Actual Deferral Percentage ADP The percentage of a plan participants

Actual deferral percentage adp the percentage of a

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Actual Deferral Percentage (ADP): The percentage of a plan participant’s compensation contributed to a 401(k) plan as an employee elective deferral. Annual Defined Contribution Limit: The maximum 401(k) contribution limit that applies to all employee and employer 401(k) contributions within a calendar year. This limit is the lesser of 100 percent of the employee’s total pre-tax compensation or a fixed amount that can vary annually. Annuity: This is a contract in which an insurance company agrees to make regular payments to someone for life or for a fixed period of time. Appreciation: The increase in value of an investment over time. Asset Allocation: How you divide your investment portfolio among the major asset categories. It’s the most important decision you will make when managing your investment portfolio. Asset Allocation Fund: A common trust fund or mutual fund that distributes its portfolio among a wide range of investments, from domestic and foreign stocks and bonds, to government securities, and real estate stocks. This gives small investors far more diversification than they could ever have access to allocating money on their own. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change. Asset: An asset is a resource that has financial value to its owner. Examples of an asset are cash, accounts receivable, inventory, real estate, and securities. Automatic Contribution Arrangement: A feature in a plan whereby a covered employee’s salary is withdrawn by an amount specified in the plan and deposited into the plan on the employee’s behalf, unless the employee makes an affirmative election to have a different amount or no amount contrib - uted to the plan. In the case of a 401(k) plan with an automatic contribution arrangement, the amounts withheld from employees’ compensation are contributed to the plan as elective deferrals and the percentage of compensation contributed is called the default deferral rate. Auto Enrollment: Auto enrollment is the practice of enrolling all eligible employees in a plan and beginning participant deferrals without requiring the employees to submit a request to participate. The plan’s design specifies how these automatic deferrals will be invested. Employees who do not want to make deferrals to the plan must actively file a request to be excluded from the plan. Participants can generally change the amount of pay that is deferred and how it is invested. Auto Escalation: This is a plan which automatically increases the percentage of (retirement) funds saved from an annual salary. This type of plan generally features a default or standard contribution escalation rate. Balance Sheet: The overall financial statement of the firm overseeing and managing the retirement accounts. It provides a complete picture of its assets, debts, and net worth at a specific point in time.
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