THE TOOLS AND TECHNIQUES OF EMPLOYEE BENEFIT
AND RETIREMENT PLANNING
(11th Edition)
Educational Objectives
CHAPTER 1 DESIGNING THE RIGHT RETIREMENT PLAN
Upon completion of this chapter, the student should be able to:
1. explain what objectives can be accomplished by a pension plan
2. discuss the differences between a qualified and nonqualified plan
3. distinguish between a defined contribution plan and a defined benefit plan
4. describe various employer objectives and which plans would meet those objectives
CHAPTER 2 PLANNING FOR RETIREMENT NEEDS
Upon completion of this chapter, the student should be able to:
1. describe the steps involved in the retirement planning process
2. distinguish between the objectives of long range planning and planning at or near retirement
CHAPTER 3 SOCIAL SECURITY
Upon completion of this chapter, the student should be able to:
1. explain how a person becomes eligible for Social Security benefits
2. describe the various retirement and survivorship benefits available under Social Security
3. discuss how a person’s Social Security benefits are calculated
4. explain how working after retirement will affect the receipt of Social Security benefits
5. describe the income taxation of Social Security retirement and survivorship benefits
CHAPTER 4 MEDICARE
Upon completion of this chapter, the student should be able to:
1. explain what Medicare is and how it is funded
2. understand the benefits offered under each distinct part of Medicare (Parts A, B, and D)
3. explain the options available under Medicare Advantage (Part C)
4. describe the purpose of and options available in Medicare supplement insurance
CHAPTER 5 TRADITIONAL IRAs
Upon completion of this chapter, the student should be able to:
1. explain what an IRA is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a plan
3. describe the contribution limits for IRAs and the effect of participation in employer-provided retirement plans on the deduction limits for IRA contributions
4. analyze the tax implications of distributions from IRAs and rollovers to and from IRAs
CHAPTER 6 ROTH IRAs
Upon completion of this chapter, the student should be able to:
1. explain what a Roth IRA is and when its use is indicated
2. understand the fundamental differences between a traditional IRA and a Roth IRA
3. discuss the advantages and disadvantages of this type of a plan
4. describe the contribution limits for Roth IRAs
5. analyze the tax implications of distributions from Roth IRAs and conversions from traditional IRAs to Roth IRAs
CHAPTER 7 QUALIFIED PLANS: GENERAL RULES FOR QUALIFICATION
Upon completion of this chapter, the student should be able to:
1. explain the eligibility and coverage requirements applicable to qualified plans
2. discuss the nondiscrimination in benefits and contributions requirement and how Social Security integration works
3. describe the funding and vesting requirements applicable to qualified plans
4. explain the Section 415 limitation on benefits and contributions to a qualified plan
CHAPTER 8 QUALIFIED PLANS: DISTRIBUTIONS AND LOANS
Upon completion of this chapter, the student should be able to:
1. describe the various payout options available under a qualified plan
2. evaluate the advantages and disadvantages of the various payout options
3. discuss the taxation of the various payout options
4. explain the use of qualified domestic relations orders
5. analyze the tax implications of retirement plan distributions and rollovers
CHAPTER 9 ESTATE AND RETIREMENT PLANNING FOR QUALIFIED PLANS AND IRAs
Upon completion of this chapter, the student should be able to:
1. explain estate and retirement planning is indicated
2. evaluate the advantages and disadvantages of rolling over a distribution or keeping it in the plan
3. analyze the benefits of converting to a Roth IRA
4. discuss the required minimum distributions and appropriate planning strategies
CHAPTER 10 INSTALLING A QUALIFIED RETIREMENT PLAN
Upon completion of this chapter, the student should be able to:
1. explain the steps involved in installing a qualified plan
2. discuss plan adoption procedures
3. describe the advantages of receiving an advance determination letter for a qualified plan
4. distinguish between master and prototype plans and custom-designed plans
CHAPTER 11 QUALIFIED PLAN INVESTMENTS
Upon completion of this chapter, the student should be able to:
1. briefly describe the requirements that govern fiduciary handling of qualified plan investments
2. explain the definition of fiduciary
3. discuss the types of prohibited transactions
4. understand the concept of unrelated business income
5. distinguish between the basic types of investments appropriate for a qualified plan
CHAPTER 12 ERISA REPORTING AND DISCLOSURE
Upon completion of this chapter, the student should be able to:
1. describe the role of ERISA in plan regulation
2. explain the items that must be disclosed to all participants under ERISA
3. describe the items that must be provided upon request by a participant
4. distinguish between pension plans and welfare plans
5. understand which plans are exempt from ERISA reporting and disclosure requirements
CHAPTER 13 LIFE INSURANCE IN A QUALIFIED PLAN
Upon completion of this chapter, the student should be able to:
1. explain when the use of life insurance in a qualified plan is indicated
