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Pension Plans

Fiduciary A person legally appointed and authorized to hold assets in trust for another person.
Cliff Vesting The process by which EEs earn the right to receive full benefits from the ERs retirement plan account at a specified date.
Qualified Reservists A member of the military reserve who is not actively serving but may be called to duty and who is eligible to make an early withdrawal from his/her IRA without incurring the usual early distribution penalty.
Graded Vesting The process by which EEs gain a percentage of irrevocable rights over ER contributions made to the EEs retirement plan account. Generally 20% of their accrued benefits go towards the retirement plan account, with an additional 20% in each year thereafter.
Money-Purchase Plan a.k.a. Defined Contribution Plan A pension plan to which ERs and EEs make contributions based on a percentage of annual earnings (in accordance w/ plan terms). Upon retirement, the total pool of capital in the members account can be used to purchase a lifetime annuity.
415 Limits The maximum 401(k) contribution limit that applies to all EE & ER 401(k) contributions in a calendar year. *Catch-up contribution limit is also accepted & added on top of this limit.
402(g) Limits Limits the amount EEs can contribute towards their 401(k), 403(b) or 457 elective deferrals. This limit is set at $18,000.
Catch-Up Contributions At the age of 50+, you are able to contribute more towards your retirement plan. The total amount you are able to contribute is $6,000/year.
Highly Compensated EE An employee who makes more than $120,000/year is classified as being one of these.
Force-Out Former (Terminated) employees who don't have the minimum amount saved in their 401(k) account. 90% of plans have this provision. Closing an account requires participant to roll over the funds to an IRA, another 401(k) plan, or take the "cash-out" option
5500 A form a plan administrator files with the IRS to report information on the retirement plans offered to EEs. This form is filed in order to ensure compliance with ERISA.
Early Distribution Penalty Imposed by the IRS, this penalty (10%) is charged to the taxable amount withdrawn from a retirement account if one elect to withdraw before the age of 59 1/2.
QACA (Qualified Automatic Arrangements) Companies that use these enroll EEs in defined contribution plans at a negative deferral rate, unless the EE specifically opts-out. Minimum 3% of his/her compensation for years 1&2, increasing by 1% each year after. Contribution amount no more than 10%
EACA (Eligible Automatic Arrangements) ERs are not required to set aside a minimum deferred contribution per EE nor does it annually increase the amount set aside. These can be subjected to vesting requirements.
Spousal Consent The (usually) written approval provided by the spouse of a retirement account owner for the retirement account owner to take certain actions with his/her retirement account.
"Non-Discriminating Rule" Found in qualified retirement plans stating that ALL EEs of a company must be eligible for the same benefits, regardless of position within the company. This is required for a plan to be ERISA qualified.
Safe Harbor 401(k) Provides ERs more leniency in setting up plans without concerns about discrimination in favor of highly compensated EEs. ALL contributions must be fully vested, IMMEDIATELY. ER must provide appropriate notice to EE about their rights under the plan.
Vesting Schedule Setup by ER, determines when the EE acquires full ownership of what has been vested on his/her retirement/pension plan.
Vesting An employee accrues non-forfeitable rights over employer-provided contributions or incentives made to the EEs qualified retirement/pension plan. *Non-forfeitable rights accrue based on how long the EE has worked at the org.
Hardship Withdrawals An emergency withdrawal from a retirement plan that may be subject to certain tax or account penalties.
Lifetime Annuity An insurance product that features a predetermined periodic payout amount until the death of the annuitant. These are most frequently used to help retirees budget their money after retirement.
Tax Deferred Investment earnings such as interest, dividends or capital gains that accumulate tax-free until the investor withdraws or takes possession of them. Most common types of these investments are those in IRAs and Annuities.
Created by: gregt864