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Glossary of Terms


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A
 
  • Account Fee - An account fee is a fee that some funds separately impose on investors in connection with the maintenance of their accounts. For example, some funds impose an account maintenance fee on accounts whose value is less than a certain dollar amount.
  • ACP - See Actual contribution percentage (ACP) test.
  • Active Participants - Employees covered by a plan who are earning or retaining credited service under the plan. This category includes any individuals who are eligible to elect to have the employer make payments to a Code section 401k qualified cash or deferred arrangement.
  • Active vs. Index Fund Management - Active management means that the manager is trying to outperform the market, as measured by certain benchmarks. Index fund management (often referred to as passive fund management) means that the fund manager is trying to achieve a return that matches the return of a specified market index.
  • Actual Contribution Percentage (ACP) test - A nondiscrimination test that measures the actual contributions of the employer and the employee. To pass the test the employer matching and employee contributions to a plan must satisfy at least one of the following tests. The ACP of the group of eligible HCEs cannot be more than 125% of the ACP of the eligible NHCEs; or the ACP of the eligible HCEs cannot be more than two percentage points greater than the ACP of eligible NHCEs, and the ACP of the eligible HCEs cannot be more than two times the ACP of the eligible NHCEs.
  • Actual Deferral Percentage (ADP) test - A nondiscrimination test that measures the actual deferral ratios of different classes plan participants. To pass the test the elective contributions to a plan must satisfy at least one of the following tests. The ADP of the group of eligible HCEs is not more than 125 percent of the ADP of the eligible NHCEs; or the ADP of the eligible HCEs is not more than two percentage points greater than the ADP of the eligible NHCEs, and the ADP of the eligible HCEs is not more than two times the ADP of the eligible HCEs.
  • Administration/Recordkeeping Fee - Fee for providing recordkeeping and other plan participant administrative type services. For start-up or takeover plans, these fees typically include charges for contacting and processing information from the prior service provider and 'matching up' or mapping participant information. Use of this term is not meant to identify any ERISA Section 3(16)(A) obligations.
  • ADP - See Actual deferral percentage (ADP) test.
  • Annual Audit - Federal law requires that all ERISA-covered plans with more than 100 participants be audited by an independent auditor. It is also common to refer to a DOL or IRS examination of a plan as a plan audit. Any charge imposed by a service provider in connection with this audit is reflected on Schedule B.
  • Asset Classes - Broad categories of investments with varying levels of risk and return opportunities, for example, stocks, bonds, and cash.
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B
 
  • Back-End Load - Sales charges due upon the sale or transfer of mutual funds, insurance/annuity products or other investments, which may be reduced and/or eliminated over time.
  • Balance Inquiry - Fee that may be charged each time a participant inquires about his or her balance.
  • Bond Funds - Investment funds that are invested primarily in bonds. Bonds are essentially loans or debt. A bond certificate is like an IOU - it shows the amount loaned (principal), the rate of interest to be paid on the loan, and the date that the principal will be paid back (maturity date). Bonds can be issued by governments, their agencies, corporations, and asset-backed securities issuers to raise money.
  • Brokerage Commission - A fee paid to a broker or other intermediary for executing a trade.
  • Brokerage Window - A plan investment option allowing a participant to establish a self-directed brokerage account.
  • Bundled Services - Arrangements whereby plan service providers offer 401(k) plan establishment, investment services and administration for an all-inclusive fee. Bundled services by their nature are priced as a package and cannot be priced on a per service basis.
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C
 
