Back to Reading Center

R  S  T  U  V  W  XYZ    A-H  I-Q

R

reallocation

A change in the existing allocation which affects future contributions. Reallocation is not the same as fund transfer, which affects existing account balances. The preferred term is investment allocation change.

reamortization

Process used to amend loan features other than the dollar amount of the loan.

refinance

Process wherein a participant who has one outstanding loan requests to borrow an additional amount.

repayment frequency

For loans to active participants, the payroll frequency of the employer. For terminated participants, the repayment frequency will be no less frequent than monthly.

return

Profit or loss on a security or capital investment, usually expressed as an annual percentage rate.

risk

The probability that an investment will lose or fail to gain in value. For investment management, the term risk is also measured as volatility, which is the rate of fluctuation from a long-term trend.

risk tolerance

An investor’s willingness to take the chance that an investment will devalue or will fluctuate in value. The amount of risk an investor is willing to assume is a determining factor in designing an investment portfolio.

rollover

A participant transfers all or part of their assets from one tax-deferred program to another. If tax-deferred funds are not rolled over into a new tax-deferred account, the participant must pay taxes and, in some cases, a penalty. See also “direct rollover.”

rollover, 60-day

A participant who receives a direct distribution has 60 days to transfer the distributed funds into another qualified plan or an IRA. If this is not done, the participant's withdrawal will be subject to ordinary income taxes and, in some cases, penalties.

S

S&P 500

See “Standard & Poor’s 500 Index.”

section 415 limits

Section 415 defines annual qualified plan contribution limits for both employer and employee contributions. Section 415 sets this limit at $30,000 or 25% of 415 wages. Effective January 1, 1998, 415 wages are gross wages minus picked-up employee contributions.

security

An instrument signifying ownership in a corporation (stock), or a creditor relationship with a corporation or government (bond) or right to ownership.

share

The portion of a fund held by a person which measures the percentage ownership held by that individual. The number of shares owned will increase/decrease based on contributions, fund transfers into/out of the fund and fund redemptions. See also “share value.”

share accounting

Essential to daily cash processing and settlement, share accounting is an efficient way to track business by centrally storing share prices, changing numbers of shares only with transactions and calculating balances when needed. Share accounting is used across the securities industry.

share price

The current worth of a share in a particular fund, calculated by totaling the market value of all securities owned by the fund, plus cash and other assets, subtracting any liabilities and dividing the result by the number of fund shares outstanding. Share prices increase or decrease based on activity in the underlying securities of the fund. Also called “NAV,” “net asset value” or “share value.”

share value

The current worth of a share in a particular fund, calculated by totaling the market value of all securities owned by the fund, plus cash and other assets, subtracting any liabilities and dividing the result by the number of fund shares outstanding. Share prices increase or decrease based on activity in the underlying securities of the fund. Also called “net asset value,” “NAV” or “share price.”

short-term

Investment with a maturity of one year or less.

simple interest

Interest calculated only on the original principal amount. Simple interest contrasts with compound interest, which is applied to principal plus accumulated interest.

single life annuity

A single life annuity provides you with regular payments for as long as you live. No amounts are payable to your beneficiary upon your death.

small balance withdrawal (457)

457 participants who have a “de minimis” balance and meet certain other criteria, may voluntarily request a lump sum payment upon termination or retirement while still employed or have their employer request this payment. See “de minimus.”

spousal consent

The required consent by a spouse before a participant may elect to waive a qualified joint and survivor annuity (QJSA) or a qualified preretirement survivor annuity (QPSA) or take a loan from a qualified plan.

Standard & Poor's

An investment services company providing bond ratings, the Standard & Poor’s 500 Stock Index, and a wide variety of other investment guides and services. It is a subsidiary of McGraw-Hill, Inc.

Standard & Poor's 500 Index

A measure of stock price changes based on the performance of 500 selected common stocks. The average takes into account not only the price of the stocks but also the number of outstanding shares. Abbreviated S&P 500, it is a broader market indicator than the Dow, which consists of only 30 stocks.

stock

Ownership of a corporation represented by shares claiming part of the corporation’s earnings and assets.

stock fund

An investment vehicle with assets primarily in equities.

T

term certain/joint life annuity

This type of annuity provides you or your joint annuitant with regular payments for as long as you or your joint annuitant live. If you and your joint annuitant should die before the specified period of time (term certain), payments will continue to your beneficiary for the balance of the period. For example, a 10-year term certain/joint life annuity will provide your named beneficiary with regular payments for the remaining 4 years of the 10-year term certain if you and your joint annuitant should die after receiving regular payments for only 6 years.

term certain/single life annuity

This type of annuity provides you with regular payments for as long as you live. If you should die before the specified period of time (term certain), payments will continue to your beneficiary for the balance of the period. For example, a 10-year term certain/single life annuity will provide your named beneficiary with regular payments for the remaining 8 years of the 10-year term certain if you die after receiving regular payments for only 2 years.

total return

A fund's total return includes change in value of assets due to capital appreciation and loss and income from dividends or interest.

total return funds

Comprised of portfolios of publicly traded securities that can be expected to vary in value over time, as income (dividends or interest) and capital gains and losses (appreciation or depreciation) occur.

trustee

The employer, by virtue of the adopting resolution, is plan trustee for the money purchase plan.

trustee-to-trustee transfer

The transfer of funds in a qualified plan or an IRA directly from one plan’s trustee to another. See “direct rollover.”

U

unforeseeable emergency withdrawal

A strictly defined Internal Revenue Code provision allowing 457 plan participants to withdraw some or all their account assets to cover the cost of the emergency and any tax liabilities incurred by the withdrawal. The emergency must meet criteria determining that it was unforeseeable and has created severe financial hardship. See “emergency withdrawal.”

V

vesting

The extent to which a participant has a right to contributions and benefits derived from plan contributions made by the employer.

vesting schedule

The rate at which employer contributions (made on behalf of participants) become an asset of the participant. This schedule is designated by the employer.

voluntary after-tax

A contribution source which, if selected by employers in their Adoption Agreements, allows participants to have up to 10 percent of their earnings contributed to the plan on an after-tax basis. May be withdrawn up to two times per year.

W

withholding

IRS and state tax agency mandated subtractions from benefit payments or other asset distributions to plan participants.

XYZ

yield

Generally, the return of an investor’s capital investment. For bonds, the coupon rate of interest divided by the purchase price, is called the current yield. And, the percentage of the current stock price that is paid in the form of dividends. See also “earnings.”