Accrued Benefit:A benefit that an employee has acquired through participation in a retirement plan. In a defined benefit plan, the accrued benefit is determined by reference to the benefit that will be provided to a participant when he/she reaches normal retirement age as specified by the plan. Typically, the defined benefit is based in part on credited service and compensation earned, and is not maintained as an individually funded account.
Alternate Payee:A spouse, former spouse, child or other dependent of a participant who, according to a Domestic Relations Order, is entitled to receive all or a portion of the benefits payable under a plan with respect to the participant.
Annuity:A stream of periodic payments that continue based on the lifetime of either the participant or the alternate payee over a fixed period of time.
Beneficiary:A person designated by a participant or an alternate payee who, by the terms of the plan, may be eligible for benefits under the plan, if the participant or the alternate payee dies with all or a portion of the account or benefit remaining.
Cost of Living Adjustments:Cost of living adjustments are increases to the amount of the pension benefit. The adjustment to the benefit is a way for a retirement plan to account for inflation related changes in the participants' purchasing power during retirement. However, such adjustments are not guaranteed, and are only implemented in accordance with the specific defined benefit plan, if applicable. The amount and frequency of cost of living adjustments, if any, are determined at the plan's discretion.
Defined Benefit Plan:A plan that is designed to provide participants with a specific benefit, usually for a period of years after retirement. The final benefit payable under the plan is determined by the plan benefit formula, and is characteristically based on factors such as credited service and compensation earned. In contrast to typical defined contribution plans, the employer has the entire investment at risk, and must cover any funding shortfall.
Defined Contribution Plan:A plan that provides an individual account for each participant. Individual defined contribution accounts are funded by participant and/or employer contributions depending on the type of plan. Allocated income, expenses, gains, and/or losses affect the value of the account.
Domestic Relations Order (DRO):A judgment, decree or order, including a court approved property settlement agreement, which relates to the provision of child support, alimony payments or marital property rights for the benefit of a spouse, former spouse, child or other dependent of a plan participant, and which is made pursuant to a state domestic relations law (including a community property law). A Domestic Relations Order becomes a 'QDRO' when it is determined by the Plan Administrator to have met qualification requirements in accordance with The Employee Retirement Income Security Act of 1974, as amended, and The Internal Revenue Code of 1986, as amended.
Early Retirement Subsidy:When a participant retires before normal retirement age with a benefit in a defined benefit plan, the amount of the retirement benefit is actuarially reduced to account for the fact that it will be paid over a longer period of time. If a participant retires prior to normal retirement age and the plan does not apply a full actuarial reduction in the amount of benefit that is paid to the participant, the amount by which the benefit has not been actuarially reduced is called an early retirement subsidy. A participant who receives an early retirement subsidy receives a greater total benefit than the participant would have received if the benefit were paid with a full actuarial reduction.
Earnings:The result of investment experience in a defined contribution account. This amount may include dividends, interest, gains and/or losses, as calculated in accordance with the plan's procedures. Earnings impact the net value of the account, as distinct from contributions.
ERISA - The Employee Retirement Income Security Act of 1974, as amended:The Federal statute governing employee benefit plans. ERISA incorporates applicable Internal Revenue Code provisions and labor law provisions. Its focus is to protect the rights of participants in and beneficiaries of employee benefit plans. ERISA imposes various qualification requirements and fiduciary responsibilities on welfare benefit and retirement plans, as well as enforcement procedures.
IRC:The Internal Revenue Code of 1986, as amended.
Joint and Survivor Annuity:An annuity paid for the life of the Participant with a survivor annuity for his or her spouse. The survivor annuity must be at least 50% but not more than 100% of the annuity received by the participant during his or her lifetime.
Jurisdiction:A court's power to decide a case or issue a decree over the subject matter, the parties' rights, and the type of relief sought.
Marital Property Fraction:A marital property fraction can be used to signify the portion of a participant's total accrued vested benefit which was acquired during the marriage. This concept is primarily applicable to defined benefit plans, and is most useful when the years of participation in a given retirement plan do not coincide closely with the years of the marriage. A marital property fraction generally has a numerator reflecting the participant's months of credited service earned during the marriage, and a denominator reflecting the participant's total months of credited service.
Participant:An employee or former employee of the Plan sponsor for whom a benefit under a qualified plan is maintained. It is the Participant's benefit that is divided in a QDRO.
Plan Administrator:The individual or entity designated by the plan and responsible for the control and management of contributions to the qualified plan, whether exercised directly or through a designated agent or trustee.
Plan Sponsor:The entity that establishes and maintains the qualified retirement plan.
Qualified Domestic Relations Order (QDRO):Any judgment, decree or order (including a court approved property settlement agreement) issued under state domestic relations law, and which relates to the payment of child support, alimony or marital property rights. A QDRO recognizes an alternate payee's right to receive plan benefits otherwise payable to a participant.
Qualified Joint and Survivor Annuity (QJSA):A form of benefit that provides regular periodic payments to the Participant, and on the Participant's death, provides payments to the surviving spouse in the form of a survivor annuity for the remainder of the survivor's lifetime.
Qualified Pre-retirement Survivor Annuity (QPSA):A payment made to the surviving spouse of a vested participant who was married and died before commencing his or her own benefit under the plan. If applicable, a QPSA must be provided whether or not the participant separated from service before death.
Rollover:A federal income tax deferred transfer of cash or other assets from a qualified retirement plan or an eligible IRA to another eligible retirement plan.
Segregated Funds:Amounts that would be payable to an alternate payee under the terms of the domestic relations order, following qualification of the order.
Separate Interest Approach:A method of defining the division of the participant's retirement benefit into two separate portions, giving the alternate payee a separate right to receive the awarded portion of the retirement benefit at a different time and in a different form from that chosen by the participant. A separate interest approach may not be used if the participant has already started to receive the retirement benefit to be divided.
Shared Interest Approach:Approach used to split each actual benefit payment made under a retirement plan. This gives the alternate payee a portion of each payment as it is otherwise made to the Participant. Under this approach the alternate payee will not receive any payments unless the participant receives a payment.
Summary Plan Description ('SPD'):A document that the plan administrator is required to furnish to each participant and beneficiary receiving benefits that summarizes their rights and benefits along with the obligations of the plan.
Unitized Shares:When a stock fund is unitized, a participant's balance in the fund is expressed in 'unitized shares' or 'units' instead of shares per se. Unitized funds operate similarly to a mutual fund, in that they are composed of stock, and a small percentage of cash or another short-term interest-bearing vehicle. The inclusion of cash provides liquid assets to allow for the daily processing of transfers, loans and withdrawals. The value of a unit in a unitized stock fund is based on the Net Asset Value (NAV), which is the value of the underlying common stock and the cash piece held by the fund, divided by the number of units outstanding. Therefore, the NAV of the fund (the 'unit price') will, as a rule, be different from the closing price of the underlying stock on the applicable exchange.
Valuation Date:The date as of which benefits are measured or calculated, in order to calculate an alternate payee's award amount pursuant to a Qualified Domestic Relations Order. In certain defined contribution plan scenarios, the valuation date is also the start date for calculating earnings on an award. Normally, contributions, loans, withdrawals, compensation and service increases in the Participant's account or benefit after the valuation date will not be included in the calculation of the alternate payee's award.
Vested Benefits:Accrued benefits of a participant which have become non-forfeitable under the vesting schedule adopted by the plan.