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Quick Definintions

Age-weighting - Profit sharing contributions are allocated to favor older employees since these participants have less time to accrue benefits before retiring.

Cross-testing - Also known as a new-comparability design, different levels of profit sharing contributions may be given to different groups of employees as long as certain discrimination tests are met.

Employee deferrals - An employee election to contribute a portion of pay that is not currently available to be redirected to a 401(k) plan.  (Limitations as to the amount or percent of deferral is set by the employer and defined in the plan document.)

Employer match - Employer contributions made pursuant to employee deferrals.  Only employees who defer may receive a matching contribution in a formula set by the employer.  (The formula may change year-to-year based upon the plan document.)

ESOP - Company owners looking to share ownership with their employees and who may be looking for a retirement strategy may sell some or all of their shares to a retirement plan in a tax-favored manner.  Review the ESOP process here.

Pro-rata or integrated profit sharing - Not always dependent upon profits, a contribution to all eligible participants.  Contributions are the ratio of your pay to everyone's eligible pay (pro-rata) or may have an extra contribution if you earn over the taxable wage-base.

Safe harbor - A plan design alleviating the plan sponsor from certain discrimination testing.  Employer contributions may be a match or non-elective (i.e., does not depend upon employee deferrals).  Contributions are 100% vested and have notice requirements.

email: team@pyrastarpensiongroup.com

mail:1875 Old Alabama Rd Suite 1110
Roswell, GA 30076

Toll Free: 866-345-3767

 

Additional Resources

From 401kHelpCenter.com
Check the Glossary for simple definitions of investment and re
tirement-related terms.

From theBeehive.com
Resources for educating employees about 401(k) plans.


From investorwords.com
An expansive offering of the terms you need to know.

From BenefitNews.com
Diversification as a current approach to plan sponsorship

ESOP Information
ESOP's and Succession Planning
ESOP Checklist
ESOP Feasilibity
ESOP Implementaion
An ESOP Story

 

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