Forms & Publications


Term Definition
401(k) plan A defined contribution benefits plan into which employees can make pre-tax contributions through salary reduction agreements.
403(b) plan Equivalent to a 401(k) plan, but applicable to non-profit and public organizations.
Accrued Benefit For any retirement plan that is not a defined benefit pension plan, a participant’s accrued benefit is the balance in his or her plan account, whether vested or not. In the case of a defined benefit pension plan, a participant’s accrued benefit is his or her benefit as determined under the terms of the plan expressed in the form of an annual benefit commencing at normal retirement age.
Accrued Liability The present value of all benefits earned by members of a pension plan, as of the date of the actuarial valuation.This value can be different if different actuarial cost methods or sets of assumptions are used.
Active Member An active member is a person who is working as a permanent employee for the plan sponsor or an outside district and earning service credit in a retirement plan. Active members also include members on authorized leave who are not earning service credit.
Actuarial Assumptions Assumptions made by actuaries in estimating certain benefit costs (for example: yield rate, mortality rate, employee turnover, etc.).
Actuarial Equivalent An alternative benefit in which what is gained is equal in present value to what is given up.
Actuarial Funding Method Any of several techniques that actuaries use in determining the amounts and incidence of employer contributions to provide for pension benefits .
Actuarial Valuation The procedure used to estimate the present value of benefits to be paid under a plan and to compute the amount of contributions required to cover the unfunded cost of benefits.
Actuarially Aound A pension fund is considered “actuarially sound” when the amount in the fund and the current levels of contributions to the fund ard sufficient, on the basis of assumptions made concerning interest and other factors, to meet the liabilities already accrued and accruing.
Actuary An actuary is a person trained in mathematics, statistics, and legal accounting methods and in the principles of sound operation of insurance, annuities and pension plans, who employs life expectancy projections, financial projections, and related data in the funding projections, and related data in the funding and management of such plans.
Administrator The person or organization (frequently the sponsor) specifically designated, by the terms of the instrument under which a pension or welfare plan operates, to direct the plan.
After-Tax Contributions After-tax or nontaxable contributions are member contributions made through payroll deductions (or any lump-sum payment other than a rollover made by a member) and taxed at the time they were made. Nontaxable contributions are not subject to taxation when a member withdraws them or retires, although the interest earned on the contribution is taxable.
Age Discrimination in Employment Act (ADEA) Makes non-federal employees over age 40 a protected class, relative to their treatment (in pay, benefits, employment and other personnel actions).
Aggregate Funding Method A method of accumulating money for future payment of pensions, whereby an actuary determines the present value of all future benefit payments, deducts from this value whatever funds may be on hand with the insurance company or trustee, and distributes the cost of the balance over the future on a reasonable basis.
Amortization Paying off an interest bearing liability by gradual reduction through a series of installments as opposed to paying it off by one lump sum payment. A technique for gradually extinguishing a liability, deferred charge, or capital expenditure over a period of time. Includes such practices as depreciation, depletion, write-off of intangibles, prepaid expenses and deferred charges (e.g., mortgages are amortized by periodically retiring part of the face amount). The liquidation of a debt on an installment basis.
Annuity Periodic payment made to a pensioner over a fixed period of time, or until his or her death. To purchase an annuity means to pay a lump sum or make periodic payments to an insurance company. In return, the insurance company guarantees that certain periodic payments will be made to the participant, as long as he or she lives beyond the first due date of the annuity.
Annuity, Joint and Survivor An annuity, payable to the pensioner until his or her death, at which time it becomes payable (either in whole or in part) to a named survivor or contingent annuitant until the contingent annuitant‘s death. Also called a contingent annuity.