Are you well versed with pension/retirement terminology? If not, take a go at our pension alphabet.
A – Accrued benefit - A benefit that an employee has earned (or accrued) through participation in a particular benefit program.
B – Defined Benefit plan - A benefit program that promises participants a specified monthly benefit at retirement. It usually provides disability, death, and survivor benefits as well and the retirement system manages the funds.
C – Defined Contribution plan - Defined contribution is a benefit program that provides an individual account for each participant. The member manages his/her account funds and upon retirement, and the account balance represents the member’s retirement account.
D – Deduction - Amount of insurance premium taken from member’s monthly benefit based on the type of insurance and pension plan.
E - Employee Retirement Income Security Act (ERISA) - The federal law that establishes the basic requirements for employee benefit plans.
F - Funded plans – Plans can be fully funded, underfunded or unfunded. A fully funded plan is one with sufficient assets to pay all current and future benefits.
G – Governmental plan - a plan established or maintained for its employees by the U.S. government, a state or local government, or other governmental entities.
H – Hardship withdrawal - An emergency withdrawal from a retirement plan that may be subject to certain tax or account penalties. In the United States, funds withdrawn prior to the age of 59.5 are typically subject to a 10% Internal Revenue Service (IRS) early withdrawal penalty, as well as standard income taxes.
I – Individual Retirement Account (IRA) – IRA is a form of "individual retirement plan", provided by many financial institutions, that provides tax advantages for retirement savings.
J - Joint annuitant - refers to the person that a member (annuitant) designates to receive his/her retirement benefits with after death. A joint annuitant is typically a spouse to the annuitant. In the event of the member's death, the member's retirement benefits would continue to be paid out to the spouse.
K - Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA) - Under this law, Congress established a new process for multiemployer pension plans to propose a temporary or permanent reduction of pension benefits (if projected to run out of money before paying all promised pension benefits).
L - Line of Business (LOB) – LOB is a solution is a product or application used by an end-user at a client site. It is a customized pension software system that replaces the client's legacy system (whether that be an outdated software system or largely paper-based business operation).
M – Member – Participant of a retirement plan.
N – Net pension liability - The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair value) set aside in a trust and restricted to paying benefits to current employees, retirees, and their beneficiaries.
O – Ordinary disability retirement – There are two types of disability retirement – accidental and ordinary. A person suffering from non-work related injury or illness and has a certain amount of years of service credit, they may be eligible for an ordinary disability retirement benefit.
P – Pension plan - Generally, any plan, fund, or program that an employer and/or employee organization establishes or maintains to provide retirement income to employees.
Q – Qualified plans - A benefit program that meets the requirements of the Internal Revenue Code (generally, Section 401 (a)). Qualified plans are eligible for special tax considerations.
R – Reciprocal systems - retirement systems that have been identified legislatively as eligible to share member service and earnings information to enable the members to combine service and earnings from reciprocal system to meet retirement eligibility requirements and to increase their benefit amount within these systems.
S – Service credit - Measure of the employee’s months/years working for a qualified employer(s).
T – Trust - For pension plan purposes, a fund established to hold and invest the assets of a pension plan.
U – Under/Un-Funded plan – A pension plan without enough assets to pay all benefits and Unfunded Benefit Liabilities – The amount of promised pension benefits that exceed a plan’s assets.
V – Vesting - Vesting is an issue in conjunction with employer contributions to an employee stock option plan, deferred compensation plan, or to a retirement plan such as 401(k), annuity or pension plan.
W – Web self-service – Ability to access all employer and member data on a pension system and conduct various actions like member enrollment, contribution reporting, payment submission etc.
X – EXpression of wish - A means by which a member can indicate a preference as to who should receive any lump sum due on their death that is payable at the discretion of the trustees.
Y – Year of service - Typically, a 12-month period of service that a plan credits to an employee for purposes of determining benefit accruals, eligibility, and/or vesting.
Z – Zero account balance – Ability of pension IT systems to stop a deduction once the account balance in member’s plan reaches zero.
Read more on how to administer pension benefits with innovative and modern technology.