Module 4 Vocab

Question 1

401(k) Plan

Answer 1

A plan that allows an employee to defer salary to a tax-deferred profit sharing plan.

Question 2

403(b) plan

Answer 2

AKA a tax-sheltered annuity, is available to employees of certain charitable organizations and other non-profit organizations.

Question 3

Deductible IRA

Answer 3

An individual retirement account that allows the owner to deduct the amount they contribute from their federally taxable income.

Question 4

Direct Transfer

Answer 4

A direct transfer moves retirement benefits from one institution to another without the individual ever having possession of the moeny.

Question 5

Early distribution

Answer 5

An early distribution occurs when a distribution is made prior to age 59 1/2. It can result in a 10% penalty.

Question 6

Elective deferral

Answer 6

A deferral of compensation made by the employee participant in a 401(k) or SIMPLE plan.

Question 7

Employee Retirement Income Security Act of 1974 (ERISA)

Answer 7

A federal law governing the operation of private retirement plans. Qualified employer-sponsored plans must comply with ERISA.

Question 8

Employer contributions

Answer 8

Contributions made by the employer that are non-elective, part of a profit sharing plan, or meet the required contribution amount.

Question 9

Forfeitures

Answer 9

Unvested benefits left in a retirement plan by a departing participant.

Question 10

Individual Retirement Account

Answer 10

In 2024 the contribution limit is $7,000 with an additional $1,000 for people over 50.

Question 11

Lump Sum Distribution

Answer 11

A retirement plan distribution that occurs at a single point in time.

Question 12

Medicaid

Answer 12

A public assistance program designed to provide broad medical expense benefits to the needy.

Question 13

Money purchase plan

Answer 13

A type of defined contribution plan. Employers are required to contribute. The maximum deductions for contributions to the plan man not exceed 25%.

Question 14

Plan year

Answer 14

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.

Question 15

Profit sharing plan

Answer 15

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.

Question 16

Roth IRA

Answer 16

Non-deductible retirement account which allows for tax free withdrawals after age 59 1/2 and the account is at least 5 years old.

Question 17

Saving Incentive Match Plan for Employees (SIMPLE)

Answer 17

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.

Question 18

Spousal IRA

Answer 18

An IRA established for the non-working spouse using the income from the working spouse to meet contribution eligibility requirements.

Question 19

Stock bonus plan

Answer 19

A defined contribution plan where an employee can purchase stock in the employing corporation.

Question 20

Tax-sheltered Annuity (TSA)

Answer 20

A special form of retirement plan that is available to public school teachers and non-profits employees

Question 21

Trustee of qualified plan

Answer 21

A party named in the plan documents that is authorized to hold and invest the assets for plan participants.

Question 22

Vesting

Answer 22

Gives the employee nonforfeitable rights to employer-provided contributions over time. Vesting gives the employee incentive to perform well and remain with the company.