Revenue Act of 1921
Exempted interest income on trusts for stock bonus or profit-sharing plans from current taxation. Trust income was taxed as it was distributed to employees only to the extent that it exceeded employees' own contributions. Did not authorize deductions for past service contributions.
Revenue Act of 1926
Income of pension trusts exempted from current taxation.
Revenue Act of 1928
Allowed employers to take tax deductions for reasonable amounts paid into a qualified trust in excess of the amount required to fund current liabilities. Changed the taxation of trust distribution so that individuals are taxed only on distributions that are attributable to employer contributions and earnings.
Social Security Act of 1935
Enacted Social Security.
Revenue Act of 1938
Enacted nondiversion rule. Made pension trusts irrevocable.
Investment Advisers Act of 1940
Required delegation of investment responsibilities only to an adviser registered under the act or to a bank or an insurance company (qualified under the laws of two or more states).
Revenue Act of 1942
Tightened coverage standard qualification, limited allowable deductions, and allowed integration with Social Security.
Labor-Management Relations Act of 1947
Sec. 302 provided fundamental guidelines for the establishment and operation of pension plans administered jointly by an employer and a union.
Revenue Act of 1950
Restricted stock options.
Social Security Amendments of 1950, 1952, 1954, 1958 and 1967
Affected pension integration provisions.
Welfare and Pension Plans Disclosure Act of 1958
Established disclosure requirements to limit fiduciary abuse.
Revenue Act of 1961
Amended sec. 403(b) to extend tax deferral for annuity purchases to employees of public school systems.
Welfare and Pension Plans Disclosure Act Amendments of 1962
Revised the 1958 act; shifted responsibility for protection of plan assets form participants to federal government to prevent fraud and poor administration.
Self-Employed Individual Retirement Act of 1962
Also known as the Keogh Act—adopted and subsequently liberalized by amendment. Made available qualified pension plans for self-employed persons, unincorporated small businesses, farmers, professionals and their employees.
Tax Reform Act of 1969
Sec. 302 provided fundamental guidelines for the establishment and operation of pension plans administered jointly by an employer and a union. Provided that part of a lump-sum distribution received from a qualified employee trust within one taxable year (on account of death or other separation from service) was to be given ordinary income treatment instead of the capital gains treatment it had been given under prior law. Under this act, the bargain element on the exercise of statutory options is a tax preference item, unless the stock option is disposed of in the same year the option is exercised.
Employee Retirement Income Security Act of 1974 (ERISA)
Signed into law September 2, 1974, ERISA was designed to secure the benefits of participants in private pension plans through participation, vesting, funding, reporting, and disclosure rules, and established the Pension Benefit Guaranty Corporation. Provided added pension incentives for the self-employed (through changes in Keoghs) and to persons not covered by pensions (through individual retirement accounts (IRAs)). Established legal status of employee stock-ownership plans (ESOPs) as an employee benefit; codified stock bonus plan under Internal Revenue Code. Established requirements for plan implementation and operation.
Tax Reduction Act of 1975
Established the Tax Reduction Act stock-ownership plan (TRASOP) as employee benefit. Provided additional 1 percent of investment tax credit for acquisitions, construction, and other capital expenditures made between February 1975 and January 1977, if employer sets up a TRASOP.
Tax Reform Act of 1976
Extended availability of TRASOP credit from February 1977 to January 1981 and added another 0.5 percent credit for employer-employee matching contributions.
Revenue Act of 1978
Extended TRASOP tax credit provisions through December 31, 1983, and required all TRASOPs to be tax-qualified if employee contributions were made for plan years beginning after December 11, 1978.
Established qualified deferred compensation plans (sec. 401(k)) under which employees are not taxed on the portion of income they elect to receive as deferred compensation rather than direct cash payments.
Created simplified employee pensions (SEPs). Changed IRA rules. Established nondiscrimination rules for cafeteria plans.
Miscellaneous Revenue Act of 1980
Permitted tax-qualified ESOPs to provide cash distribution to participants.
