Salary Deferral
The process of setting aside a certain portion of a participant's pay to contribute to a company-sponsored qualified retirement plan.
Salary Reduction Plan
A plan that enables the employee to defer receipt and taxation of a portion of current compensation.
SARSEP
A salary reduction plan that is available only to companies with 25 or fewer employees. What distinguishes a SARSEP from other SEPs is the opportunity for employees to elect to contribute a portion of their pay on a pretax basis. Under current law, new SARSEPs cannot be established. Those established prior to 1997, however, can continue to be funded.
Savings Incentive Match Plan for Employees (SIMPLE)
An employer-sponsored retirement plan that can be either an IRA for each employee of part of a 401(k) plan. Available to employers with 100 or fewer employees who earn at least $5,000 a year and who have no other qualified plans.
Savings or Thrift Plan
A defined contribution plan in which participants make contributions on a
discretionary basis with limits, and to which employers may also contribute,
usually on the basis of fully or partially matching participants' contributions.
Contributions are commonly made with after-tax earnings.
SEC
The Securities & Exchange Commission is an “independent, non-partisan, quasi judicial regulatory agency with responsibility for administering federal securities laws.” Visit www.sec.gov.
Section 501(c)(3)
Nonprofit entities recognized by the Internal Revenue Code that are organized and operated for religious, charitable, scientific, educational, literary, or safety-testing purposes.
Service Requirement
Employees must be employed for a minimum amount of time before being eligible to participate in the 401(k) plan.
Simplified Employee Pension (SEP)
A pension plan established by a business on behalf of employees; contributions are deposited into the Individual Retirement Accounts (IRA) of the employees.
Stock Bonus Plan
A profit sharing plan in which employer contributions generally are made with employer shares. Employee stock ownership plans (SDOPs) and leveraged employee stock ownership plans (LESOPs) are the most common types of stock bonus plans.
Summary Plan Description (SPD)
A detailed, reader-friendly description of benefit plan provisions that must be provided to all plan participants and beneficiaries.
This is an overview of the 401(k) plan’s rules and benefits.
