Account
An account maintained for the benefit of a participant in a retirement plan.
Account Statement
A quarterly summary of the retirement account, including the value of the account at the end of each calendar quarter, recent transactions, and how the account is invested in the various plan investment options.
Auto Enrollment
A method of enrolling all eligible employees in a retirement plan at a predefined contribution rate of eligible pay without requiring them to submit a request to participate. Plan design specifies how these automatic deferrals are invested. If your plan has an auto enrollment feature you will have to manually opt out. Participants can change the amount of pay that is deferred and how it is invested.
Auto Escalation
A plan feature which automatically increases the percentage of pre-tax savings from salary. The rate will automatically increase by a defined percent over time.
Beneficiary
A person entitled to receive a share of a deceased participant’s interest in an account under the plan.
Catch-Up Contribution
An additional voluntary contribution that a participant who is 50 years of age or older may make into the 401(k) or 403(b) retirement plans. Catch-up contributions may be subject to cost-of-living adjustments. For 2022, the catch-up amount is $6,500.
Compensation
Wages and all other payments to an employee by the employer for services rendered to the employer during the course of employment. Plan compensation may include all or only a portion of such compensation.
Default
A failure to repay a plan loan in accordance with the provisions specified in the Summary Plan Document. The document must identify the events that constitute the failure and the parameters for any grace period.
Default Investment Alternative
A specific investment identified as the investment vehicle in which participant accounts shall be invested if no investment instructions are provided by the participant.
Direct Rollover
A tax-deferred transfer of assets from one qualified retirement plan to another qualified retirement plan or IRA. The transfer is made without any funds being sent directly to the plan participant.
Distributions and Withdrawals
When money is withdrawn from a retirement account, the withdrawal is referred to as a distribution. Plan assets can be withdrawn without penalty after age 59 ½.
Diversification
The practice of spreading risk by investing in a number of securities that have different return patterns over time. When one investment is yielding a low or negative rate of return in a diversified portfolio, another investment may be enjoying positive or above-normal returns.
Eligibility
Eligibility determines who can participate in the retirement plan and when they can participate.
Employer Matching Contribution
A contribution made to your retirement plan by your employer. Match availability and eligibility is outlined in your employer's retirement plan documents.
Forfeiture
The portion of an employee's account balance that is lost because it is not vested when the employee terminates employment.
Frozen Plan
A retirement plan under which accruals and/or contributions have ceased but assets are still held for participants and beneficiaries.
Grandfathered
A grandfather clause (or grandfather policy or grandfathering) is a provision in which an old rule continues to apply to some existing situations while a new rule will apply to all future cases. Those exempt from the new rule are said to have grandfather rights or acquired rights, or to have been grandfathered in.
Hardship Withdrawal
An in-service distribution from the plan which is made because the participant has suffered severe financial difficulty, or an extraordinary event as defined by the Summary Plan Description. Financial hardships are defined by federal income tax regulations and can only be requested after attempting to satisfy the need by borrowing the maximum amount available through a plan loan or other readily available financial resources. Hardship withdrawals are not available in all retirement plans.
Loan
Participants may be eligible to take loans from their retirement account for any reason; however, they are subject to approval. There are loan fees and conditions to be considered before borrowing from a retirement plan, including defaulting on the loan which would cause a taxable distribution. Loan details can be found in your retirement plan summary plan document.
Lump Sum
The distribution, in a single payment, of a participant's entire vested accrued benefit under the plan (or what remains of the participant's vested benefit at the time of the single-sum distribution).
Matching Contribution
The amount an employer may contribute towards your retirement plan. Please refer to the Summary Plan Description for details concerning the matching formula and eligibility.
Normal Retirement Age
Age at which some plans allow for certain types of in-service withdrawals. For example, a normal retirement age of 65 may indicate that you are now eligible to take a distribution from your account even though you are still actively employed.
Participant
An eligible employee who is covered by a retirement plan.
Participant Account
The account established and maintained for each participant with respect to such participant’s total interest under the plan. Plan assets may include voluntary and matching contributions, rollovers, transfers, and earnings.
Payout Options
Any of the forms of distribution or options for benefit payments that may be available established in the terms of the Summary Plan Description.
Period of Severance
A continuous period of time during which a former employee is not actively employed by the company. It is generally only pertinent if they are rehired at a later date.
Plan
Refers to relevant retirement plan.
Plan Trust and Trustee
Assets of the Plan are held in a trust. Once a contribution is made to a participant’s plan account, the money is paid to the trust fund, where it is invested and held by the trustees.
Portability
This occurs when, upon termination of employment, an employee transfers retirement plan assets from one employer's plan to another without penalty.
Qualified Domestic Relations Order (“QDRO”)
A QDRO is a domestic relations order, made pursuant to a state domestic relations law, that provides for the payment of all or a portion of the participant’s benefits to a spouse, former spouse, child, or other dependent (“alternate payee”) relating to child support, alimony payments, or marital property rights.
Retired Participant
A plan participant who has met the plan qualifications for retirement benefits and has retired.
Retirement Date
The date as of which a participant retires.
Rollover
A participant’s transfer of retirement funds from one retirement plan to another plan of the same type or to an IRA without incurring a tax liability. The transfer must be made within 60 days of receiving a cash distribution. The law requires 20 percent federal income tax withholding on money eligible for rollover if it is not moved directly to the second plan or an investment company.
Summary Plan Description (SPD)
The SPD is a detailed guide to the benefits a retirement plan provides and how the plan works.
Vesting
The period of time an employee must work at his or her company before gaining access to matching contributions. Participant voluntary contributions are immediately vested.
Vested
The non-forfeitable portion of any account maintained on behalf of a participant in a retirement plan.
Year of Service
Year of Service is a term defined in the Summary Plan Description. It describes the period of time and the method for measuring service. The result of the measured service generally determines when a colleague is eligible to participate in the Plan.
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