Month: August 2005

I really enjoyed the tons of emails containing benefits acronyms. There were so many that I decided to compile them in a Benefits Acronym Lexicon. (Permanent link is in the right-hand column.) I hope to add more acronyms and helpful links as they come to mind or are suggested. Here are some of the acronyms sent to me (in no particular order):

RSOL (Regional Solicitor’s Office)
PBSD (Plan Benefits Security Division)
ECP (Employer Contribution Project)
REACT (Rapid ERISA Action Team)
OE (Office of Enforcement)
TPA (third party administrator)
own-occ (own-occupation disability insurance)
any-occ (any-occupation disability insurance)
RBD (required beginning date)
ADA (Americans with Disabilities Act)
COLA (cost of living adjustment)
GI (guaranteed insurability)
LTC (long-term care)
EAP (employee assistance program)
EOB (explanation of benefits)
EOI (evidence of insurability)
ESRD (end stage renal disease)
MSA (medical savings account)
MSP (Medicare Secondary Payer)
PCP (primary care physician)
PHO (Physician Hospital Organization)
POS (point of service)
PPA (Preferred Provider Arrangement)
PPO (Preferred Provider Organization)
QMB (qualified Medicare beneficiary)
SSDI (Social Security disability insurance)
WHCRA (Women’s Health and Cancer Rights Act)
YTD (year-to-date)
AD & D (accidental death and dismemberment)
ADB (accidental death benefit)
ADR (alternative dispute resolution)
TSA (tax-sheltered annuity)
QMCSO (Qualified Medical Child Support Order)
STD (short-term disability)
LTD (long-term disability)
COCC or COC (Certificate of Creditable Coverage)
PTO (paid-time off)
WC (Workers’ Compensation)
SSA (Social Security Administration)
TAMRA (Technical and Miscellaneous Revenue Act of 1988)
FIT (Federal Income Tax)
FUTA (Federal Unemployment Tax)
SUTA (State Unemployment Tax)
FUI (Federal Unemployment Insurance)
SUI (State Unemployment Insurance)
RASD (retroactive annuity starting date)
DVP (deferred vested pension)
ASD (annuity starting date)
QJSA (Qualified Joint and Survivor Annuity)
QPSA (Qualified Pre-retirement Survivor Annuity)
QSUPP (Qualified Social Security Supplement)
CDHP (consumer driven health plan)
AJCA (American Jobs Creation Act)
EE (employee)
EB (employee benefits)
ER (employer)
BOLI (bank-owned life insurance)
NUA (net unrealized appreciation)
RMD (required minimum distribution) or MRD (minimum required distribution) for some
TAM (Technical Advice Memorandum)
PLR (Private Letter Ruling)
VCO (Voluntary Correction of Operational Defects)
VCT (Voluntary Correction of Tax-sheltered Annuity Failures)
A-org or FSO (first service organization under section 414(m) of the Internal Revenue Code)
B-org (technical term under section 414(m) of the Internal Revenue Code
ASG (Affiliated service group)
M & P (master & prototype)
QMAC (Qualified Matching Contributions)
PTCE (prohibited transaction class exemption)
FAB (Field Assistance Bulletin)
CEBS (Certified Employee Benefit Specialist)
AARP (Association of American Retired Persons)
ASPPA (American Society of Pension Professionals and Actuaries)
ABC (American Benefits Council)
ERIC (ERISA Industry Committee)
PSCA (Profit Sharing/401k Council of America)
NCEO (National Center for Employee Ownership)
SLOB (separate line of business)
QSLOB (qualified separate lines of business)
QSERP (qualified supplemental executive retirement plan)

UPDATE: Joe Kristan suggests that we might be “speaking in tongues” or that the “men in white coats” might soon be arriving. If the truth were to be told though, the accountants and tax folks could probably come up with a pretty good list themselves containing all of all of the mysterious lingo that they use in their practice. How about AGI, MAGI, and MACRS for starters?

Thanks to readers, the benefits acronyms are rolling in. I will try to “aggregate” them and publish a new list over the weekend. Many thanks!