Economic Recovery Tax Act of 1981 (ERTA)
Raised contribution limits on IRAs and Keogh plans and extended IRA eligibility to persons covered by employer pension plans. Also authorized qualified voluntary, employee contributions. Permitted payroll-based tax credit instead of investment-based TRASOPs, Repealed qualified stock options. Established incentive stock options (ISOs) subject to taxation, modification, and reporting,
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
TEFRA changed Keogh plan contribution limitations, established a new category of plans known as top-heavy plans, and imposed more stringent sec. 415 funding and benefit limitations. Altered provisions allowing loans to plan participants. Changed rules governing integration with Social Security. Reduced estate tax exclusion for proceeds of qualified retirement plans, set age limits for plan distributions, and established various rules aimed at personal service corporations.
Social Security Amendments of 1983
Prohibited further pullouts of state and local government employer associations after effective date of law. Included amounts in salary reduction plans as taxable compensation for payroll tax purposes. Increased payroll taxes for self-employed persons. Required gradual increase of Social Security normal retirement age.
Tax Reform Act of 1984 (also see DEFRA)
Made substantial changes to rules governing IRAs, SEPs, ESOFs. ISOs. top-heavy plans, and golden parachutes.
Deficit Reduction Act of 1984 (DEFRA)
(included in Tax Reform Act of 1984)
Froze TEFRA's maximum annual pension benefit and contribution limits through 1987. Modified TEFRA's top-heavy provisions and definition of key employees, and exempted government plans from top-heavy requirements. Made changes affecting 401(k) plans, including the nondiscrimination test, Substantially changed TEFRA's rules on distribution limits from qualified plans. Established additional tax incentives to encourage the formation of ESOPs.
Retirement Equity Act of 1984 (REA)
Changed the age requirements for purposes of enrollment and vesting in pension plans. Permitted certain breaks in service without loss of pension credits. Changed treatment of pension benefits for widowed and divorced spouses.
Consolidated Omnibus Budsmt Reconciliation Act of 1985 (COBRA)
(included in Single-Employer Pension Plan Amendments Act of 1986)
Significantly restricted the definition of insured termination for purposes of Pension Benefit Guaranty Corporation (PBGC) coverage. Raised the employer's annual PBGC premium rare.
Tax Reform Act of 1986
Established faster minimum vesting schedules, changed rules for integration of private pension plans with Social Security, and mandated broader and more comparable minimum coverage of rank- and file-employees. Restricted 401(k) salary reduction contributions, tightened nondiscrimination rules, required inclusion of all after-tax contributions to defined contribution plans as annual additions under sec. 415 limits. Extended the limit on amount of compensation that may be taken into account under all qualified plans, imposed new excess benefit tax on distributions over a certain amount, and reduced maximum benefits payable to early retirees under defined benefit plans. Restricted the allowable tax-deductible contributions to IRAs for individuals who participate in employer-sponsored pension plans and whose income exceeds a specified threshold. Imposed excise tax on lump-sum distributions received before age 59 1/2. Created SEP salary reduction option for firms with 25 or fewer employees. Subjected loans above a certain amount to current income tax.
Omnibus Budget Reconciliation Act of 1986 (OBRA '86)
Required that employers with pension plans provide pension accruals or allocations for employees working beyond age 64 and for newly hired employees who are within five years of normal retirement age.
Omnibus Budget Reconciliation Act of 1987 (OBRA '87)
Changed funding rules governing underfunded and overfunded pension plans and PBGC premium levels and structure. Increased per-participant premiums for single-employer defined benefit plans, and established variable rate surcharge for underfunded plans. Established maximum funding limit of 150 percent of current liability, beyond which employer contributions are not deductible. Tightened minimum funding requirements for underfunded plans: required quarterly premium payment for single-employer plans. Amended Age Discrimination in Employment Act (ADEA) and the Employee Retirement Income Security Act (ERISA) to require full pension service credits for participants employed beyond normal retirement age.
Technical and Miscellaneous Revenue Act of 1988 (TAMRA)
Increased excise tax on excess pension assets upon termination of qualified plans.
Omnibus Budget Reconciliation Act of 1989 (OBRA '89)
Partially repealed the interest exclusion on ESOP loans, Imposed mandatory Labor Department civil penalties on violations by qualified plan fiduciaries and created a tax penalty for substantial overstatement of pension liabilities in determining deductibility. Required that various forms of deferred compensation be included in determination of average compensation and, in turn, the Social Security taxable wage base.
