401k Rollover Glossary

A - E

401(k) Plan:

A qualified, employer-sponsored retirement plan in which employees elect to make pre tax contributions in lieu of receiving taxable income.

Custom Plan Document:

Written to accommodate the needs of a single plan sponsor, always requires filing with the IRS and must be maintained by the plan sponsor for regulatory changes.

Defined Benefit Plan:

A retirement plan that promises a specific benefit at retirement usually defined in terms of such factors as salary and years of service.

Defined Contribution Plan:

Participant benefits based on individual account balances. Individual balances are determined by contributions and investment performance.

Directed Trustee:

A trustee who acts at the direction of a plan fiduciary.

Discretionary Contribution:

An employer contribution that is not mandated by the terms of the plan.

Discrimination Testing:

A series of annual 401(k) plan tests that measure whether salary deferrals and employer contributions discriminate in favor of highly compensated employees.

Employee Retirement Income Security Act of 1974 (ERISA):

The basic law defining the rules of plan qualification, the rights of plan participants and beneficiaries and the obligations of plan fiduciaries, as well as the responsibilities of the IRS and DOL in enforcing its provisions.

Employer Matching Contribution:

Contribution made by the employer based upon the participant's (elective) salary deferral; can be expressed as a percentage or a dollar amount.

Employer Securities:

Shares of stock that are issued by the employer and are offered as a plan investment.

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