CMS has estimated that the average monthly benefit premium for the new Medicare prescription drug benefit will be about $32.20 per month when the benefit takes effect in 2006. Read about it here from KaiserNetwork.com: “Medicare Drug Benefit Monthly Premiums To Average $32, Down from Earlier Estimates, Officials Announce.”

I was thinking today about all of the acronyms that benefits professionals utilize when they “talk shop.” I was reminded of the very first benefits conference I ever attended, just out of law school (many years ago), which, upon hearing all of the vernacular, caused me to wonder if benefits folks were really from another planet. However, after practicing for awhile in the area, one does come to accept and use the most common acronyms that prevail in the industry, to the point that we sometimes forget what the acronym actually stands for. Anyway, here is a list and I am sure there are more, so email me ones that come to mind, and I will add them:

ERISA, IRC, DB, DC, CODA, IRAs, SEPs, SIMPLEs, SERPs, NQDC, ADEA, NESTEG, ERTA, TEFRA/DEFRA/REA, GUST, USERRA, SBJPA, TRA, RRA, CRA, UCA, OBRA, GATT, EGTRRA, JGGTRA, WFTRA, SOX, HSAs, HRAs, FSAs, HIPAA, COBRA, HMOs, DOL, EBSA, IRS, PBGC, HHS, CMS, EEOC, GAO, FASB, EPTA, TE/GE, ISOs, AMT, COLIs, DROPs, FLSA, FMLA, FICA, VEBAs, ESOPs, TRASOPs, PAYSOPs, KSOPs, SRI, ETI, LRMs, EPCRS, SCP, VCP, CAP, PT, UBTI, SPD, SMM, MEWA, QDRO, ACP/ADP, HCEs, non-HCEs or NHCEs, QNECs, J & S, . . .

(Not to mention all of the benefit plans known by Code section number (such as 401(k)’s, 457’s, 403(b)’s, etc., or short phrases such as “rollover”, “cash-out”, “orphan plan”, etc. which have their own peculiar meanings.)

From the Wall Street Journal–“Judge Rules in Disney’s Favor In Long-Running Ovitz Case.” The article reports that a “Delaware judge ruled that directors of Walt Disney Co. didn’t breach their fiduciary responsibility in the hiring or termination of Michael Ovitz, dealing a defeat to shareholder activists seeking greater accountability for corporate boards.” Excerpt:

The suit has been considered groundbreaking in the corporate-governance world in part because it proceeded as far as it did. Chancellor Chandler ruled in May 2003 that Disney shareholders could go ahead with the suit, concluding that the litigation raised legitimate questions as to whether Disney directors should be held personally liable for breaching their duty to consider Mr. Ovitz’s employment carefully. It was the first time the Delaware Chancery Court has threatened directors with personal liability for decisions involving ordinary business matters.

Broc Romanek has commments here.

Those seeking information about SRI* will want to read this recent article by George R. Gay and Johann A. Klaasen from the Journal of Deferred Compensation–“Retirement Investment, Fiduciary Obligations, and Socially Responsible Investing.” Excerpt:

Whether motivated by the recent corporate scandals, by a desire not to profit from alcohol and tobacco, or by a growing concern for environmental sustainability, more plan participants are expressing a desire for a coherent system of selecting investments based on criteria beyond conventional analysis, with a focus on societal goals beyond investment returns. But in what circumstances, and to what extent, might such an investment strategy be permissible? May those charged with making decisions about retirement investments reasonably choose SRI?

The article goes on to conclude that “[c]onsiderations of fiduciary duty do not prevent retirement plan trustees from implementing basic SRI strategies in the plans for which they are responsible.”

Some additional resources pertaining to the legal implications of SRI:

• ERISA Opinion Letter 98-04A (May 28, 1998)
• Interpretive Bulletin 94-1, 29 C.F.R. section 2509.94-1
• Board of Trustees of Employees” Retirement System of City of Baltimore v. Mayor and City Council of Baltimore City, 562 A.2d 720, 317 Md. 72 (Md. 09/01/1989) (A case which is frequently cited in most articles on SRI, but which could not be found anywhere on the internet, so you can access it now from this website.)
• But see this recent DOL letter to the AFL-CIO (discussed in a previous post here) setting forth the DOL’s views regarding the ERISA violations that could occur if plan fiduciaries are involved in expending “plan assets to inform participants about the current public debate on Social Security” as well as the “hiring and firing of [plan] service providers based upon their opinions on Social Security reform.” DOL’s bottom line in that letter was that a “fiduciary may never increase a plan’s expenses, sacrifice the security of promised benefits, or reduce the return on plan assets, in order to promote its views on Social Security or any other broad policy issue.”
• See also The KLD Resource Page and this 2002 article from the Journal of Financial Planning–“Socially Responsible Investing: An Imperfect World for Planners and Clients” which lists resources.

