Defined Benefit (DB) Plan
Defined Contribution (DC) Plan
Highly Compensated Employee
- Any employee who owns (directly or indirectly) more than 5% of the business.
- Any employee whose annual compensation exceeds $125,000 in 2019 or $130,000 in 2020.
Integration is the practice of considering the anticipated Social Security Benefits of participants when determining benefits from or contributions to the plan.
A key employee is any employee who fits into the following classifications:
- An officer whose annual compensation exceeds $185,000 (as indexed for 2020).
- An employee who owns (directly or indirectly) more than 5% of the business
- An employee who owns (directly or indirectly) more than 1% of the business and whose annual compensation exceeds $150,000.
The Pension Benefit Guaranty Corporation (PBGC) is a federal corporation created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of defined benefit pension plans, provide timely and uninterrupted payment of pension benefits to participants and beneficiaries in plans covered by PBGC, and keep pension insurance premiums at the lowest level necessary to carry out the Corporation’s objectives.
Acronym for Portable Document Format, a file format developed by Adobe Systems. PDF files preserve formatting information from a variety of desktop publishing applications, making it possible to present them so they appear on the recipient’s monitor or printer as they were intended. To view a file in PDF format, you need Adobe Reader, a free application distributed by Adobe Systems.
As designated by the plan document, the Plan Administrator is the individual or entity responsible for managing the day-to-day affairs of the plan.
The written compilation of the benefits a plan offers and the rules that govern them.
This is the entity (employer) that establishes the plan.
Profit Sharing Plan
A profit sharing plan is a type of defined contribution plan. The allocation method must be laid out in the plan document, but the amount of the contribution, if any, can be discretionary.
Top Heavy Plan
A plan is generally a top heavy plan when more than 60% of the plan assets are attributable to key employees. If the plan becomes top heavy in any plan year, non-key employees will be entitled to certain “top heavy minimum benefits,” and other special rules will apply.
A Third Party Administrator is an entity or individual hired to provide purely ministerial services for the plan. TPAs aid in the administration of the plan, but the liability remains solely with the plan’s sponsor and trustees.
The entity, person, or persons named in the plan document, who shall be responsible for the prudent management of the plan’s assets.
Note: These definitions are in no way intended to be a complete explanation of the complex rules that govern Qualified Retirement Plans. They are provided solely to offer a basic understanding of the concepts involved.