  • Cash or Deferred Arrangement (CODA) - An arrangement under which an eligible employee may make a cash or deferred election with respect to benefits under a plan. It does not include an arrangement under which amounts contributed at an employee's election are treated at the time of contribution as after-tax employee contributions. If the employee is not permitted to receive cash as one of the choices, the CODA does not satisfy IRC section 401k.
  • Collective Investment Fund - A tax-exempt pooled fund operated by a bank or trust company that commingles the assets of trust accounts for which the bank provides fiduciary services.
  • Commingled Pool - A type of institutional fund. A "commingled pool" is similar to a mutual fund because it combines the money of many investors who own a share of the pool. Both mutual funds and commingled pools have a fund manager who invests the assets on behalf of all the shareholders or unit holders. Commingled pools, however, are different from mutual funds in the way they are set up legally and in terms of who can invest in them. They are offered by banks or trust companies that are frequently affiliated with investment management firms, and participation is restricted to certain types of investors such as qualified pension or profitsharing plans. Commingled pools are regulated by the Office of the Comptroller of the Currency (OCC) or state banking authorities.
  • Common/Collective Trust (CCT) - A trust maintained by a bank, trust company, or similar institution, which is regulated, supervised and subject to periodic examination by a state or Federal agency for the collective investment and reinvestment of assets contributed thereto from employee benefit plans maintained by more than one employer or controlled group of corporation. In the case of 401k plans a CCT is a non-mutual fund investment option typically added to the plan because of cost efficiencies over retail mutual funds.
  • Contract Administration Charge - An omnibus charge for costs of administering the insurance/annuity contract, including costs associated with the maintenance of participant accounts and all investment-related transactions initiated by participants.
  • Contract Termination Charge - A charge to the plan for 'surrendering' or 'terminating' its insurance/annuity contract prior to the end of a stated time period. The charge typically decreases over time.
  • Conversion - The process of changing from one service provider to another.
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D
 
  • Deferred Sales Charge (Load) - The category "Deferred Sales Charge (Load)" in the fee table refers to a sales load that investors pay when they redeem fund shares (that is, sell their shares back to the fund). You may also see this referred to as a "deferred" or "back-end" sales load. When an investor purchases shares that are subject to a back-end sales load rather than a front-end sales load, no sales load is deducted at purchase, and all of the investors' money is immediately used to purchase fund shares (assuming that no other fees or charges apply at the time of purchase). For example, if an investor invests $10,000 in a fund with a 5% back-end sales load, and if there are no other "purchase fees," the entire $10,000 will be used to purchase fund shares, and the 5% sales load is not deducted until the investor redeems his or her shares, at which point the fee is deducted from the redemption proceeds. Typically, a fund calculates the amount of a back-end sales load based on the lesser of the value of the shareholder's initial investment or the value of the shareholder's investment at redemption. For example, if the shareholder initially invests $10,000, and at redemption the investment has appreciated to $12,000, a back-end sales load calculated in this manner would be based on the value of the initial investment -- $10,000 -- not on the value of the investment at redemption. Investors should carefully read a fund's prospectus to determine whether the fund calculates its back-end sales load in this manner. The most common type of back-end sales load is the "contingent deferred sales load," also referred to as a "CDSC," or "CDSL." The amount of this type of load will depend on how long the investor holds his or her shares and typically decreases to zero if the investor hold his or her shares long enough. For example, a contingent deferred sales load might be 5% if an investor holds his or her shares for one year, 4% if the investor holds his or her shares for two years, and so on until the load goes away completely. The rate at which this fee will decline will be disclosed in the fund's prospectus. A fund or class with a contingent deferred sales load typically will also have an annual 12b-1 fee.
  • Delinquent Filer Voluntary Compliance Program (DFVC) - A Department of Labor (DOL) program that facilitates voluntary compliance by plan administrators who are delinquent in filing annual reports under Title I of ERISA by permitting administrators to pay reduced civil penalties for voluntarily complying with their DOL annual reporting obligations.
  • Distribution Expense - The costs typically associated with processing paperwork and issuing a check for a distribution of plan assets to a participant. May include the generation of IRS Form 1099R. This fee may apply to hardship and other in-service withdrawals as well as to separation-from-service or retirement distributions.
  • Distribution [and/or Service] (12b-1) Fees - This category identifies so-called "12b-1 fees," which are fees paid by the fund out of fund assets to cover distribution expenses and sometimes shareholder service expenses."12b-1 fees" get their name from the SEC rule that authorizes a fund to pay them. The rule permits a fund to pay distribution fees out of fund assets only if the fund has adopted a plan (12b-1 plan) authorizing their payment. "Distribution fees" include fees paid for marketing and selling fund shares, such as compensating brokers and others who sell fund shares, and paying for advertising, the printing and mailing of prospectuses to new investors, and the printing and mailing of sales literature. The SEC does not limit the size of 12b-1 fees that funds may pay. But under FINRA rules, 12b-1 fees that are used to pay marketing and distribution expenses (as opposed to shareholder service expenses) cannot exceed 0.75 percent of a fund's average net assets per year. Some 12b-1 plans also authorize and include "shareholder service fees," which are fees paid to persons to respond to investor inquiries and provide investors with information about their investments. A fund may pay shareholder service fees without adopting a 12b-1 plan. If shareholder service fees are part of a fund's 12b-1 plan, these fees will be included in this category of the fee table. If shareholder service fees are paid outside a 12b-1 plan, then they will be included in the "Other Expenses" category. FINRA imposes an annual .25% cap on shareholder service fees (regardless of whether these fees are authorized as part of a 12b-1 plan).
  • Diversification - Investing your money among different kinds of investments to potentially moderate your investment risk. It corresponds to not putting all your eggs in one basket. A diversified portfolio may help shield you from large losses because even if some securities falter, others may perform well. Diversification does not ensure a profit or guarantee against loss.
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E
 
