IRS Application for Extension of Time to File Certain Employee Plan Returns.


Form 5330

The IRS Return of Excise Taxes Related to Employee Benefit Plans.


ACP (Actual Contribution Percentage)

The percentage of any matching contributions and/or after-tax contributions that have been put into the plan for each participant.


ADP (Actual Deferral Percentage)

The percentage of compensation that has been deferred, pre-tax, to the 401(k) plan by each participant.


DOL (Department of Labor)

U.S. department that deals with issues related to the American workforce including administering the provisions of Title 1 of ERISA for workplace pension and benefit plans.


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

Extensive changes signed into law in 2001 including increased contribution limits for IRAs, increased deduction limits for profit sharing plan contributions, relaxed portability rules for retirement plans, and increased salary deferral contribution limits for employer sponsored plans.


EPCRS (Employee Plans Compliance Resolution System)

The IRS voluntary corrections program that allows plan sponsors to correct any compliance failures without endangering the qualified status of their plans.


ERISA (Employee Retirement Income Security Act of 1974)

A federal law that sets standards of protection for individuals in most qualified retirement plans. Provisions include requiring plans to provide participants with plan information outlining fiduciary responsibilities for those who manage plan assets; requires a claims and appeals process for participants to get benefits; gives participants the right to sue for breaches of fiduciary duties; and, guarantees payment of certain benefits through the PBGC if a defined benefit plan is terminated.


ESOP (Employee Stock Ownership/Option Plan)

A qualified defined contribution plan in which plan assets are invested primarily or exclusively in the securities of the sponsoring employer.


HCE (Highly Compensated Employee)

An employee who: (1) During the current or preceding year is or was a more than 5% owner; or, (2) Received compensation in excess of the specified dollar limit for the preceding year. The plan must make an election to have the top 20% of employees HCE instead of all who have compensation in excess of the specified dollar limit. Not all plans make the election.


IRA (Individual Retirement Account)

A tax-deferred retirement savings account that allows individuals to make tax-deductible contributions, invest the funds, and defer taxes on the earnings until the funds are distributed. They are not employer sponsored plans.


IRS (Internal Revenue Service)

The branch of the U.S. Treasury Department responsible for administering the requirements of qualified pension plans. The IRS developed Form 5500 and is responsible for monitoring annual submissions.


NHCEs (Non-Highly Compensated Employees)

Employees who are not highly compensated (see HCE).


PBGC (Pension Benefit Guaranty Corporation)

A federal agency established by Title IV of ERISA for the insurance of defined benefit pension plans by providing payment of limited pension benefits if a plan terminates and is unable to cover all benefits.


QDRO (Qualified Domestic Relations Order)

A court order in a divorce case giving the divorced spouse their share of an asset or retirement plan.


QJSA (Qualified Joint and Survivor Annuity)

An annuity payment from a qualified plan or 403(b) account that provides a life annuity to the participants and a survivor annuity for the spouse after the participant’s death.


QNEC (Qualified Non-Elective Contribution)

A type of employer contribution made to each eligible employee regardless of whether or not the employee makes their own contribution to the plan. A QNEC can be made to correct a failed ADP/ACP nondiscrimination test.


QMAC (Qualified Matching Contribution)

An employer contribution to 401(k) plans to correct failed ADP nondiscrimination tests and satisfy vesting and distribution requirements.


SEP (Simplified Employee Pension Plan)

A plan which allows employers to contribute to traditional IRAs (SEP-IRAs) set up for participants.


SIMPLE (Savings Incentive Match Plan for Employees)

A plan in which a small business with 100 or fewer employees can offer retirement benefits through employee salary reductions and matching contributions (similar to those found in a 401(k) plan). It can be either a SIMPLE IRA or a SIMPLE 401(k) and required employer contributions are immediately 100% vested in both.


SPD (Summary Plan Description)

A plain language description of important features of the plan. Participants must be informed of material changes either through a revised Summary Plan Description or in a separate document called a Summary of Material Modifications.