2. discuss the advantages and disadvantages of providing for life insurance in a qualified plan
3. illustrate how life insurance is used in defined benefit plans and defined contribution plans
4. distinguish between the benefits of a plan using the combination or envelope funding approach and a fully insured plan
5. analyze the tax implications of life insurance in a qualified plan
CHAPTER 14 DEFINED BENEFIT PENSION PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a defined benefit plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of a defined benefit pension plan
4. illustrate the different formulas for determining benefits to be provided under such a plan
5. analyze the tax implications of a defined benefit pension plan
CHAPTER 15 CASH BALANCE PENSION PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a cash balance pension plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of a cash balance pension plan
4. distinguish between a cash balance pension plan and a traditional defined benefit plan
5. analyze the tax implications of such a plan
CHAPTER 16 MONEY PURCHASE PENSION PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a money purchase pension plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of a money purchase pension plan
4. explain the difference between a money purchase pension plan and a defined benefit plan and the difference between a money purchase pension plan and a profit-sharing plan
5. analyze the tax implications of such a plan
CHAPTER 17 PROFIT SHARING PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a profit-sharing plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of a profit-sharing plan
4. discuss the factors involved in deciding whether a profit-sharing plan should be integrated with Social Security and what integration level should be chosen
5. analyze the tax implications of such a plan
CHAPTER 18 ESOP/STOCK BONUS PLAN
Upon completion of this chapter, the student should be able to:
1. explain what ESOPs and stock bonus plans are and when their use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of an ESOP and a stock bonus plan
4. distinguish between ESOPs and stock bonus plans and explain the added tax benefits available to an ESOP
5. analyze the tax implications of such plans
CHAPTER 19 SAVINGS/MATCH PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a savings plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of a savings plan
4. analyze the tax implications of such a plan
CHAPTER 20 SECTION 401(k) PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a Section 401(k) plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of a Section 401(k) plan
4. discuss the additional qualification requirements applicable to Section 401(k) plans
5. analyze the tax implications of such a plan
CHAPTER 21 CROSS-TESTED/AGE-WEIGHTED PLAN
Upon completion of this chapter, the student should be able to:
1. explain what cross-tested and other age-weighted plans are and when their use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of cross-tested and other age-weighted plans
4. distinguish between a cross-tested plan and other age-weighted plans
5. analyze the tax implications of such plans
CHAPTER 22 HR 10 (KEOGH) PLAN
Upon completion of this chapter, the student should be able to:
1. explain what an HR 10 plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a qualified plan
3. describe the design characteristics of an HR 10 plan
4. explain the differences between an HR 10 plan and a regular qualified plan covering employees only
5. analyze the tax implications of an HR 10 plan
CHAPTER 23 SIMPLE IRAs
Upon completion of this chapter, the student should be able to:
1. explain what a SIMPLE plan is and when its use is indicated
2. discuss the advantages and disadvantages of SIMPLE plans
3. describe the major requirements a SIMPLE IRA or SIMPLE 401(k) plan must meet
4. explain the primary differences between a SIMPLE IRA and a SIMPLE 401(k) plan
5. analyze the tax implications of such plans
CHAPTER 24 SIMPLIFIED EMPLOYEE PENSIONS (SEPs)
Upon completion of this chapter, the student should be able to:
1. explain what a SEP is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the major requirements a SEP must meet
4. explain the additional requirements applicable to a salary reduction SEP
5. analyze the tax implications of such a plan
CHAPTER 25 TAX DEFERRED ANNUITY
Upon completion of this chapter, the student should be able to:
1. explain what a tax deferred annuity is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the design characteristics of TDA
4. illustrate the various limits on the amount of excludable contributions to a TDA
5. analyze the tax implications of a TDA
CHAPTER 26 NONQUALIFIED DEFERRED COMPENSATION
Upon completion of this chapter, the student should be able to:
1. explain what nonqualified deferred compensation is and when its use is indicated
2. discuss the advantages and disadvantages of such plans
3. describe the employee and employer objectives in designing a nonqualified deferred compensation plan
4. explain the consequences of funded versus unfunded plans
5. analyze the tax implications of nonqualified deferred compensation plans
CHAPTER 27 GOVERNMENTAL AND TAX-EXEMPT EMPLOYER DEFERRED
COMPENSATION (SECTION 457) PLANS
Upon completion of this chapter, the student should be able to:
