Module 4 Vocab Flashcards
401(k) Plan
A plan that allows an employee to defer salary to a tax-deferred profit sharing plan.
403(b) plan
AKA a tax-sheltered annuity, is available to employees of certain charitable organizations and other non-profit organizations.
Deductible IRA
An individual retirement account that allows the owner to deduct the amount they contribute from their federally taxable income.
Direct Transfer
A direct transfer moves retirement benefits from one institution to another without the individual ever having possession of the moeny.
Early distribution
An early distribution occurs when a distribution is made prior to age 59 1/2. It can result in a 10% penalty.
Elective deferral
A deferral of compensation made by the employee participant in a 401(k) or SIMPLE plan.
Employee Retirement Income Security Act of 1974 (ERISA)
A federal law governing the operation of private retirement plans. Qualified employer-sponsored plans must comply with ERISA.
Employer contributions
Contributions made by the employer that are non-elective, part of a profit sharing plan, or meet the required contribution amount.
Forfeitures
Unvested benefits left in a retirement plan by a departing participant.
Individual Retirement Account
In 2024 the contribution limit is $7,000 with an additional $1,000 for people over 50.
Lump Sum Distribution
A retirement plan distribution that occurs at a single point in time.
Medicaid
A public assistance program designed to provide broad medical expense benefits to the needy.
Money purchase plan
A type of defined contribution plan. Employers are required to contribute. The maximum deductions for contributions to the plan man not exceed 25%.
Plan year
Any 12-month period during which a plan chooses to keep its records. Typically the calendar year or the fiscal year of the plan sponsor.
Profit sharing plan
A defined-contribution plan in which the employer us not required to make a set contribution each year, but the contributions should be substantial and recurring.
Roth IRA
Non-deductible retirement account which allows for tax free withdrawals after age 59 1/2 and the account is at least 5 years old.
Saving Incentive Match Plan for Employees (SIMPLE)
An employer-sponsored retirement plan that can be either an IRA or part of a 401(k) plan. Available to employers with less than 100 employees making at least $5k per year and have no other qualified plans.
Spousal IRA
An IRA established for the non-working spouse using the income from the working spouse to meet contribution eligibility requirements.
Stock bonus plan
A defined contribution plan where an employee can purchase stock in the employing corporation.
Tax-sheltered Annuity (TSA)
A special form of retirement plan that is available to public school teachers and non-profits employees
Trustee of qualified plan
A party named in the plan documents that is authorized to hold and invest the assets for plan participants.
Vesting
Gives the employee nonforfeitable rights to employer-provided contributions over time. Vesting gives the employee incentive to perform well and remain with the company.
