DSB New Hire Training Vocab 3 Flashcards
This deck covers terms associated with the basics of 401(k)s and other finance related vocabulary
Involuntary Cash Out
A mandatory distribution of more than $1,000 from a plan qualified to be paid in a direct rollover to a traditional IRA of a designated trustee or issuer if the participant does not make an affirmative election to have the amount paid in a direct rollover to an eligible retirement plan or to receive the distribution directly.
Loan Issuance
The process of fulfilling a participant’s request for a loan.
Mandatory Cash Out
The IRS allows 401(k) plans to automatically “cash out” small account balances - defined as less than $5,000 - upon their termination of employment without the owner’s consent. Under these rules, account balances between $1,000 and $5,000 must be rolled over into an MCO IRA for the benefit of the employee. If less than $1,000 it will process as a lump sum cash payout (a live check to the participant).
OneAlliance
OneAlliance (OA) plans is a service level agreement in which OneAmerica does not track the vesting nor do we calculate RMDs, generally. If a participant requests a distribution from an OA plan, the vesting must be on the request form if the withdrawal request is for a fund that may be subject to vesting. (Omni Field PM731=OA)
OneAlliance Plus
One Alliance Plus is a service level that Plan Sponsors may choose to have. For OP plans, OneAmerica tracks the vesting. OP is similar to the full-service level except we generally do not calculate RMDs. (Omni Field PM731=OP).
Deemed loan
Loans that do not meet regulatory requirements may be considered “deemed distributions.” For instance, if loan repayments are not made at least quarterly, the remaining unpaid balance is treated as a distribution that is not rollover eligible, which means the amount will be subjected to income tax. If there is a deemed loan in the same year as a termination, the deemed loan amount is taxable.
Gross-up
To increase the employee’s net withdrawal amount so that it includes the taxes owed on the withdrawal.
Default Loan
If a participant separates from the plan and has a loan outstanding, the loan will be defaulted and the loan amount is taxable. A 1099 form will be issued.
Inactive Account
When an account has no transactions for a period of time (typically 12 months) it is considered inactive, though dormancy periods vary by state. A transaction is an activity initiated by the account holder. System-generated activities like posting interest do not count as a transaction.
Spousal Approval
Under ERISA, your spouse is automatically named as sole beneficiary of your 401(k) account. You can’t name a different or additional beneficiary unless your spouse approves it in writing. The IRS states that a 401(k) plan may require an employee’s spouse to consent to a distribution, depending on the type of distribution and the plan specifics.
Return Trailing Distributions
When a participant has separated from the Plan Sponsor or just the plan, there may be a delay in stopping the contributions into the plan from the participant’s earnings. These post-separation contributions must be returned to the participant.
Plan Termination
When a plan sponsor submits a request to terminate the retirement plan, assets are fully paid out, and OA completes final services (final annual reports, final 5500 preparation).
Asset Retention
The former name of the Customer Concierge Service (CCS). Also, the name of the withdrawal process in which CCS talks to a participant about depositing funds into an OA IRA instead of taking their money out of their OA managed plan.
