Key Concepts
401(k) Plans - Plan allowing employees to take the money as usual in their paycheck or defer a specific amount from their paycheck. Typically, the employer will match the contribution made by the employee. Amounts deferred are not included in the employee's gross income and the funds and earnings are not taxable until distribution.
403(b) Plans - A tax sheltered annuity plan similar to a 401(k) plan except it is for nonprofit organizations.
Defined Benefit Plan - A pension plan under which benefits are determined by a specific benefit formula.
Defined Contribution Plans - A tax qualified retirement plan in which annual contributions are determined by a formula set forth in the plan. Benefits paid vary with the amount of contributions made and length of service.
Keogh Plans - Designed to fund retirement of self-employed individuals; name derived from the author of the Keogh Act (HR-10), under which contributions to such plans are given favorable tax treatment.
Nonqualified Retirement Plan - Plan that does not meet federal government requirements and is not eligible for favorable tax treatment.
Qualified Retirement Plan - Plan established and maintained by an employer that meets specific guidelines spelled out by the IRS and consequently receives favorable tax treatment.
Rollover IRA - An individual retirement account established with funds transferred from another IRA or qualified retirement plan that the owner had terminated.
Section 457 Plans - Deferred compensation plan for employees of state and local governments in which amounts deferred will not be included in gross income until they are actually received or made available.
Simplified Employee Pension Plan - SEP - A type of qualified retirement plan under which the employer contributes to an individual retirement account set up and maintained by the employee.
Spousal IRAs - An individual retirement account that persons eligible to set up IRAs for themselves may set up jointly with a nonworking spouse.
Traditional IRA - Individual Retirement Account - A personal qualified retirement account through which eligible individuals accumulate tax-deferred income up to a certain amount each year, depending on the person's tax bracket.
Vesting - Right of employees under a retirement plan to retain part or all of the annuities purchased by the employer's contributions on their behalf or, in some plans, to receive cash payments or equivalent value, on termination of their employment, after certain qualifying conditions have been met.
Familiarize yourself with the Key Concepts in the Florida study manual, Unit 13.