(*Definitions of SRI or “Socially Responsible Investing”:

The article–“Retirement Investment, Fiduciary Obligations, and Socially Responsible Investing“–defines SRI as “investing in companies that meet certain baseline standards of social and environmental responsibility; actively engaging those companies to become better, more responsible corporate citizens; and dedicating a portion of assets to community economic development” and “the process of integrating values, societal concerns and/or institutional mission into investment decision-making.”

However, the article–“Socially Responsible Investing: An Imperfect World for Planners and Clients“–offers this comment regarding defining SRI:

Socially responsible investing—or more politically correct these days, socially conscious investing—started out as a protest in the early 1980s primarily against investing in South Africa during apartheid. Today, SRI has evolved into many permutations that can include not only the avoidance of the traditional “sin” stocks of gambling, pornography and alcohol, but tobacco, companies with bad records on employee relations or the environment, nuclear weapons, defense, and a variety of faith-based issues such as abortion or anti-family entertainment. Generally, it’s what people don’t want to invest in, versus what they do, though as Leonard’s client who wanted only women-led companies illustrates, that constraint can eliminate nearly everything.

Perhaps the most succinct, yet comprehensive, definition we heard came from Dennis Carpenter, CFP, whose Grapevine, Texas, planning firm of International Wealth Management specializes in biblically based investing: “Basically, it means making certain that your investment dollars and your beliefs are in concert with one another.

“Mission-based investing” is also a term used interchangeably by the industry, and is defined in this paper–“Introduction to Mission-Based Investing“–as “the incorporation of an institution?s mission into its investment decision-making process.” The paper goes on to note that “[a]n institution?s mission is its purpose or calling which is often summarized in a mission statement” and that the “institution?s mission may serve as a guide in determining what, if any, non-financial objectives it may set for its portfolio.”)

This previous post here highlighted the pitfalls related to incentive stock options and AMT. Please note this recent Tax Court case–Robert J. Merlo, TC Memo 2005-178–in which a taxpayer sought to stave off the ravages of AMT by arguing that the stock was subject to a substantial risk of forfeiture due to the employer’s policy against insider trading. Holding against the taxpayer, the court stated:

The evidence in the instant case shows that petitioner had no substantial risk of losing the rights to his shares of Exodus stock. There is no evidence that Exodus could have ever compelled petitioner to return his shares after he exercised his ISO; no sellback provision is present; nor is there any evidence that Exodus could have compelled petitioner to forfeit his shares of stock. In consequence of the foregoing, we hold that petitioner’s rights to his shares of Exodus stock were not subject to a substantial risk of forfeiture.

A related issue was discussed in this recent Revenue Ruling 2005-48 in which the IRS answered this question–If an employee exercises a nonstatutory option more than six months after grant, but is subject to restrictions on his ability to sell the stock obtained through exercise of the option under rule 10b-5 under the Securities Exchange Act of 1934 and certain contractual provisions, is the employee required to recognize income under section 83 of the Internal Revenue Code at the time of the exercise of the option? Roth CPA.com discusses the Revenue Ruling here.

Looking for that certain Tax Court opinion issued in 2005? Small Business Taxes & Management has created a handy summary of all Tax Court cases in 2005 with direct links to the full text of the cases located at the Tax Court website. You can also access a similar list of 2004 cases here.

I have added permanent links in the right-hand column for guidance (regulations, rulings, notices, etc.) published by the IRS in 2005 under the heading “Recent IRS Regulations and Published Guidance Relating to Benefits.” The links are as follows:

Treasury Regulations Issued in 2005

2005 Revenue Rulings

2005 Revenue Procedures

2005 Notices

2005 Announcements

(Source: Benefitslink.com)