DSB New Hire Training Vocab 2

Question 1

Foreign National

Answer 1

A foreign national is any person who is not a naturalized citizen of the country in which they are living.

Question 2

Forfeiture

Answer 2

The loss of employer contributions that are available as a time of service requirements is met. If the Participant separates from the plan or employment prior to meeting the full-service requirement, those contributions and earnings are surrendered.

Question 3

Guaranteed Minimum Death Benefit

Answer 3

A benefit term that guarantees that the beneficiary, as named in the contract, receives a death benefit if the annuitant dies before the annuity begins paying benefits.

Question 4

Hardship

Answer 4

Although not required, a retirement plan may allow participants to receive a distribution from a participant’s elective deferral account when the participant can demonstration both: an immediate and heavy financial need; and the distribution is limited to the amount necessary to satisfy that financial need.

Question 5

Housing Allowance

Answer 5

A sum of money awarded by the governing board of a house of worship to its minister to offset housing expenses. For tax purposes, this allowance is exempted from the minister’s gross income.

Question 6

In-Service Withdrawal (T444)

Answer 6

Any withdrawal of funds from a qualified retirement plan while a participant is employed by the plan sponsor.

Question 7

Corrections & Adjustments

Answer 7

A corrective distribution is necessary when results from a plan’s annual compliance test result in excess contributions made to the plan by the participant. The participant is refunded the excess contributions, and this restores the checks and balances of the plan.

Question 8

Installment

Answer 8

A method of paying or receiving money in specified intervals rather than one lump sum.

Question 9

Investment Only Service Level

Answer 9

OneAmerica does have plans that are ‘investment only.’ They are similar to PFRK plans but normally don’t have a third party agreement (TPA). The investment only service level is no longer offered by OA, and there should not be any new investment only plans.

Question 10

Limited Service Level

Answer 10

Limited service plans are plans where employers (plan sponsors) have a third party administrator (TPA). In some cases, OA may manage some services and work with a TPA.

Question 11

Multiple Beneficiaries

Answer 11

The beneficiary is the person or entity named to receive the money in accounts held by the deceased. The beneficiary may be a trust or an estate and there can be more than one beneficiary.

Question 12

Pre-87 Balance

Answer 12

Prior to 1987, employees could withdraw after-tax contributions tax-free. In 1986, congress implemented the Tax Reform Act. This act established the “basis recovery rules” that apply to distributions from after-tax accounts. Pre-1987 after-tax contributions have to be tracked separately on a completely tax-free basis. For withdrawals of post-1986 amounts, participants must treat the recovery on a pro-rata basis.

Question 13

Required Minimum Distribution (RMD)

Answer 13

The amount that plan participants must begin withdrawing from their retirement accounts by April 1 following the year they reach age 701⁄2. Exceptions apply to those covered under a qualified plan who are still employed. RMD amounts must then be distributed by December 31 that year and each subsequent year.

Question 14

Qualified Reservist

Answer 14

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 individual retirement account (IRA) without incurring the usual early distribution penalty. To qualify for this exception, the reservist must be called to active duty for more than 179 days and the withdrawal must occur while the reservist is serving on active duty.

Question 15

Third Party Agreement (TPA)

Answer 15

A company that provides operational services such as day-to-day account administration functions and employee benefits management under contract to another company.

Question 16

Unusual Activity

Answer 16

An unusual activity review is used to verify that the distribution request was legitimately made by the participant.

Question 17

Voluntary Tax Deferred Annuity (VTDA)

Answer 17

An investment vehicle that offers fixed or variable rates of return. It grows tax-free until retirement. Also referred to as a voluntary savings plan, a tax-sheltered annuity, or simply as a 403(b).

Question 18

True-up Contributions

Answer 18

This type of contribution allows employers or plan sponsors to fund the difference in match contributions for participants who may reach the maximum statutory deferral amount prior to the end of the year or for participants who did not contribute enough for part of the year to receive the full match.