Omnibus Budiget Reconciliation Act of 1990 (OBRA '90)
Increased the excise tax on asset reversions from 15 percent to 20 percent in certain cases. Increased the excise tax to 50 percent if the employer does not maintain a qualified replacement plan or provide certain pro rata increases. Allowed the limited use of qualified transfers of excess pension assets to a 401(h) account to fund current retiree health benefits. Raised the PBGC flat premium and increased the variable premium Extended Social Security coverage to states and local government employees who are not participating tn a state or local public employee retirement system.
Older Workers Benefit Protection Act of 1990
Amended the Age Discrimination in Employment Act (ADEA) to apply to employee benefits. Restored and codified the equal-benefit-for-equal-cost principle. Set a series of minimum standards for waivers of rights under ADEA in early retirement situations.
The Comprehensive Deposit Insurance Reform and Taxpayer Protection Act of 1991
Enacted to reform the banking industry. Included provisions to eliminate pass-through coverage for benefit-responsive bank investment contracts (BICs) and to limit federal deposit insurance to $100,000 per individual per institution.
Unemployment Compensation Amendments of 1992
Imposed a 20 percent mandatory withholding tax on lump-sum distributions that are not rolled over into qualified retirement accounts. Liberalized rollover rules, and required plan sponsors to transfer eligible distributions directly to an eligible plan if requested by the participant.
Pension Benefit Guaranty Corporation (PBGC) Lease Settlements Act of 1993
Solidified a settlement made by PBGC and Continental Airlines clarifying that PBGC will be protected in the event of a future Continental Airlines bankruptcy
Omnibus Budget Reconciliation Act of 1993
Reduced the compensation limit for qualified plans (sec. 401(a)(17)) from $235,840 to $150,000. Increased the amount of Social Security benefits subject to taxation from 50 percent to 85 percent for single individuals with incomes above $34,000 ($44,000 for married individuals filing jointly). Placed a cap on the deduction of executive compensation in excess of $1 million that is not tied to performance.
Social Security Administrative Reform Act of 1994
Established the Social Security Administration as an independent federal agency effective March 31, 1995.
Pension Annuitants Protection Act of 1993
Clarified that, in cases where a pension plan fiduciary purchases insurance annuities in violation of ERISA rules, a court may award appropriate relief, including the purchase of backup annuities, to remedy the breach.
Uniformed Services Employment and Reemployment Rights Act of 1993
Guaranteed a veteran's right to pension benefits that would have accrued during military service. Pension plans would nor have to pay earnings or forfeitures on make-up contributions. Repayment of employee contributions can be made over a period of three times the period of military service, not to exceed five years. If the service member elects not to be re-employed, no pension rights accrue for the period of military service, but the person's vested interest prior to entering military service would remain intact.
Bankruptcy Reform Act of 1994
Gave the PBGC and state and local government pension plans seats on creditors' committees in corporate bankruptcies.
Social Security Act Amendments of 1994
Simplified employment taxes for domestic services. Reallocated a portion of the Social Security tax to the Disability Insurance trust fund.
Uruguay Round Agreements Act of 1994
Included provisions from the Retirement Protection Act of 1993 to require greater contributions to underfunded plans. Limited the range of interest rate and mortality assumptions used to establish funding targets, phased out the variable rate premium cap, modified certain rules relating to participant protections, and required private companies with underfunded pension plans to notify the PBGC before engaging in a large corporate transaction. Slowed pension cost-of-living adjustments. Extended through the year 2000 a tax provision that allows excess pension assets in certain defined benefit plans to be transferred into a 401(h) retiree health benefits account.
The Small Business Job Protection Act of 1996
Created the savings incentive match plan for employees (SIMPLE) for small establishments. Created a new nondiscrimination safe harbor, repealed sec. 415(e) limits, created a new definition of highly compensated employees, modified plan distribution rules, repealed family aggregation rules, made USERRA technical changes, and required that sec. 457 plan assets be held in trust. Additionally, allowed nonworking spouses to contribute up to $2,000 to an individual retirement account (IRA) if the working spouse is eligible, clarified employment tax status for independent contractors, and temporarily reinstated the sec. 127 education deduction.
"Source Tax" Repeal of 1996
Amended the Internal Revenue Code to eliminate state taxation of pension income received by individuals who no longer reside in the state where they earned their pensions.
SOURCE: Employee Benefit Research Institute, Washington, DC.