1
Security
Security is defined as the “state of being
free from danger or injury.” It can also
be defined as “defense against financial
failure; financial independence.”
To that point, Hendricks Holding
Company and its portfolio companies
want our employees to have financial
independence and be free from danger
or injury in their financial future. That is
why we offer our 401(k) program, and
the opportunity to defer Pre-Tax and
Roth dollars.
In this book you will find the answers you
need to get started in our 401(k)
program, as well as some important
things to consider as you make your
investment choices.
If you need more information, please feel
free to reach out to Alliance Pension
Consultants at (800) 406-4015, your local
HR team, or me at (608) 713-4295 or
apesik@hendricksholding.com.
Thank you for all you do for us!
Table of Contents
Important Numbers and Contacts……....3
Eligibility……………………………………………..3
Types of 401(k)s………………………………….4
Enrollment…………………........................ ..5
Mid Year Changes……………………………..11
Loans………………..…………………..………….11
Hardships………………………………..………..12
Additional Resources
Advice to Consider…………………………….13
Glossary…………………………………………….23
For a copy of the Summary Plan
Description for this plan please see
www.hendricksholdingbenefits.com
or the SPD book available from your
local HR team. You may also
retrieve a copy of the SPD on
www.alliance-plan.com under
Documents & Reports / Forms &
Notices.
Anne C. Pesik, SPHR, SHRM-SCP
Manager – Human Resources
Hendricks Holding Company
Please remember:
This book is meant as a guide only.
If you have specific questions, please see your local HR
department or contact the benefit vendor directly.
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Contacts
Alliance Pension Consultants
• Customer Service: (800) 406-4015
• Please have your Social Security Number ready
• www.alliance-plan.com
• You will be required to set up an account
Financial Advisor: Brett Jacobs
• Phone: (630) 282-1777
• Email: bjacobs@amwestbrook.com
Plan Administrator: Anne Pesik
• Phone: (608) 713-4295
• Email: apesik@hendricksholding.com
Eligibility
Unless stated otherwise by your local HR team, all non-union employees of
Hendricks Holding company and its portfolio companies are eligible for 401(k)
deferrals on 1st of month after 90 days of service.
Your company may make employer matching contributions based on a specific
percentage of your deferrals. The Summary Plan Description shows the type of
matching contribution your company has selected. You may obtain additional
information on the matching formula through your HR department.
3
Types of 401(k)s
The Hendricks Group 401(k) Plan offers two types of 401(k) salary deferral
accounts: Pre-Tax and Roth. Listed below are the differences between the two.
Please note: company match will be calculated on a combination of your PreTax and Roth contributions but will be distributed as a Pre-Tax amount only.
Contributions
Maximum Election
Contribution
(2015)
Pre-Tax 401(k)
Roth 401(k)
Employee election made
with before-tax dollars
Employee election made
with after-tax dollars
$18,000 if under age 50
$24,000 if age 50 or older
(combined between Pre-Tax and Roth)
Account Grows
Tax Free
Tax Free
Employer Match
Made with pre-tax
dollars to accumulate
in the same account
Made with pre-tax dollars to
accumulate in a separate
account and will be taxed as
income at withdrawal
Distributions
(after age 59 ½)
Taxed
Tax free if you’ve held the
account for 5 years or more
Required
Distributions
Must begin no later than age 70 ½, unless still
working and not a 5% owner
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Enrollment
To enroll for the first time in the Hendricks Group 401(k) Plan please follow these
directions.
In your Internet browser, go to www.alliance-plan.com.
Click on “New Web User?/Enroll Now!”
5
Step 2: Enter the requested information:
• Social Security Number
• Birth Date
• Zip Code
Click “Submit”
Step 3: Re-enter your Date of Birth to confirm
Click “Submit”
6
Step 4: Choose 3 alternate identification questions and answer them
Click “Submit”
7
Step 5: Enter all requested personal information
Click “Next”
8
Step 6: Enter information for your beneficiary
Click “Next”
Step 7: Change “Action” to “Change” and enter new contribution amount
Click “Next”
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Step 8 : Click on the source you want to allocate – if you want all money to go to the
same allocations choose “All Sources”. Enter your desired allocation percentages.
Click “Next Step”
Step 9 : You will receive a confirmation screen of everything you’ve just entered.
If this is correct you’re done!
More on Alliance-Plan.com
Check out www.alliance-plan.com for more information including:
• Enrollment Kit & Presentation
• Retirement Needs Calculator
• Managing your contributions
• Forms & Plan Documents
• Video Tutorials
• Market Insights
• Loan requests
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Mid Year Changes
The 401(k) plan is not like other benefit plans available through Hendricks
Holding Company. You may change your elections and contribution rate at any
point in time.
Please keep in mind that the best strategy to have a secure future is to “stay
the course” and keep your contribution rate steady. Also, please remember
that election changes are processed outside of the market trading day, so you
won’t see an immediate change in real time after entry.
401(k) Loans
The Hendricks Group 401(k) Plan allows for loans to be taken from your 401(k)
deferrals.
Loans are:
• Capped at 50% of your plan available balance
• Required to have a minimum balance of $1,000
• Capped at two loans at any one time
• Paid back with interest
• Subject to an origination fee of $180
Please contact Alliance Pension Consultants at (800) 406-4015 or your local HR
team for more information on a 401(k) loan.
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401(k) Hardships
What is a 401(k) financial hardship provision?
