12b-1 Fee
Sometimes called a management fee, this charge is deducted from the investors’
fund assets to pay for distribution and marketing costs. It is usually a
percentage of assets held, but sometimes is a flat fee.
401(k) Plan
An arrangement defined by Code Section 401(k) under which a covered employee
can elect to defer income by making pre-tax contributions to a profit-sharing
or stock bonus plan.
401(k) Stock Bonus Plan. (Also known as a KSOP)
A 401(k) plan in which contributions are invested in the employer's stock.
403(b) Plan
A tax-sheltered retirement plan established by governmental employers and other
tax-exempt organizations as defined in Section 501(c). This includes
organizations whose purposes are religious, scientific, charitable, or
educational.
404(c)
A subsection in the Internal Revenue Code which defines how a Plan Sponsor can
find relief from liability as a fiduciary for investment decisions made by
participants in a participant-directed individual account plan such as Profit
Sharing or 401(k) Plans.
457 Plan
A tax-sheltered retirement plan established by governmental employers and other
tax-exempt organizations as defined in Sections 501-528. This covers
organizations not classified as 501(c)(3) organizations [403(b) plans]. 457
plans include governmental agencies, civic organizations and other religious,
scientific, or educational organizations.
ACP Test
A discrimination test that involves a percentage comparison of matching contributions and nonelective employer
contributions made on behalf of non-highly compensated employees with the matching contributions and nondeductible
employee contributions made on behalf of highly compensated employees.
Adoption Agreement
That portion of the master or prototype plan document that contains all of
the alternatives and options that may be selected by an adopting employer.
ADP Test
A nondiscrimination test that compares the deferral rates of non-highly compensated participants relative
to their compensation with the deferral rates of highly compensated participants in the same 401(k) plan.
Age-Weighted Profit Sharing Plan
A type of qualified retirement plan that allocates employer contributions based on compensation and age.
Annual Management Fee
A mutual fund company charges the investor a fee each year to, in part, pay the investment’s fund manager.
It usually ranges from .25% to 1.5% of assets held.
Annual Rate of Return
The percentage change (gain or loss) in a funds value from the last trading day of the previous year.
Return may also be shown as a cumulative percentage (since the fund was first created) or in a shorter time frame
(monthly, quarterly, etc.).
Asset Allocation
Dividing an investment portfolio among the major asset categories, ex;, stocks; bonds; cash; real estate.
The underlying idea is that if you own assets that behave differently, you'll always have one or two investments that are doing okay.
Asset Allocation Fund
A common trust fund or mutual fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, and real estate stocks.
This gives small investors far more diversification than they could get allocating money on their own. Some of these funds keep the
proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change.
Asset Mapping
Asset choices / categories between original plan and new plan are matched as closely as possible .
Automatic Enrollment
Employees are automatically enrolled in the 401(k) plan as soon as they meet the plan’s eligibility standards.
Default investments (usually a money market) and a default contribution rate (usually 3% to 5% of compensation) are preset by the
employer. All passively enrolled employees must be immediately notified of their participant status, and given the opportunity to change
the contribution rate and/or investment selection.