1. explain what a Section 457 plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of a plan
3. describe the design characteristics of a Section 457 plan
4. distinguish between the requirements for and taxation of eligible and ineligible plans
5. analyze the tax implications of a Section 457 plan
CHAPTER 28 THE PROCESS OF EMPLOYEE BENEFIT PLANNING
Upon completion of this chapter, the student should be able to:
1. explain what objectives can be accomplished with benefit plans
2. describe the various steps in the planning process
CHAPTER 29 DESIGNING THE RIGHT LIFE INSURANCE PLAN
Upon completion of this chapter, the student should be able to:
1. describe the various steps in designing a life insurance plan to meet employer and employee needs
2. identify insurance and/or capital accumulation needs and employee and employer objectives
CHAPTER 30 DESIGNING THE RIGHT HEALTH BENEFIT PLAN
Upon completion of this chapter, the student should be able to:
1. explain what objectives can be accomplished with a health benefit plan
2. discuss the design characteristics of these types of plans
3. describe the tools and techniques of managed health care
4. analyze the various components of designing and maintaining a health benefit plan
CHAPTER 31 CASH COMPENSATION PLANNING
Upon completion of this chapter, the student should be able to:
1. explain what cash compensation planning is and when its use is indicated
2. discuss the advantages and disadvantages of this type of planning
3. analyze the tax implications of cash compensation
4. describe the alternatives to cash compensation
CHAPTER 32 BONUS PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a bonus plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. analyze the tax implications of a bonus plan
4. describe the steps involved in setting up such a plan
CHAPTER 33 SEVERANCE PAY PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a severance pay plan is
2. analyze the tax implications of such a plan
3. describe the requirements a severance pay plan must meet in order to be exempt from ERISA requirements
CHAPTER 34 GOLDEN PARACHUTE PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a golden parachute is
2. analyze the tax implications of a golden parachute
CHAPTER 35 STOCK OPTION
Upon completion of this chapter, the student should be able to:
1. explain what a stock option is and when its use is indicated
2. discuss the advantages and disadvantages of such an option
3. analyze the tax implications of a stock option
CHAPTER 36 INCENTIVE STOCK OPTION (ISO)
Upon completion of this chapter, the student should be able to:
1. explain what an incentive stock option plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. analyze the tax implications of such a plan
CHAPTER 37 EMPLOYEE STOCK PURCHASE PLAN (Section 423 Plan)
Upon completion of this chapter, the student should be able to:
1. explain what an employee stock purchase plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. explain the statutory requirements for an employee stock purchase plan
4. analyze the tax implications of an employee stock purchase plan
CHAPTER 38 RESTRICTED STOCK PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a restricted stock plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the objectives that can be accomplished with a restricted stock plan
4. analyze the tax implications of such a plan
CHAPTER 39 CAFETERIA PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a cafeteria plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. illustrate examples of cafeteria plans
4. analyze the tax implications of a cafeteria plan
5. describe the steps involved in setting up such a plan
CHAPTER 40 FLEXIBLE SPENDING ACCOUNT
Upon completion of this chapter, the student should be able to:
1. explain what a flexible spending account plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the basic features of a flexible spending account plan
4. analyze the tax implications of such a plan
5. describe the steps involved in setting up a flexible spending account plan
CHAPTER 41 GROUP-TERM LIFE INSURANCE
Upon completion of this chapter, the student should be able to:
1. explain what group-term life insurance is and when its use is indicated
2. describe the basic features of a group-term life insurance plan
3. discuss the carve-out concept and its benefits and structure
4. analyze the tax implications of such a plan
5. describe the steps involved in setting up a group-term life insurance plan
CHAPTER 42 SPLIT DOLLAR LIFE INSURANCE
Upon completion of this chapter, the student should be able to:
1. explain what split dollar insurance is and when its use is indicated
2. discuss the advantages and disadvantages of this type of arrangement
3. describe the design characteristics of a split dollar arrangement
4. discuss the various types of split dollar arrangements used
5. analyze the tax implications of a split dollar arrangement
CHAPTER 43 KEY EMPLOYEE LIFE INSURANCE
Upon completion of this chapter, the student should be able to:
1. explain what key employee life insurance is and when its use is indicated
2. analyze the tax implications of key employee life insurance to the employee and the corporation
3. describe the alternatives to key employee life insurance
CHAPTER 44 DEATH BENEFIT ONLY (DBO) PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a DBO plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the design characteristics of a DBO plan
