C-ELBW key terms

A person who exercises discretionary authority or control over plan management or assets, or who renders investment advice for a fee, or who has discretionary responsibility in plan administration. Fiduciaries must act solely in participants' interest.

The ERISA conduct test requiring a fiduciary to act with the care, skill, prudence, and diligence that a knowledgeable person familiar with such matters would use in similar circumstances. It focuses on the process of decision-making rather than outcomes.

The ERISA requirement that plan assets be held for the exclusive purpose of providing benefits to participants and beneficiaries and defraying reasonable administrative expenses. It bars using plan assets for employer purposes.

A transaction between a plan and a party in interest that ERISA forbids absent an exemption, such as a sale of property, extension of credit, or payment of excessive compensation. Violations trigger excise taxes and possible fiduciary liability.

An entity or individual with a specified relationship to a plan, including the plan sponsor, fiduciaries, service providers, and certain relatives or affiliates. Dealings between a plan and such persons are restricted under ERISA.

An administrative or statutory exemption issued by the Department of Labor that permits an otherwise prohibited transaction when specified conditions protecting the plan are satisfied. Common examples cover certain loans, leases, and service arrangements.

A safe harbor shielding plan fiduciaries from liability for participant-directed investment losses when the plan offers a broad diversified menu, provides required disclosures, and participants exercise genuine control over their accounts.

An individual account arrangement in which the participant chooses how to invest assets among designated options. Investment risk and decision responsibility shift to the participant, subject to plan design and disclosure rules.

An investment default for automatically enrolled participants that carries fiduciary relief under Department of Labor rules. Examples include target-date funds, balanced funds, and managed accounts meeting prescribed notice and design conditions.

A plan design in which eligible employees are enrolled by default at a set deferral rate unless they affirmatively opt out. Properly structured arrangements may rely on ERISA preemption of contrary state payroll laws.

A nondiscrimination test comparing average elective deferral rates of highly compensated employees with those of non-highly compensated employees. Excess contributions by the highly compensated group must be corrected.

A nondiscrimination test comparing average employer matching and after-tax contribution rates of highly compensated employees with those of non-highly compensated employees. It limits the share of such contributions the highly compensated group may receive.

An employee who meets an Internal Revenue Code compensation threshold for the lookback year, or who owned more than five percent of the employer at any time during the lookback or current year. Status drives many tests.

An employee whose status triggers top-heavy testing, generally an officer above a compensation threshold, a more-than-five-percent owner, or a more-than-one-percent owner above a pay threshold. Key employee status drives minimum benefit requirements.

A plan in which key employees hold more than sixty percent of account balances or accrued benefits. Such plans must provide minimum contributions or benefits to non-key employees and satisfy accelerated vesting rules.

The rule requiring a qualified plan to benefit at least seventy percent of the employees eligible under the ratio test, or to satisfy an average benefit test combining nondiscriminatory classification and average benefit percentage comparisons.

Statutory schedules governing when employees earn a nonforfeitable right to employer-provided benefits. Plans typically use graded vesting over several years or cliff vesting after a shorter period, with faster schedules required for top-heavy plans.

The portion of a participant's benefit earned to date under the plan formula, expressed as a monthly benefit at normal retirement age in defined benefit plans or as an account balance in defined contribution plans.

The age specified in the plan at which a participant may retire with an unreduced benefit, subject to statutory limits on how early a plan may set it. It anchors benefit accrual and distribution timing rules.

The minimum amount that must be withdrawn annually from tax-favored retirement accounts after the required beginning age. Failure to withdraw the required amount triggers a steep excise tax on the shortfall.

A retirement plan meeting Internal Revenue Code requirements for tax deferral, including coverage, vesting, nondiscrimination, and distribution rules. Employer contributions are generally deductible and trust earnings tax-exempt.

The federal statute governing employee pension and welfare benefit plans. It sets fiduciary standards, reporting and disclosure duties, claims procedures, and enforcement remedies, while the tax code supplies qualification rules.

A plain-language document that ERISA requires plans to furnish participants, describing plan terms, benefits, eligibility, and participant rights. It must be updated periodically and upon material changes.

The yearly informational return most ERISA plans file with federal agencies, disclosing financial condition, participant counts, service providers, and compliance information. Large plans generally attach audited financial statements.

The regulatory process plans must follow when denying benefits, including timeframes for decisions, full and fair review on appeal, and disclosure of documents. Exhaustion of these steps is generally required before litigation.

A law requiring most employers with group health plans to offer qualified beneficiaries a temporary continuation of coverage after a qualifying event such as termination or divorce, with notice and premium payment rules.

An occurrence that triggers COBRA continuation rights, such as termination of employment, reduction in hours, divorce, death, or a dependent's loss of status. The event type determines the maximum continuation period.

The federal law whose portability and privacy provisions govern group health plans. It limits preexisting condition exclusions, protects individually identifiable health information, and imposes special enrollment and nondiscrimination rules.

The requirement that applicable large employers offer affordable, minimum-value coverage to full-time employees or face assessable payments. It uses look-back measurement periods and specific affordability safe harbors.

The Internal Revenue Code provision governing nonqualified deferred compensation. It restricts elective deferrals, payment timing, and acceleration, imposing immediate taxation and penalties when arrangements fail to comply.

An arrangement in which an employer promises to pay compensation in a later year, beyond qualified plan limits, without the tax benefits of a qualified trust. Such promises are generally unsecured obligations of the employer.

The tax code rule disallowing deductions for excess parachute payments and imposing a twenty percent excise tax on recipients. Payments contingent on a change in control are tested against a base amount.

The tax code provision limiting deductions for compensation paid to certain covered employees above a statutory threshold, subject to exceptions for performance-based and other qualifying arrangements under current rules.

The amount a contributing employer owes a multiemployer pension plan upon complete or partial withdrawal, representing its share of unfunded vested benefits. It is calculated under statutory rules and plan provisions.

A collectively bargained plan to which two or more unrelated employers contribute, typically administered by a joint board of trustees. Special funding, withdrawal liability, and insolvency rules apply.

A plan maintained under a collective bargaining agreement between an employer and a union. Bargained plans may be exempt from certain nondiscrimination testing, though coverage and other rules still apply.

An Internal Revenue Service program allowing plan sponsors to self-correct qualification failures with reduced sanctions, sometimes with anonymous pre-submission review. Correction methods and fees depend on the failure type.

The Internal Revenue Service's consolidated correction framework, combining self-correction, voluntary submission, and closing agreement programs. It sets eligibility, correction methodology, and fee rules for fixing plan failures.

Amounts exceeding statutory or nondiscrimination limits that must be corrected, such as deferrals above the annual limit or amounts failing the actual deferral percentage test. Correction may require refunds and earnings.