Forms & Publications


Term Definition
Economic Benefit Rule A doctrine of the IRS, used to determine current tax liability in the absence of constructive receipt. (See constructive receipt.)
Economic Recovery and Tax Act of 1981 (ERTA) Governs specific areas of employee compensation, including incentive stock options, deductible voluntary employee contributions, tax credit ESOPs and withdrawal provisions in savings/thrift plans. Expanded lRAs and KEOGH plans.
Employee Contributions Member contributions are the retirement contributions made by members who participate in a contributory plan. The contribution amount is calculated by multiplying an age-based percentage rate by the member's compensation earnable.
Employee Retirement Income Security Act of 1974 (ERISA) This requires that persons engaged in the administration, supervision, and management of pension monies have a fiduciary responsibility to ensure that all investment-related decisions are made
(1) with the care, skill, prudence and diligence that a prudent person familiar with such matters would use and
(2) by diversifying the investments so as to minimize risk. This wording mandates two significant changes in traditional investment practice:
(1) the age-old “prudent person” rule has been replaced by the notion of a prudent “expert”;
(2) the notion of a prudent investment has been replaced by the concept of a prudent portfolio. ERISA also established an insurance program, the Pension Benefit Guarantee Corporation (PBGC), designed to guarantee workers receipt of pension benefits if their defined pension plan should terminate. It regulates the majority of private pension and welfare group benefit plans in the U.S. equity Anything of value earned through the provision or investment of something of value.
(I) In the case of compensation, an employee earns equity interest through the provision of labor on a job. So defined, equity often is used as a fairness criterion in compensation. People should be paid according to their contributions.
(2) On a company’s balance sheet, equity represents the book value of the owner’s stake in the company.
Employer Contributions Employer contributions are monies contributed to the retirement fund by the plan sponsors for all plan participants.
Employer Matching Contribution An amount which an employer contributes to a plan, generally in proportion to the employee’s contribution.
Employer Pick Up (IRC §414(h)) Pre-tax contributions to a pension which reduces the participant‘s salary but are deemed to be employer contributions.
Entry Age Normal Actuarial Cost Method A method under which the actuarial present value of the projected benefits of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit age(s). The portion of this actuarial present value allocated to a valuation year is called the normal cost. The portion of this actuarial present value not provided for at a valuation date by the actuarial present value of future normal costs is called the actuarial accrued liability. Under this method, the actuarial gains (losses) are reflected as they occur in a decrease (increase) in the unfunded actuarial accrued liability.
equity funding The funding of a portion of a retirement plan by investment in equity. Equity funding affects the employer’s contributions, but not the employee’s benefits.
equity investment A financial investment that offers no fixed return or guarantee of the principal amount.
ERISA ERISA is the acronym for the Employee Retirement Income Security Act of 1974, which is a federal statute that governs most private employer pension plans. Public retirement systems are not subject to ERISA requirements.
Escheat Reversion of property to the state.
Excise Tax on Early Distribution and Large Distribution An employer that contributes to a qualified plan will be subject to an excise tax liability for failing to contribute the amount determined to be an accumulated funding deficiency (excess of total charges over total credits in the funding standard account). The tax liability is to be 5% of the accumulated funding deficiency at the end of the plan year.