4. analyze the tax implications of such a plan
5. describe the steps involved in setting up a DBO plan
CHAPTER 45 HEALTH INSURANCE
Upon completion of this chapter, the student should be able to:
1. explain the fundamental types of health insurance plan designs
2. discuss the benefit structures of health insurance plans
3. describe the various funding mechanisms for such plans
4. explain the eligibility and coverage requirements, including COBRA continuation coverage requirements
5. analyze the tax implications of such plans
CHAPTER 46 HEALTH MAINTENANCE ORGANIZATION (HMO)
Upon completion of this chapter, the student should be able to:
1. explain what a HMO plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the basic types of HMOs and the requirements for federally qualified HMOs
4 distinguish between insured plans and typical HMOs
5. analyze the tax implications of such a plan
CHAPTER 47 HEALTH SAVINGS ACCOUNT (Section 223 Plan)
Upon completion of this chapter, the student should be able to:
1. explain what an HSA is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the characteristics of a high deductible health plan
4. determine eligibility and contribution limits for an HAS
5. analyze the tax implications of an HSA
CHAPTER 48 HEALTH REIMBURSEMENT ARRANGEMENT (HRA)
Upon completion of this chapter, the student should be able to:
1. explain what an HRA is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the design characteristics of HRAs
4. explain the COBRA continuation coverage requirements applicable to HRAs
5. analyze the tax implications of such a plan
CHAPTER 49 LONG-TERM CARE PLAN
Upon completion of this chapter, the student should be able to:
1. define a qualified long-term care insurance contract
2. explain the income taxation of long-term care insurance premiums and benefit payments
3. discuss when long-term care insurance is appropriate for an employer to offer as an employee benefit
CHAPTER 50 SICK PAY (SHORT TERM DISABILITY)
Upon completion of this chapter, the student should be able to:
1. explain what a sick pay plan is and when its use is indicated
2. discuss the design characteristics of this type of plan
3. analyze the tax implications of such a plan
4. describe the ERISA reporting requirements applicable to a sick pay plan
CHAPTER 51 LONG TERM DISABILITY INSURANCE
Upon completion of this chapter, the student should be able to:
1. explain what a long term disability insurance plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the design characteristics of a long term disability insurance plan
4. analyze the tax implications of such a plan
CHAPTER 52 "FRINGE" BENEFITS (SECTION 132)
Upon completion of this chapter, the student should be able to:
1. explain what fringe benefits are and when their use is indicated
2. discuss the advantages and disadvantages of each fringe benefit
3. analyze the tax implications of various fringe benefits
CHAPTER 53 COMPANY CAR OR REIMBURSEMENT PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a company car program and a reimbursement plan is and when their use is indicated
2. discuss the advantages and disadvantages of these programs
3. analyze the tax implications of both programs
4. describe the reporting requirements for both programs
CHAPTER 54 DEPENDENT CARE ASSISTANCE PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a dependent care assistance plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the design characteristics of a dependent care assistance plan
4. analyze the tax implications of such a plan
CHAPTER 55 EDUCATIONAL ASSISTANCE PLAN
Upon completion of this chapter, the student should be able to:
1. explain what an educational assistance plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the requirements an educational assistance plan must meet
4. analyze the tax implications of such a plan
CHAPTER 56 LEGAL SERVICES PLAN
Upon completion of this chapter, the student should be able to:
1. explain what a legal services plan is and when its use is indicated
2. discuss the advantages and disadvantages of this type of plan
3. describe the design characteristics of a legal services plan
4. analyze the tax implications of such a plan
5. describe the steps involved in setting up a legal services plan
CHAPTER 57 LOANS TO EXECUTIVES
Upon completion of this chapter, the student should be able to:
1. explain when a loan to an executive is indicated
2. discuss the advantages and disadvantages of such a loan
3. analyze the tax implications of such a loan
4. describe the alternatives to making a loan to an executive
CHAPTER 58 MOVING EXPENSE REIMBURSEMENT
Upon completion of this chapter, the student should be able to:
1. explain what a moving expense reimbursement is and when its use is indicated
2. discuss the advantages and disadvantages of this type of benefit
3. analyze the tax implications of a moving expense reimbursement
CHAPTER 59 VEBA WELFARE BENEFITS TRUSTS
Upon completion of this chapter, the student should be able to:
1. explain what welfare benefit trusts and VEBAs are and when their use is indicated
2. discuss the advantages and disadvantages of these types of trusts
3. distinguish between a welfare benefit trust and a VEBA
4. analyze the tax implications for employees and for both types of trusts