  • Elective deferral limits - The law, under IRC section 402(g), limits the amount that you can defer on a pre-tax basis each year. Elective deferrals that exceed the section 402(g) dollar limit for a year or are re-characterized as after-tax contributions as part of a correction of the Actual Deferral Percentage (nondiscrimination) test are included in your taxable income.
  • Eligible Employee - Any employee who is eligible to participate in and receive benefits from a plan.
  • Employee Benefit Security Administration (EBSA) - The agency within the Department of Labor that is primarily responsible for the administration and enforcement of Title I of the Employee Retirement Income Security Act of 1974. Prior to February 2003, EBSA was known as the Pension and Welfare Benefits Administration (PWBA).
  • Employee Retirement Income Security Act of 1974 (ERISA) - A federal statute that establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries by requiring the disclosure to them of financial and other information concerning the plan; by establishing standards of conduct for plan fiduciaries; and by providing appropriate remedies and access to the federal courts. The term ERISA is sometimes used to refer to the full body of laws regulating employee benefit plans, which are mainly found in the Internal Revenue Code and ERISA itself.
  • Exchange Fee - An exchange fee is a fee that some funds impose on shareholders if they exchange (transfer) to another fund within the same fund group.
  • Expense Ratio - The cost of investing and administering assets, including management fees, in a mutual fund or other collective fund expressed as a percentage of total assets.
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F
 
  • Fiduciary - An individual who has legal or moral responsibility for managing property for the benefit of another. Under ERISA law whether or not an individual is a fiduciary depends on the functions they perform, not their title. Service providers become fiduciaries if they exercise discretion, authority, or control over plan assets.
  • Form 5500 - The annual return/report form pension and welfare benefit plans generally are required to file regarding their financial condition, investments and operations. The Department of Labor, Internal Revenue Service and Pension Benefit Guaranty Corporation jointly developed the Form 5500 to satisfy annual reporting requirements under Title I and Title IV of ERISA and under the Internal Revenue Code. The Form 5500 Series is an important compliance, research, and disclosure tool for the Department of Labor, a disclosure document for plan participants and beneficiaries, and a source of information and data for use by other Federal agencies, Congress, and the private sector in assessing employee benefit, tax, and economic trends and policies.
  • Front-End Load - Sales charges incurred when an investment in a mutual fund is made.
  • Fund Manager - An investment management company retained to decide when and where to invest a fund's assets based on established guidelines.
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G
 
  • Group Insurance Arrangement (GIA) - An arrangement that provides benefits to the employees of two or more unaffiliated employers, fully insures one or more welfare plans of each participating employer, uses a trust or other entity as the holder of the insurance contracts, and uses a trust as the conduit for payment of premiums to the insurance company.
  • Growth style - Funds investing in this style typically seek to purchase the stocks of companies whose sales and/or earnings are expected to grow at an above-average rate. The extent to which these stocks are undervalued or "cheap" is often of secondary, rather than primary, importance to the fund manager.
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H
 
