DSB New Hire Training Vocab 4

Question 1

Orphan plans

Answer 1

Plans that continue to exist with a participant, but the plan sponsor is no longer responsible for the maintenance of the plan.

Question 2

Outstanding Loan

Answer 2

An unpaid debt that the borrower is legally obligated to repay. This includes the total amount of principal and accrued interest and charges (if any) due under the terms of the loan.

Question 3

Partial Distribution (Pro-rata Calculation)

Answer 3

Pro-rata is a Latin term used to describe a proportional allocation. For Distributions, it refers to calculating the total of all outside fees and expenses from all participant account balances. The calculator will compare the total balance in each participant’s account to the total balance in the plan to calculate a ratio. This ratio (by participant) is then applied to deduct from all investments (except LN and XX).

Question 4

Permissive withdrawal

Answer 4

Most retirement plan distributions are subject to income tax and may be subject to an additional 10% tax.

Question 5

Plan Termination

Answer 5

Also called a deconversion, plan termination is when the Plan Sponsor decides to withdraw their plan from OA.

Question 6

Pro Rata

Answer 6

This is the term used to describe how taxes are calculated on withdrawals from post-1986 funds after-tax accounts. The amount a participant is entitled to exclude from taxation is determined by multiplying the amount of the payment by the ratio of the participant’s basis to the total value of the after-tax account balance under the plan as of the date of distribution.

Question 7

Profit Sharing Plan

Answer 7

A profit-sharing plan gives employees a share in their company’s profits based on its quarterly or annual earnings. It is up to the company to decide how much of its profits it wishes to share. Contributions to a profit-sharing plan are made by the company only; employees cannot make them, too

Question 8

Qualified Birth and Adoption Distribution (QBAD)

Answer 8

Defined by the IRS as any distribution of up to $5,000 from an applicable eligible retirement plan to an individual if made during the one-year period beginning on the date on which a child of the individual is born or the legal adoption of an eligible adoptee is finalized.

Question 9

Qualified Domestic Relations Order (QDRO)

Answer 9

Legal order issued by a state court or other state agency to require pension payments to alternate payees. An alternate payee must be a spouse, former spouse, child, or other dependent of a plan participant.

Question 10

Deemed severance

Answer 10

A distribution that normally would not be permitted, but is considered equivalent to a disbursement without penalty to the employee or the plan at the time of termination.

Question 11

Escheatment

Answer 11

The process of turning over unclaimed assets to the government, in specific instances. The most general occurrence is when an entity (e.g., a bank) holds money or property (e.g., an account in that bank) and the property goes unclaimed for some specified period of time (generally referred to as a dormant account). In many jurisdictions, if the owner cannot be located, such property must be turned over to the government.

Question 12

Reversals / Reprocessing

Answer 12

Reversals are transactions used to perform a variety of tasks including stop an RMD payment, update payment frequency, delete a history record, and other tasks.

Question 13

Shadow Fund Credit

Answer 13

The crediting of the Shadow Fund is a manual process for distributions when Fee Override Type = F - Fee Control text file. A T966 should be run to apply the credit.

Question 14

Safe Harbor

Answer 14

A legal provision to sidestep or eliminate legal or regulatory liability in certain situations, provided that certain conditions are met. Safe harbor 401(k) plans feature simple, alternative methods for meeting non-discrimination requirements. These 401(k) plans give the employer safe harbor from compliance concerns by providing them with a simplified product.

Question 15

Great GASB / SOMI Plan

Answer 15

There are a variety of different types of plans. Some plans are defined by the IRS code that brought them into existence. Other plans are defined by the plan sponsor(s), brokers or dealers. The GASB/SOMI plans are notable as all withdrawals are processed as rollovers.