Refers to IRS Form 1099-R. Retirement plans file this form to report payments made to Plan participants to the IRS and state tax authorities.

The Internal Revenue Code subsection allowing an arrangement where employees can defer income by making pretax contributions to certain qualified plans.

The Internal Revenue Code subsection governing matching contributions in a 401(k) plan.

A coverage test specified in section 410(b) of the Code that is designed to ensure that qualified plans benefit a sufficient number of non-highly compensated employees.

Any employee who directly or indirectly owns more than 5% of the stock in the corporation, or more than 5% of the capital or profit interest if the employer is not a corporation.

The Actual Contribution Percentage test; a non-discrimination test applied to employer matching and employee (after-tax) contributions.

The Actual Deferral Percentage test, a special test that limits the extent to which elective contributions to a 401(k) plan made by highly compensated employees can exceed elective contributions made by non-highly compensated employees.

A group of employers, having some common ownership, which provide services to each other or to third parties, and which, under rules provided in IRC Section 414(m), must be treated as a single employer for qualified retirement plan purposes.

A spouse, former spouse, child, or other dependent of a participant who is recognized by a Qualified Domestic Relations Order as having a right to receive all or a portion of the benefits for a participant payable under the plan.

Refers to the IRC Section 415(c) limitation. It's a term used in connection with the limits on allocations of employee and employer contributions, as well as forfeitures, to a participant's account in a defined contribution plan.

An IRA used to temporarily hold a rollover from an employer's qualified retirement plan and eventually transferred to a qualified plan of another employer.

401k Plans typically accept contributions from four "sources":
- Employee contributions (often called "salary deferral" or 401k contributions
- Employer matching contributions (contingent on the employee contributing)
- Employer profit sharing (made for eligible employees whether they contribute or not)
- Rollover contributions (funds transferred by employees from a previous employer's Plan)

It is very important to motivate employees to contribute to the Plan so that the Plan passes the 401k nondiscrimination test. The average matching formula is approximately 50% of the first 6% of pay the employee contributes.

A group of two or more employers with sufficient common ownership under IRC Section 1563 to require treatment as a single employer for certain qualified retirement plan requirements and limits.

A distribution made to correct IRC Section 415 excesses, an excess contribution, an excess aggregate contribution, or an excess deferral.

A U.S. Government agency which, as part of its charter, has the authority and responsibility to interpret, regulate, and enforce compliance with the provisions of ERISA.

Same as elective contribution: a contribution made to a 401(k) by the employer on behalf of an employee, pursuant to that employee's cash-or-deferred election.

Eligibility rules can be established by the employer sponsoring the Plan. A minimum age requirement can be set provided that it is no higher than age 21. A minimum waiting period can be set provided it is no more than 1 Year of Service. If "1 Year of Service" is chosen, then an employee must work (or be paid for) a minimum of 1,000 hours of service in the one year period beginning on his or her date of hire. If a waiting period of less than 1 Year is chosen then no minimum number of hours of service may be required. Thus part-time employees will join the Plan after the waiting period regardless of the number of hours worked.

A major Congressional act which, when enacted in 1974, completely overhauled federal laws pertaining to qualified retirement plans. ERISA established rules for participation, vesting, funding, handling assets, disclosure, and reporting.

The aggregate amount of employee after tax contributions and matching contributions made on behalf of highly compensated employees for a plan year which are in excess of the maximum amount of such contributions permitted under the ACP test.

The amount of contributions and/or forfeitures, made on behalf of a participant, for a limitation year in excess of the maximum amount of such contributions and/or forfeitures permitted under IRC Section 415.

The amount of the elective contributions, made to a 401(k) plan on behalf of highly compensated employees, for the plan year in excess of the maximum amount of such contributions permitted under the ADP test.

An employee's elective contributions for the taxable year in excess of an annually adjusted dollar amount.

Any part of benefits that a participant loses if he or she is not 100% vested upon termination of employment. Forfeitures relate only to employer contributions. Pre-tax, after-tax, and rollover contributions that the employee makes are 100% vested at all times.

Generally, any employee who during the current or preceding year was a 5% owner or compensation in excess of an annually adjusted dollar amount in the prior year.

The IRS allows employees to borrow one-half of their vested account balance up to $50,000. Repayment is made through payroll deduction and the loan is typically amortized over a five-year period. The interest rate is usually the prime rate and both principal and interest are credited to the employee's account. The loan repayments are made with after-tax dollars.

Specified in the plan document, the normal retirement age (usually age 65) means the age at which time a participant shall become fully vested in his or her account.

The date defined in a plan on which a participant becomes eligible to have his benefit distributed to him.

A fiduciary, provider of services, participant, plan sponsor, beneficiary, or some other party with a relationship to the plan. Parties in Interest are prohibited from entering into certain transactions with the plan.

Qualified Domestic Relations Order: a judgement, decree, or order made pursuant to a state domestic relations law. Relates to the child support, alimony payments, or marital property rights of an alternate payee.

An annuity paid for the life of a participant, with a survivor annuity for his or her spouse. The survivor annuity must be at least 50 percent, but not more than 100 percent, of the annuity received by the participant during his or her lifetime.

Also known as elective contributions. The amount of contribution that the employee voluntarily reduces from his or her pay on a before tax basis, for contribution to a 401(k) or similar type of plan.

A summary of the plan document provisions written in lay terms, which must be provided to participants and beneficiaries.

A plan where over 60% of all accrued benefits or account balances are held for the benefit of key employees.

The process by which a plan participants earns the right to keep his or her employer-financed accounts upon termination of employment. Note that the employees own contributions are always 100% vested - vesting schedules only apply to employer derived funds.

Each plan has a vesting schedule that defines the percentage of the account that the participant keeps. The remainder is forfeited by the participant and reverts back to the Plan (not the employer). This "forfeiture" is then "reallocated" to the remaining participants or used to finance future matching contributions for the employer.

For example, if the vesting schedule on the employer match is "20% per year of service," an employee who quits after three years of service will keep 100% of his or her own contributions (plus investment gains or losses) but only 60% of the employer matching account.

A 12-month period during which an employee is credited with at least 1,000 hours of service.