Adoption Agreement

When your firm adopts a plan offered through the Program, an Adoption Agreement is created. The Adoption Agreement specifies which provisions of the master plan document apply to your firm’s plan. Your firm also will tailor specific elements of the plan such as plan eligibility and entry date, the vesting schedule, and employer contributions. You will need to refer to your plan’s Adoption Agreement to check/verify information that may be specific to your firm’s plan.

Your firm may have completed one or more Adoption Agreements, depending on the number of Program plans at your firm.
Your firm’s Adoption Agreement may be amended from time to time by your firm, as organizational and employee needs change or as required by changes in law.

Department of Labor (DOL)

The U.S. DOL is the federal agency responsible for administering and enforcing ERISA. While the DOL and IRS share regulatory authority with respect to employee benefit plans, the DOL is primarily responsible for reporting and disclosure, and fiduciary responsibility.

Employee Retirement Income Security Act of 1974 (ERISA)

The Employee Retirement Income Security Act of 1974, or ERISA, is the federal law that established legal guidelines for pension plan administration and investment practices.

Internal Revenue Code (IRC)

The IRC is the federal law that specifies how and what income is to be taxed and what may be deducted from taxable income.

Internal Revenue Service (IRS)

The IRS is the federal agency responsible for administering and enforcing the Internal Revenue Code, through the assessment and collection of taxes, determination of pension plan qualification, and related activities. While the DOL and IRS share regulatory authority with respect to plans, the IRS is primarily responsible for plan qualification, funding and tax-related issues.

IRS Form 1099-R

The IRS Form 1099R is used to report any distributions that have been made from pension plans, annuities, profit sharing plans and individual retirement accounts.

By January 31 of each year, the ABA Retirement Funds Program (the Program) sends this form to participants who received payments during the previous calendar year so the participants can use the information when filing their income taxes.

Qualified Default Investment Alternative (QDIA) Notice

Plan fiduciaries can help shield themselves from liability for losses if a QDIA is used for participants who fail to direct the investment of their accounts. The protection is available only if the QDIA requirements prescribed by the Department of Labor (DOL) are met, including participant notice requirements. In general, an initial QDIA notice must be provided at least 30 days before the participant becomes eligible for the plan or before his or her contributions are first invested in a QDIA. Thereafter, an annual notice must be provided at least 30 days before the start of each plan year.

Self-Directed Brokerage Account (SDBA)

The SDBA allows participants to invest their funds as they direct in a wide variety of publicly traded debt and equity securities and shares of numerous mutual funds.

Summary Annual Report (SAR)

The SAR is a summary for participants of basic financial information included in the Form 5500 filed with IRS. It includes information on the assets and liabilities of the plan, payments and receipts for the last plan year. The Program provides the SAR with the Form 5500. If you have a defined contribution plan (which includes profit sharing plans, 401(k) plans, money purchase pension plans and target benefit plans), then you must annually distribute the SAR to each participant, beneficiary and alternate payee.

Summary of Material Modifications (SMM)

If the plan changes, an SMM (or revised SPD) must be given to participants. An SMM notifies participants of the change. It acts as an amendment to the SPD until a new SPD is distributed. The SMM must be sent to all plan participants within 210 days after the end of the plan year in which the amendment was adopted.

Summary Plan Description (SPD)

An SPD is a summary of the plan provisions that the Program provides to firms for their participants. It includes information such as eligibility, vesting, employee rights and appeal procedures. As Plan Administrator, you must provide the SPD as follows:

  • For new participants and beneficiaries: Within 90 days after a plan participant or beneficiary becomes eligible for the plan. Beneficiaries become eligible for the plan on the date of the death of the participant. This also includes distributing any existing summaries of material modifications (SMMs) to the SPD.
  • For new plans: To participants within 120 days after the plan is adopted or effective, whichever is later.
  • For updated plans: To participants within 210 days after the plan year in which the amendment was adopted.