  • HCE - See Highly Compensated Employee.
  • Highly Compensated Employee (HCE) - A classification of a plan's employees due to nondiscrimination rules. An employee is considered highly compensated if is either a 5% owner of the company or receives compensation in excess of a certain dollar threshold during the determination year. For 2009 the HCE dollar threshold is $105,000. The dollar threshold increases to $110,000 in 2010.
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I
 
  • Income Objective - Funds with this objective earn most of their returns from interest income or dividends, rather than from appreciation in the value of their holdings.
  • Index Fund - An investment fund that tries to match the returns of a particular index, such as the S&P500, an unmanaged index of common stock prices.
  • Individually Managed Account - An investment account managed for a single plan.
  • Installation Fee - One-time fee for initiating a new plan or initiating new services.
  • Institutional Fund - A fund that targets large "Institutional" investors such as pension funds, endowments, foundations, and high-net-worth individuals. Typically, an entity needs at least $1 million to qualify as an institutional investor and may be subject to other qualifications. Institutional funds usually have lower investment management and administrative fees and higher minimum investments than retail mutual funds that are available to all types of investors. Institutionally managed funds often have stricter guidelines in place to focus their investment strategy and control risks. Types of institutional funds include commingled pools, institutional mutual funds, and separately managed accounts.
  • International Stock or Equity Funds - International stock funds invest assets in equity securities whose primary trading markets are outside the United States. Note that foreign investments often involve greater risks than U.S. investments. These risks include currency fluctuations and, especially in emerging markets, political and economic uncertainties.
  • Investment Transfer Expense - Fee associated with a participant changing his or her investment allocation, or making transfers among funding accounts under the plan.
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L
 
  • Large Cap, Mid-Cap, Small-Cap Stock Funds - "Cap" refers to the size of the "market capitalization" or the total value of the outstanding shares of stock (basically, the number of shares outstanding multiplied by the share price). Although boundaries can vary, large-cap stock funds generally invest in companies that have over $14 billion in share value. Mid-cap stock funds generally invest in those companies whose total outstanding share value is between $2 billion and $14 billion. Small-cap funds generally invest in companies whose outstanding share value falls below $2 billion. Investments in smaller companies may involve greater risks than those in larger, more well-known companies.
  • Loan Maintenance and Repayment Tracking Fee - Fee charged to monitor outstanding loans and repayment schedule.
  • Loan Origination Fee - Fee charged when a plan loan is originally taken.
  • Loan Processing Fee - Fee charged to process a plan loan application.
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M
 
  • Management Fee - Management fees are fees that are paid out of fund assets to the fund's investment adviser (or its affiliates) for managing the fund's investment portfolio , and administrative fees payable to the investment adviser that are not included in the "Other Expenses" category.
  • Master Trust Investment Account (MTIA) - A "Master Trust" is a trust for which a regulated financial institution serves as trustee or custodian, and in which assets of more than one plan sponsored by a single employer or by a group of employers under common control are held.
  • Mortality Risk and Administrative Expense (M&E Fee) - Fee charged by an insurance company to cover the cost of the insurance features of an annuity contract, including the guarantee of a lifetime income payment, interest and expense guarantees, and any death benefit provided during the accumulation period.
  • Multiemployer Plan - A plan is a multiemployer plan if: (a) more than one employer is required to contribute, (b) the plan is maintained pursuant to one or more collective bargaining agreements between one or more employee organizations and more than one employer, and (c) an election under Code section 414(f)(5) and ERISA section 3(37)(E) has not been made.
  • Multiple-Employer Plan - A plan that is maintained by more than one employer and is not a multiemployer plan. Multiple-employer plans can be collectively bargained and collectively funded, but if covered by PBGC (link) termination insurance, must have properly elected before September 27, 1981, not to be treated as a multiemployer plan under Code section 414(f)(5) or ERISA sections 3(37)(E) and 4001(a)(3).
  • Mutual Fund - In a mutual fund, your money is pooled with money from other investors, and a fund manager buys and sells securities with this money to pursue the fund's objectives and seeks to earn a profit for its investors. Legally, each mutual fund is structured as a separate investment company and is registered with the Securities and Exchange Commission (SEC). Most funds are considered "retail" mutual funds and are available to the general public. There are also "institutional" mutual funds, which have very high minimum investments and typically lower fees.
  • Mutual Fund Window - A self-directed portion of a plan that supplements a plan's core investment menu. The window gives eligible plan participants access to a variety of additional mutual fund options. Participants may or may not have to pay additional fees for access to the mutual fund window.
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N
 
