We’ve been celebrating ERISA’s 40th birthday with a series of articles on the Act’s history leading up to enactment and subsequent related events. Our birthday issue , published 40 years to the day after ERISA was signed by President Gerald Ford (September 2, 1974), offers a report card on ERISA’s success in meeting its goals. In keeping with our classroom theme, what follows is a “pop quiz” to test your knowledge of ERISA.
- Which of the following 1974 ERISA features are no longer in existence?
a) IRC section 415(e) limits for participants covered by both defined benefit and defined contribution plans
b) IRC section 401(j) defined benefit plan limits for self-employed individuals and shareholder-employees
c) IRC section 401(a)(8) prohibition on reallocation of forfeitures in a money purchase plan
d) All of the above
- Which of the following 1974 ERISA qualified retirement plan features remain in the current tax rules?
a) Qualified bond purchase plans
b) The income exclusion for up to $5,000 of death benefits distributed
c) Continued tax deferral on rollover distributions only if the full “balance to the credit of the employee” is paid
d) Income tax exclusion of net unrealized appreciation in employer securities
- Which of the following current rules were not in 1974 ERISA?
a) IRC section 436 Benefit distribution restrictions for poorly funded plans
b) Section 401(k) salary reduction average deferral percentage test
c) Requirement to obtain spousal consent to waive the qualified joint and survivor distribution form
d) All of the above
- Health and welfare plans escaped the kind of massive changes 1974 ERISA brought to retirement plans. Which of these subsequent ERISA changes was enacted first?
a) Consolidated Omnibus Budget Reconciliation Act (COBRA)
b) Health Insurance Portability and Accountability Act (HIPAA)
c) Newborns’ and Mothers’ Health Protection Act (the Newborn’s Act)
d) Women’s Health and Cancer Rights Act (WHCRA)
The correct answers are:
- The correct answer is (d) All of the above. The 415(e) dual plan limits were eliminated by the Small Business Job Protection Act of 1996. The 401(j) rule was repealed in the “parity” rules of the Tax Equity and Fiscal Responsibility Act of 1982. And the money purchase change was included in the Tax Reform Act of 1986.
- The correct answer is (d) Income tax exclusion of net unrealized appreciation in employer securities. Bond purchase plans in IRC 405 were included in ERISA and eliminated by the Deficit Reduction Act of 1984. The $5,000 death benefit exclusion dates back to ERISA and was eliminated by the Small Business Job Protection Act of 1996. The ERISA rollover rule called for rollovers only if the “balance to the credit of an employee” was paid in a “lump sum distribution.” Now rollovers are generally permitted for any portion of a participant’s distribution.
- The correct answer is (d) All of the above. The IRC section 436 benefit distribution restrictions for poorly funded plans were added by the Pension Protection Act of 2006. The section 401(k) actual deferral percentage test was added by the Revenue Act of 1978 and the requirement to obtain spousal consent to waive the qualified joint and survivor distribution was enacted under the Retirement Equity Act of 1984.
- The correct answer is (a) Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA was enacted in 1985; HIPAA and the Newborn’s Act were enacted in 1996; and WHCRA was enacted in 1998.
For more on this subject, see all our For Your Information publications in the ERISA@40 series thus far:
Marjorie Martin Principal, Knowledge Resource Center