Module 1 Vocab

Question 1

Accrued benefit

Answer 1

A benefit that has accumulated up to a particular point the participants’ employment that are payable to the employee at a later date

Question 2

Accrued benefit method

Answer 2

A method of calculating and funding defined benefit plan liabilities accruing in a particular year.

Question 3

Deferred compensation

Answer 3

Income that is payable to an employee at a future date

Question 4

Effective deferral

Answer 4

A deferral of compensation made by the employee participant of a Cash or Deferred Arrangement (CODA) plan (aka 401k)

Question 5

Cash or Deferred Arrangement (CODA) plan

Answer 5

a plan that defers an employees income which is instead contributed to their retirement account on their behalf (a 401k is a CODA plan)

Question 6

Funded plan

Answer 6

A non-qualified plan in which cash or property is irrevocably contributed to a separate fund for the benefit of the employee

Question 7

Indirect Rollover

Answer 7

A Rollover from one retirement account to another in which the owner takes temporary receipt of the funds before placing them in the new account. This is tax free and penalty free as long as it is rolled over by the 60th day.

Question 8

Master plan

Answer 8

A retirement plan sponsored by a financial institution that an employed can adopt by simply executing a participation agreement. The plan documents are preapproved by the IRS

Question 9

Minimum participation requirement

Answer 9

Defined benefit plans are required to meet minimum participation requirements.

The defined benefit plan must cover the lesser of 50 employees or the greater of 40% of employees or 2 employees

Question 10

Nonelective deferral

Answer 10

A plan contribution from the employer based on a percentage of the employees income, but not related to the amount deferred by the participant

Question 11

Nonelective employer contributions

Answer 11

Contributions made by the employer on behalf of the 401k participant. Nonelective contributions are not matching contributions

Question 12

Normal retirement age

Answer 12

The earlier of
(1) the retirement age specified in the plan
(2) The later of 65 or 5 years after the plan began

Question 13

Participant-directed plan

Answer 13

A defined contribution plan in which each participant is allowed to choose how to invest the assets held in their account