Module 7 Vocab Flashcards
ACP Test
A discrimination test that compares the matching and non-elective contributions percentages made by employer to Non highly and highly compensated employees.
Death Benefit Only Plan
A plan that only offers a death benefit to the employees beneficiary
Disqualified Person
Any person or entity prohibited by the IRC from entering into certain transactions with a qualified plan because of their relationship to the plan (Sponsor or fduciary)
Employee Stock Ownership Plan (ESOP)
A profit sharing or stock bonus plan in which the funds must be invested primarily in the employer’s securities. An ESOP may borrow in order to purchase company stock.
Excess Benefit Plan
A plan maintained by an employer solely to provide benefits for certain employees in excess of the limitations on contributions and benefits.
Excess contributions
The excess of the elective contributions made to a 401(k) plan for highly compensated employees for the plan year that are over the maximum amount of such contributions permitted under the ADP test for the year.
ADP Test
A nondiscrimination test that compares the deferral rates of non-highly compensated and highly compensated participants in the same 401(k) plan
Five-year cliff vesting
An approved vesting schedule in which the participant is fully vested in their benefits at the completion of five years of service. Under this schedule, if the participant leaves or is fired from their position within 5 years, they get none of their benefits.
Five-year rule
If there is no beneficiary listed on the specific account, the person inheriting a retirement account must take the distribution within 5 years.
Forward averaging
A method of calculating taxes that allows a lump sum distribution to be spread out over many years to reduce the taxable income (and rate) in any one year.
Net Unrealized Appreciation (NUA)
The increase in value of employer securities distributed from a stock bonus plan since the time they were contributed by the employer to the participants plan.
Qualified Domestic Relations Order (QDRO)
A court order that gives a dependent of the plan participant a right to some part of the participants interest in a qualified plan.
Section 457 Plan
A retirement plan that enables employees of state and local governments and nonprofit organizations to defer taxation on salary-reduction contributions. Similar to a 401(k), but not a qualified plan
Supplemental Executive Retirement Plan (SERP)
An employer paid nonqualified deferred compensation plan.
Target Benefit Plan
A defined contribution plan that establishes a fixed contribution formula to calculate the contributions required to reach a predefined benefit. The contributions are not recalculated.
