The following is a glossary for terms for Retirement Plans.

401(k) Plans

Type of deferred compensation plan. Refers to Internal Revenue Code that authorizes the plan

Affiliated Service Groups

Related employers that do not have sufficient common ownership to be considered a controlled group but, because of the nature of the services they provide to each other or collectively to third parties, they are considered to be under common control

Asset Allocation

Refers to the investment "mix" of a participant?s account among the investment types

Balance Forward

A recordkeeping and valuation method where the participant?s account balance as of the last valuation date (i.e., the last day of the prior plan year or the last day of the last plan quarter) is used as a starting off point and is then updated to reflect contributions, distributions and gains and losses that occurred since the last valuation date

Beneficiary Designation & Pre-Retirement Survivor Annuity Forms

Allows participating employees to choose the person or persons who will receive the employee's plan account balance if the employee dies while participating in the plan

Blackout Period

Any period of time of more than three consecutive business days during which the ability of participants or beneficiaries to direct or diversify assets credited to their accounts or to obtain loans or distributions from the plan is temporarily suspended, limited, or restricted

Blue-Chip Stocks

The stocks of our nation?s largest and most consistently profitable companies. Examples of blue-chip stocks are General Motors or General Electric

Cash Or Deferred Plans

A plan feature whereby the employer makes a contribution equal to a certain amount (generally a percentage of compensation) and the plan participant has the option of taking a certain percentage of the contribution in cash or as a plan contribution

Cliff Vesting

Vesting method that allows a participant top go from being zero percent vested to fully vested at a specific point in time

Controlled Groups

Two or more companies that are connected through common ownership

Custodian

Holder of the plan assets

Daily Valuation

A recordkeeping system where all plan transactions are recorded and valued in "real" time

Department of Labor (DOL)

Enforces ERISA

Elapsed Time Method

Method of crediting service does not count actual hours worked. Rather, an employee?s service is measured as the time that has elapsed from the employee?s date of hire

Elective Deferrals

The amount participants defer from their salary into the plan on a tax-favored basis

Enrollment Form / Salary Reduction Agreement

Enrolls the employee into the plan and allows the employer to withhold money from the employee?s paycheck

ERISA (The Employees Retirement Income Security Act)

Requires certain annual reporting, disclosure, and fiduciary responsibilities in order that both the DOL and the plan participant can be sure that retirement assets held in qualified plans are adequately protected. ERISA also implemented a claims procedure under which employees can dispute denied claims for benefits.

Fiduciary

A person or persons that are held personally responsible for the assets held in a 401(k) plan. Fiduciaries are held to several standards of conduct, which, if breached can result in substantial legal liability and penalties.

GIC (Guaranteed Investment Contracts

An investment contract that guarantees the payment of a specific rate of interest on the amount of money invested for a specific period of time

Graded Vesting

Vesting method that provides for incremental increases in the vesting percentage for each year of service the participant completes

Growth Stocks

The stocks of companies whose earning are expected to grow faster than average. Many high technology stocks are considered growth stocks

Guaranteed Investment Contracts (GIC)

An investment contract that guarantees the payment of a specific rate of interest on the amount of money invested for a specific period of time

Highly Compensated Employee (HCE)

An employee who, during the plan year or the preceding 12-month period, owned more than five percent of the employer, or earned compensation for the preceding year in excess of the permissible amount for that year

Hours Of Service Method

A "year of service" using the Hours of Service Method is defined as the completion of a specified number of hours of service during a 12-month computation period. This specified number of hours cannot exceed 1,000 hours

Internal Revenue Service (IRS)

Enforces the Internal Revenue Code (IRC). The IRS promulgates regulations and other written authority designed to clarify the specific provisions of the IRC

Investment Direction Form

Allows the participating employee to choose the investments for his or her plan account

Investment Manager

A registered representative under the Investment Advisors Act of 1940 or under applicable state law licensed under the laws of more than one state to perform investment management services

Investment Policy Statement

A roadmap used in the design, implementation, and ongoing monitoring of a 401(k) plan?s investment program

IRS (Internal Revenue Service)

Enforces the Internal Revenue Code (IRC). The IRS promulgates regulations and other written authority designed to clarify the specific provisions of the IRC

Key Employee

Generally, any employee who, at any time during the plan year that includes the determination date, is a "5 percent owner", a "1 percent owner" who earned more than $150,000, or an officer who earned more than $130,000 (subject to inflation adjustments)

Large-Cap Stocks

Stocks of companies with a market capitalization that exceeds $5 billion

Matching Contribution

An employer contribution that is only allocated to employees who make elective deferrals

Mid-Cap Stocks

Stocks of companies with a market capitalization of $1 billion to $5 billion

Mutual Fund

An investment company that pools the funds of many investors to purchase a portfolio of individual securities

NHCE

A Non-Highly Compensated Employee. See Highly Compensated Employee.

Non-Elective Contribution

An employer contribution that is not based on elective deferrals

Plan Administrator

Person or entity responsible for the day-to-day operation of the plan

Plan Documents

Contain all the legal and administrative requirements under which the plan must operate

Plan Sponsor

Person or entity responsible for designing and implementing the plan and its provisions

Qualified Domestic Relations Order (QDRO)

A legal document, filed with the court, that instructs the plan administrator of a 401(k) plan how funds are to be divided between separating or divorcing parties

Ratio Percentage Test

Compares the ratio of Nonhighly Compensated Employees (NHCEs) benefiting under the plan to that of the Highly Compensated Employees (HCEs)

Salary Deferral Plans

Written agreement whereby plan participants defer a portion of their salary into the 401k plan. These contributions are referred to as elective contributions and are considered plan assets.

Small-Cap Stocks

Stocks of companies with a market capitalization of less than $1 billion

Summary Plan Description (SPD)

Describes the plan in layman?s terms

Top-Heavy

Determination that more than 60% of the plan?s assets as of the beginning of the plan year belong to key employees

Trustee

Person or entity responsible for investing the plan assets in a prudent manner in the best interests of the plan participants

Value Stocks

These are stocks that are currently considered undervalued. This undervaluation may be because of a recent corporate setback or bad publicity. Investors in value stocks anticipate that this stock will recover from whatever is the cause of its current pricing

Vesting

A period of time in which monies and any earnings attributable to the employer?s contribution become available to the participant. Vesting schedules are used to encourage employees to remain with an employer.

Volume Submitter Plan Document

Plan document that is part template and part customized, and has been preliminarily reviewed by the IRS

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