  • Named Fiduciary - The individual with the ultimate authority to manage the administration of a plan. This individual must be explicitly named in the plan document so that participants, the Department of Labor, the Internal Revenue Service or other interested parties can identify who is responsible for the plan.
  • NHCE - See Non Highly Compensated Employee.
  • Non-Highly Compensated Employee - An employee who does not qualify as a highly compensated employee (see Highly Compensated Employee (HCE)).
  • Nondiscrimination Testing Expense - Tax qualified retirement plans must be administered in compliance with several regulations requiring numerical measurements. The fee charged for the process of determining whether the plan is in compliance is collectively called nondiscrimination testing expense.
  • North American Industrial Classification System (NAICS) - The standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.
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O
 
  • Other Expenses - Included in this category are expenses not included in the categories "Management Fees" or "Distribution [and/or Service] (12b-1) Fees." Examples include: shareholder service expenses that are not included in the "Distribution [and/or Service] (12b-1) Fees" category; custodial expenses; legal expenses; accounting expenses; transfer agent expenses; and other administrative expenses.
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P
 
  • Participant - Person who has an account in the plan.
  • Participant Education Materials/Distribution Expenses - All costs (including travel expenses) associated with providing print, video, software and/or live instruction to educate employees about how the plan works, the plan investment funds, and asset allocation strategies. There may be a one-time cost associated with implementing a new plan, as well as ongoing costs for an existing program.
  • Participation Rate - The percentage of eligible participants with account balances in the plan.
  • Pension Benefit Guaranty Corporation (PBGC) - An independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of voluntary private defined benefit pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations.
  • Pension Protection Act of 2006 (PPA) - Signed into law on August 17, 2006, the PPA is the most sweeping pension legislation in over 30 years and includes a number of significant tax incentives to enhance and protect retirement savings for millions of Americans. The most significant changes affecting 401k plans include: providing statutory authority for employers to enroll workers automatically, expanding disclosure requirements and giving workers greater control over how their accounts are invested.
  • Plan Document/Determination Letter Fee (Filing Fee) - Fee charged for a written plan document. Fee can also include the costs associated with preparing and filing IRS required documentation, including the request for a determination letter (document issued by the IRS stating whether the plan meets the qualifications for taxadvantaged treatment).
  • Plan Sponsor - If the plan is a single employer plan, the employer or employee organization establishes or maintains the employee benefit plan. If the plan is a multiemployer plan, a committee, joint board of trustees or other similar group of representatives of the parties establishes or maintains the plan.
  • Plan Loan - The law allows participants to borrow from their accounts up to prescribed limits. This is an optional plan feature.
  • Pooled Separate Account (PSA) - An account maintained by an insurance carrier, which is regulated, supervised and subject to periodic examination by a state agency, for the collective investment and reinvestment of assets contributed from employee benefit plans maintained by more than one employer or controlled group or corporation.
  • Portfolio - A combination of securities or funds. The purpose of combining assets is to adjust and manage risk and achieve diversification.
  • Product Termination Fee - Investment-product charges associated with terminating one or all of a service provider's investment products.
  • Purchase Fee - A purchase fee is another type of fee that some funds charge their shareholders when the shareholders purchase their shares. A purchase fee differs from, and is not considered to be, a front-end sales load because a purchase fee is paid to the fund (not to a broker) and is typically imposed to defray some of the fund's costs associated with the purchase.
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Q
 
