401k Rollover Glossary

M - Z

Money Purchase Pension Plan:

An individual account plan, in which the employer has a fixed obligation to make annual contributions to the plan, usually based on a percentage of pay.

Mutual Fund:

A registered investment company that pools the money of many investors and makes investments for its shareholders in pursuit of a stated goal. Mutual funds are a popular way to invest because of the advantages they offer, including professional management and diversification.

Nondiscretionary Trustee:

An entity that provides trust services, but does not exercise discretion with regard to plan assets.

Nonqualified Deferred Compensation Plan:

A retirement plan to which the advantages of qualification do not apply. To avoid ERISA 's eligibility, vesting, and accrued benefit requirements, these plans are unfunded and made available only to a select group of management or highly compensated employees.

Profit Sharing Contribution:

Allocated to all eligible employees (even if they are not contributing); generally based on level of compensation.

Profit Sharing Plan:

A plan under which contributions made by the employer are allocated to participants pursuant to a definite predetermined formula. Contributions are generally discretionary and may be made without regard to profits.

Prototype Plan Document:

A master plan written to accommodate the needs of many clients; standardized agreement to adopt this plan generally requires no IRS filling; nonstandardized adoption agreement requires minimal IRS filing; prototype plans are maintained by the financial institution (rather than by the plan sponsor) for regulatory changes.

Qualified Plan:

A written document containing operating rules and features for the exclusive benefit of participants and beneficiaries which satisfies the requirements of Section 401(a) of the Internal Revenue Code.

Recordkeeper/Third-Party Administrator:

An entity that maintains individual participant records through receipt of periodic data from the plan sponsor and trustee; processes contributions, distributions, loans and changes; provides management reports and participant statements confirming plan activity; may provide plan design and consulting services.

Salary (Elective) Deferral:

A plan participant's election to defer salary (on a pre tax basis) into a retirement plan.

Section 404(c):

ERISA guidelines, which help to reduce a plan sponsor's fiduciary liability for employee investment directed retirement plans. Under DOL regulations, implementing Section 404(c), the plan must:
• Allow employees to direct the investments of their contributions among at least three investment choices which have materially different risk and reward characteristics and provide employees an opportunity to diversify their account balances to reduce risk.
• Give employees adequate information about the investments in the plan so that they make informed choices.
• Afford employees the opportunity to transfer among investments at least quarterly (or more often if needed to compensate for fund volatility).
Target Benefit Plan: A retirement plan that combines the features of a money purchase pension plan and a defined contribution plan. It is designed to provide to certain target benefit at retirement while placing a ceiling on contributions made by the employer on behalf of each plan participant.

Trust Agreement:

A written arrangement describing the trust and outlining the duties and responsibilities of the trustee.

Trustee:

An entity or person responsible for the management of the plan assets accounted for in segregated trust accounts. 

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