There are different enforcement agencies that protect plan participants. ERISA (Employee Retirement Income Security Act) protects employee’s benefits and imposes fiduciary responsibility on plan’s management. The department of labor enforces rules governing plan managers, investments, reporting and disclosure, enforcement of fiduciary provisions, and workers’ benefits as regulated by ERISA. The PBGC (Pension Benefit Guaranty Corporation) guarantees pension benefits will be paid out for pension plans.
On Thursday we discussed IRAs and SEPs. An IRA is an Individual Retirement Account. A SEP is Simplified Employee Pension plan. SEPs are small business retirement plans that are non-qualified. There are different types of IRAs and SEPs. Roth IRAs were created by the Taxpayer Relief Act of 1997. The contributions made to a Roth IRA are nondeductible and qualified distributions are income tax free. A SEP grows tax deferred on contributions. A SARSEP (Salary Reduction Simplified Employee Pension) is rare to see as they cannot be established after 1996. SARSEPs are an employee elective deferral retirement plan.