  • QDRO (Qualified Domestic Relations Order) - A judgment, decree or order that creates or recognizes an alternate payee's (such as former spouse, child, etc.) right to receive all or a portion of a participant's retirement plan benefits.
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R
 
  • Redemption Fee - A redemption fee is another type of fee that some funds charge their shareholders when the shareholders redeem their shares. Although a redemption fee is deducted from redemption proceeds just like a deferred sales load, it is not considered to be a sales load. Unlike a sales load, which is used to pay brokers, a redemption fee is typically used to defray fund costs associated with a shareholder's redemption and is paid directly to the fund, not to a broker. The SEC limits redemption fees to 2%. The SEC has adopted a rule addressing the imposition of redemption fees by mutual funds in Rule 22c-2 of the Investment Company Act of 1940.
  • Risk - Degree of uncertainty of return on an investment. There are different types of risk, including risk of downside volatility (the risk that your investment will lose value over the short term) and risk that you will fail to meet investment goals (including the risk that your investments will not grow at least as fast as the pace of inflation).
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S
 
  • Safe Harbor 401k Plan - A safe harbor 401k plan is similar to a traditional 401k plan, but, among other things, it must provide for employer contributions that are fully vested when made. These contributions may be employer matching contributions, limited to employees who defer, or employer contributions made on behalf of all eligible employees, regardless of whether they make elective deferrals. The safe harbor 401k plan is not subject to the complex annual nondiscrimination tests that apply to traditional 401k plans. Employers sponsoring safe harbor 401k plans must satisfy certain additional requirements, including the notice and timing requirements.
  • Salary Deferrals - The elective deferral of a plan participant's salary into a plan. These elective deferrals are not taxed as income to the plan participant unless they are withdrawn from the plan.
  • Sales Charge (Load) on Purchases - The category "Sales Charge (Load) on Purchases" in the fee table includes sales loads that investors pay when they purchase fund shares (also known as "front-end sales loads"). The key point to keep in mind about a front-end sales load is it reduces the amount available to purchase fund shares. For example, if an investor writes a $10,000 check to a fund for the purchase of fund shares, and the fund has a 5% front-end sales load, the total amount of the sales load will be $500. The $500 sales load is first deducted from the $10,000 check (and typically paid to a selling broker), and assuming no other front-end fees, the remaining $9,500 is used to purchase fund shares for the investor.
  • Sales Loads - Funds that use brokers to sell their shares typically compensate the brokers. Funds may do this by imposing a fee on investors, known as a "sales load" (or "sales charge (load)"), which is paid to the selling brokers. In this respect, a sales load is like a commission investors pay when they purchase any type of security from a broker. Although sales loads most frequently are used to compensate outside brokers that distribute fund shares, some funds that do not use outside brokers still charge sales loads. The SEC does not limit the size of sales load a fund may charge, but FINRA does not permit mutual fund sales loads to exceed 8.5%. The percentage is lower if a fund imposes other types of charges. Most funds do not charge the maximum. There are two general types of sales loads -- a front-end sales load investors pay when they purchase fund shares and a back-end or deferred sales load investors pay when they redeem their shares.
  • SAS 70 Audit - SAS No. 70 is the authoritative guidance that allows service organizations to disclose their control activities and processes to their customers and their customers' auditors in a uniform reporting format. The issuance of a service auditor's report prepared in accordance with SAS No. 70 signifies that a service organization has had its control objectives and control activities examined by an independent accounting and auditing firm. The service auditor's report, which includes the service auditor's opinion, is issued to the service organization at the conclusion of a SAS 70 examination.
  • Section 404(c), ERISA - Section 404(c) of the Employee Retirement Income Security Act (ERISA) provides that if a pension plan that provides for individual accounts permits a participant or beneficiary to exercise control over assets in his account and that participant or beneficiary in fact exercises control over assets in his account, then the participant or beneficiary shall not be deemed to be a fiduciary by reason of his exercise of control and no person who is otherwise a fiduciary shall be liable for any loss, or by reason of any breach, which results from such exercise of control. Compliance with Section 404(c) is a complicated process and as such the 404(c) issues have been the subject of numerous lawsuits.
  • Separate Account - An asset account established by a life insurance company, separate from other funds of the life insurance company, offering investment funding options for pension plans.
  • Service Provider Termination Charge - Plan administrative costs associated with terminating a relationship with a service provider, with the permanent termination of a plan, or with the termination of specific plan services. These may be termed 'surrender' or 'transfer' charges.
  • Signature Ready Form 5500 - Fee to prepare Form 5500, a form which all qualified retirement plans (excluding SEPs and SIMPLE IRAs) must file annually with the IRS.
  • Single Employer Plan - An employee benefit plan maintained by one employer or one employee organization.
  • SMM - See Summary of Material Modifications (SMM).
  • Stable Value Fund - A stable value fund generally invests in investment contracts, certain types of fixed-income securities (e.g., U.S. Treasury bonds, corporate bonds, mortgage-backed securities, bond funds) and money market investments. While a stable value fund tries to maintain a stable $1unit price, the fund cannot guarantee that this unit price will be maintained, and its yield may fluctuate. The goal of a stable value fund is to preserve the participants' principal investment while earning interest income.
  • Start-up/Enrollment Expense - Costs associated with providing materials to educate employees about the plan, and enrolling employees in the plan. This may be part of, or included in, the education programs. There may be a one-time cost associated with implementing a new plan, as well as ongoing enrollment costs.
  • Stock or Equity Funds - Stock funds invest primarily in equity or equity-related securities such as common stocks, preferred stocks, and convertible bonds. Common stocks represent an ownership interest in a company and provide the potential for capital appreciation or depreciation.
  • 'Sub-Transfer Agency'(Sub TA) fees - Fees paid from internal mutual fund expense charges to a plan's recordkeeper for participant-level recordkeeping services. This fee is typically not itemized separately in the fund's prospectus. Sub TA fees can be asset based or charged on a 'per participant' basis.
  • Summary of Material Modification (SMM) - A document which must be given to participants free of charge when a plan is changed. Alternatively, a plan sponsor can provide a revised summary plan description to participants.
  • Summary Plan Description (SPD) - A document that tells participants what the plan provides and how it operates. It provides information on when an employee can begin to participate in the plan, how service and benefits are calculated, when benefits become vested, when and in what form benefits are paid, and how to file a claim for benefits.
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T
 
