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, 

  •  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.