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Decoding the Alphabet Soup: What's With All the Acronyms? | Part 2

DWC 08/14/18


People in the retirement plan business sure do like their acronyms.  All these letters get thrown around, and I do not know what half of them mean.


What do all those acronyms stand for?


We couldn’t agree with you more.  All that alphabet soup can be tough to keep straight, especially if you don’t work with these concepts on a regular basis.  Have no fear; DWC is here to help you make sense of it all.

Every so often, we will include an installment of the QOTW that explains some of these acronyms.  For this installment, we will cover some of the basics.


What It Means:  Employee Retirement Income Security Act of 1974

How To Pronounce It:  er-ISS-uh

What It Is:  ERISA is the law that really started it all.  Passed in response to certain well-publicized pension failures and abuses, ERISA created many of the protections that are now second nature…things like preventing companies from access plan asserts, maximum vesting schedules, nondiscrimination testing, fiduciary responsibility, etc.  ERISA and its related regulations are enforced by the DOL (a bonus acronym – Department of Labor).


What It Means:  Internal Revenue Code

How To Pronounce It:  I-R-C

What It Is:  Unlike ERISA that applies only to employee benefit plans, the Internal Revenue Code contains all of the tax rules that apply to all types of taxpayers, including those who sponsor and participate in retirement plans.  This is where rule regarding nondiscrimination testing, plan eligibility and contribution limits live.  The IRS and its related regulations are enforced by the IRS (another bonus – Internal Revenue Service).


What It Means:  Small Business Job Protection Act of 1996

How To Pronounce It: sbij-PUH (Yes, really.)

What It Is:  One of the more ridiculously pronounced acronyms, SBJPA made some pretty significant changes to the retirement plan world.  For starters, it created the safe harbor 401(k) plan and the SIMPLE plan (bonus acronym #3 – Savings Incentive Match Plan for Employees).  It also greatly simplified the definition of who is a highly compensated employee.  Although not a retirement plan, SBJPA also brought us the 529 education savings plan.


What It Means:  Economic Growth and Tax Relief Reconciliation Act of 2001

How To Pronounce It:  EGG-truh

What It Is:  EGTRRA made some pretty sweeping changes to the retirement plan rules, including the following:

  • Increases in the overall plan contribution limits,
  • Created of the catch-up contribution for those age 50 or older,
  • Accelerated vesting on company matching contributions,
  • Made retirement benefits more portable by expanding the availability of rollovers, and
  • Increased the employer deduction limit for contributions to 401(k) and profit sharing plans.


What It Means:  Pension Protection Act of 2006

How To Pronounce It:  P-P-A

What It Is:  PPA was just as sweeping a change as EGTRRA but in different areas.  Here are a few of them:

  • Accelerated vesting on employer profit sharing contributions to align with the match vesting rules,
  • Codified automatic enrollment and created several new plan designs that include it,
  • Solidified cash balance plans as viable by clarifying certain legal uncertainties,
  • Mandated quarterly participant benefit statements and blackout notices for participant-directed plans, and
  • Required the DOL to make Forms 5500 publicly available on its website.

These acronyms are not likely to become part of your daily lexicon, but you can see that the laws they represent have made a significant impact on retirement plans along with those companies that sponsor them and the participants that participate in them.

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Topics: ERISA, Automatic Enrollment, Highly Compensated Employees, Question of the Week (QOTW), DWC, Cash Balance, Acronyms


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The views expressed in this blog are those of the authors and do not necessarily represent the views of any other person or organization. All content is provided for informational purposes only and is not intended to be tax or legal advice.