CRPS key terms

A retirement plan that satisfies Internal Revenue Code requirements, which allows deductible employer contributions, tax-deferred growth, and favorable distribution rules, and that is generally subject to ERISA.

A plan that promises a stated retirement benefit, often based on pay and service, with the employer responsible for funding the promise and bearing investment risk.

A plan that keeps an individual account for each participant, where the benefit equals contributions plus investment gains or losses, so the participant bears investment risk.

A defined benefit plan that tracks a hypothetical account for each participant, crediting pay and interest, while the employer funds the promised balance and bears investment risk.

A defined contribution plan that lets employees choose pre-tax or Roth salary deferrals, often with employer matching or profit-sharing contributions, subject to testing and limits.

A 401(k) design that skips ADP and ACP testing by making required employer contributions that are fully vested, along with required notices to eligible employees.

A defined contribution plan in which the employer decides each year whether and how much to contribute, using flexible formulas and a permitted vesting schedule.

A simplified employer retirement arrangement using individual IRAs, funded only by employer contributions that are immediately fully vested and limited to a percentage of pay.

A retirement plan for small employers that permits employee deferrals and requires employer contributions, with lower limits and simpler administration than a 401(k).

A plan in which more than 60 percent of account balances or accrued benefits belong to key employees, triggering minimum contributions and faster vesting for others.

An employee who met ownership or compensation thresholds in the look-back year, used in testing to compare benefits received by higher-paid and lower-paid employees.

An employee who during the plan year is an officer, a more than 5 percent owner, or a more than 1 percent owner earning above a threshold, relevant to top-heavy rules.

The schedule that determines what percentage of employer-funded benefits a participant owns and cannot lose; employee deferrals are always fully vested.

IRS-required comparisons of benefits or contributions received by highly compensated employees versus non-highly compensated employees, intended to show the plan does not favor the highly paid.

The Code section 410(b) test that measures whether a plan benefits enough rank-and-file employees, using either the ratio percentage or average benefit test.

The form a plan sponsor signs to adopt a pre-approved plan, choosing eligibility, contribution, vesting, and distribution options from the provider's permitted selections.

A pre-approved plan document sponsored by a financial institution or trade group, consisting of a fixed document and adoption agreement, and supported by an IRS opinion letter.

A pre-approved plan document drafted for multiple adopting employers that allows more customization than a prototype and receives an IRS advisory letter.

An IRS ruling on a plan's qualified status, usually requested by individually designed plans or at plan termination; pre-approved plans generally rely on opinion or advisory letters.

A plain-language document ERISA requires the plan administrator to furnish participants, explaining plan terms, participant rights, and the claims procedure.

A test comparing the average elective deferral rates of highly compensated employees with those of non-highly compensated employees to limit deferral discrimination.

A test comparing average employer matching and after-tax employee contribution rates for highly compensated employees with those for non-highly compensated employees.

The Code section 415(c) cap on total contributions allocated to a participant's defined contribution account for a year, including deferrals, employer contributions, and forfeitures.

The annual dollar limit on an employee's pre-tax and Roth elective deferrals across all plans of unrelated employers.

An extra elective deferral permitted for participants age 50 or older, above the regular deferral limit, when the plan allows it.

A distribution from a 401(k) plan permitted only for specified immediate and heavy financial needs, subject to safe-harbor or facts-and-circumstances standards.

The minimum amount that must be withdrawn each year from tax-deferred retirement accounts beginning at the required beginning date, calculated from account balance and life expectancy.

The nonvested portion of an employer contribution that a departing participant loses, which the plan may use to reduce future employer contributions or pay reasonable expenses.

The annual return filed with the IRS and Labor Department reporting a plan's finances, participants, and operations; large plans must attach an independent auditor's report.

A person who has discretionary authority or control over plan management or assets, or who gives investment advice for a fee, and therefore owes ERISA duties.

The duty to act with the care, skill, prudence, and diligence that a knowledgeable person familiar with similar matters would use under similar circumstances.

The duty to operate a plan solely to provide benefits to participants and beneficiaries and to pay reasonable administrative expenses.

A transaction between a plan and a party in interest that ERISA forbids, such as certain sales, loans, or service arrangements, unless a statutory or administrative exemption applies.

A person or entity with a specified relationship to a plan, such as a fiduciary, service provider, employer, union, or certain relatives and affiliates, covered by prohibited transaction rules.

ERISA relief from fiduciary liability for investment losses caused by participants' own directions, available only when the plan meets disclosure and control requirements.

A default investment, such as a target-date fund, balanced fund, or managed account, that receives contributions when a participant gives no investment direction and provides fiduciary protection.

The IRS correction system, including self-correction and voluntary correction programs, used to fix plan document and operational failures and preserve a plan's qualified status.

A bank, insurer, or registered investment adviser that accepts discretionary authority over plan investments, shifting responsibility for those investment decisions away from the named fiduciary.

A written statement of a plan's investment objectives, risk tolerance, allocation targets, and monitoring criteria, used by fiduciaries to document a prudent investment process.

The ERISA requirement to give participants annual and quarterly information about plan and investment fees and a description of available investment options.