  • Total Annual Fund Operating Expenses - This line of the fee table is the total of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets.
  • Trustee Services - Fees charged by the individual, bank or trust company with fiduciary responsibility for holding plan assets.
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U
 
  • United States Department of Labor (DOL) - A Cabinet department of the United States government responsible for workplace safety, wage and hour standards, unemployment insurance benefits, and some economic statistics. The DOL is partially responsible for the interpretation and enforcement of ERISA, along with the Department of the Treasury and the Pension Benefit Guaranty Corporation (PBGC).
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V
 
  • Value Style - Funds investing in this style seek to invest in companies that the fund manager believes are undervalued or "cheap" relative to their intrinsic value. Such stocks may be temporarily out of favor or overlooked by other investors, resulting in a depressed stock price that the fund manager believes will improve over time.
  • Variable Annuity Contract - An insurance company-issued tax-deferred investment contract. The contract enables participant and employer contributions to be invested in a variety of investment options commonly referred to as sub-accounts. At a participants retirement the assets can be converted into a lump sum payment or an income stream.
  • Volatility - In investing, volatility refers to the ups and downs of the price of an investment. The greater the ups and downs, the more volatile the investment. Stock investments generally have more volatility than bond investments.
  • VRU - Voice Response Unit.
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W
 
  • Wrap Fee - An inclusive fee generally based on the percentage of assets in an investment program, which typically provides asset allocation, execution of transactions and other administrative services.
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X
 
  • Xignite - A leading provider of financial web services delivering business-critical financial market information to applications.
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