Glossary of terms

We understand that our industry has some peculiar words.  Here is a list of some common terms that you may hear us say (much of the information below is taken from "The ERISA Outline Book," published by TRI Pension Services, www.cybERISA.com):

Affiliated Service Group:  A group of related employers.  Refers to two or more organizations that have a service relationship and, in some cases, an ownership relationship.

Attribution:  The concept of treating a person as owning part of a company, when they do not actually own any part of the company. Usually this applies to a spouse, children or parents of an actual owner.

Catch-Up Contributions:  In a 401(k) Plan, once a Participant has reached the age of 50, (s)he is eligible to make an additional elective deferral.  The additional amount is declared each year by the IRS.  You can reference these limits here.

Controlled Group:  A group of related employers connected through common ownership.  Typically, the common ownership needs to be at least 80% in order to be a Controlled Group.

Eligible Compensation:  A Participant's income that is eligible for benefits.  Eligible income is required to be subject to Social Security/Payroll taxes.  Distributions/Dividends passed through to an owner of an S-Corp/LLC are not considered Eligible Compensation.

Fiduciary:  A person is a fiduciary if (s)he is described in one of the following:
    1.  Management - The person exercises any discretionary authority or discretionary control respecting management of the plan, or exercises            any authority or control respecting management or disposition of assets.
    2.  Investment advice - The person renders investment advice for a fee or other compensation, direct or indirect, with respect to any assets            of the plan, or has any authority or responsibility to render such advice even if not actually rendered.
    3.  Administration - The person has any discretionary authority or discretionary responsibility in the administration of the plan.

Five-Percent Owner:  An employee who owns more than 5% of the employer, either by direct ownership or through attribution.

Form 5500 / Annual Return:  The annual information return filed by the plan.

Highly Compensated Employee (HCE):  An employee is an HCE for a plan year if he employee meets one of the two following tests:
    1.  Five-percent owner test.  The employee owns more than 5% of the employer at any time during the current plan year or during the 12                  months preceding the plan year.
    2.  Compensation test.  An employee is an HCE if the employee's compensation for the lookback year is more than the prescribed dollar                    amount declared by the IRS for a given year.  You can reference these limits here.

Nondiscrimination Testing:  A qualified plan must satisfy certain nondiscrimination requirements, which means that the plan does not impermissibly discriminate in favor or highly compensated employees.

Safe Harbor Plan:  A plan that satisfies the safe harbor requirements for nondiscrimination testing, as prescribed by the 401(a)(4) regulations.