Your 401(k) plan, through its financial hardship provision, allows an employee to withdraw money from their 401(k)
plan for financial hardships. While each person may have their own definition of what a financial hardship is for
them, federal law and your plan document define financial hardship as it relates to your 401(k) plan. Any violation
could result in severe tax penalties for the person taking the illegal financial hardship withdrawal, and even possible
disqualification of the entire 401(k) plan.
What specific events qualify as a “financial hardship?”
Assuming your plan utilizes the safe harbor design, six events that qualify under IRS rules as a financial hardship
include:
*College education (you or your dependents)
*Medical expenses (you or your dependents)
*Purchase of a primary home
*Prevent foreclosure on your primary home
*Funeral expenses
*Natural catastrophe
Will I have to provide supporting documentation of my hardship?
Most likely, yes. The documentation must show expenses that are incurred and explicitly fit one of the listed
qualifying events. Examples of these include but are not limited to copies of escrow instructions, unpaid medical
bills, copies of college tuition payments, and eviction/foreclosure notices.
Are there any tax consequences for taking a financial hardship withdrawal?
You may owe at least three and possibly four different types of taxes on your financial hardship, including federal
and state income tax, a 10% federal excise (penalty) tax, and possibly a state excise (penalty) tax. Your financial
hardship distribution must be added to your annual income for federal and state income reporting purposes. Failure
to do so could result in further penalty taxes by the IRS. You are strongly advised to consult a tax professional
regarding these issues.
How much may I withdraw?
Your withdrawal, if approved, will be limited to the total of the documentation furnished plus the 10% federal excise
(penalty) tax. For example, if you qualify for a $10,000 financial hardship withdrawal, you may withdraw $10,000 +
$1,000 that will be used to pay the 10% federal excise (penalty) taxes. Most plans only allow your vested account
balance to be withdrawn for a financial hardship. Stated differently, any employer contributions to your 401(k) plan
that are not yet vested are not eligible for a financial hardship withdrawal.
May I still participate in the 401(k) plan after taking a financial hardship withdrawal?
You will be suspended from participating (making your own contributions) in the 401(k) plan for six months after
receiving a financial hardship withdrawal.
What is the process to request a financial hardship withdrawal?
Before an employee may request a financial hardship withdrawal, you will be required to exhaust all financial
avenues available to you. That means that you must attempt to obtain a loan through commercial means, and if you
are unsuccessful on the commercial front, via the loan provision in the 401(k) plan. If you already have an
outstanding loan, or you do not qualify for a loan under the terms of your 401(k) plan, you may then pursue a
financial hardship withdrawal. The process to complete a financial hardship application varies with each plan. Please
check with Human Resources to acquire any necessary direction or documents necessary to acquire a hardship
distribution.
Is there anything else I should consider before taking a financial hardship withdrawal?
A financial hardship withdrawal should be the last resort to obtain money. Again, you must first consider other
methods of borrowing, including bank loans, credit card cash advances, equity home loans, and even the 401(k) loan
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provision. Please consult your tax advisor or financial planning professional for advice about the most cost effective
way to access money that you need for purposes of meeting your financial hardship needs.
Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
Are You Saving Enough?
According to the U.S. Commerce Department, the net national savings rate is at
its lowest level since the Depression, and it’s falling: it’s now an astonishing 2.5% of national income.
Maximize Your 401(k) Deferrals!
To ensure a secure financial future, you should defer the maximum amount to your 401(k). If
you are unable to do this today, increase your deferrals in small amounts every six months,
or with every pay increase. Also, rebalance your account often and keep an eye on your
asset allocation, or rather, how you invest your money.
The chart below illustrates how much you might need to defer according to your income and
age (the sample below assumes you currently have no retirement assets.) If you are not
deferring enough, contact the HR Department to find out how you can increase your deferral
amount, as well as the dates you are allowed to do so.
(*Assumes a 7.5% annual rate of return; inflation at 2.8% and a retirement age of 67. This table is meant as a
guideline and is for illustrative purposes; it makes assumptions that may or may not represent the future.
“MAX” means you should be deferring the maximum amount.)
Ask For Help
The great part about saving for your future is that you don’t have to have to “go it alone.”
Talk with a professional financial planner for a strategy that’s right for you.
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
The Importance of Asset Allocation and
Diversification
Asset allocation refers to how you mix your investments across the various types of funds
or asset classes (e.g., the mix of stocks, bonds and cash in your portfolio). It might
surprise you to know that your asset allocation is what ultimately drives the earnings your
portfolio achieves!
 Asset Allocation Drives Return
Research shows that how you allocate your investments across asset classes determines more than
90% of your investment return. In other words, it’s more important to have the right mix of stocks,
bonds and cash than to pick Stock Fund A over Stock Fund B. The specific investments you choose,
and when you buy and sell – not to mention plain ‘ole luck – don’t have very much to do with
overall performance. Rather, these factors are part of the investment manager’s job.
 Diversification Lowers Risk
Asset allocation not only drives performance, it also helps you reduce risk. You know the old saying,
“don’t put all your eggs in one basket?” Well, investing in different funds within each asset class is
called diversification. This is the single most important thing you can do to manage investment risk.
Diversifying also increases likelihood of achieving long-term goals and enhances potential for longterm gain.
 Diversification among Asset Classes
“Mixing” your portfolio across asset classes makes you less dependent on performance and risk of
any single asset class. Effective diversification requires combining assets that behave differently
under various economic or market conditions. Moreover, investing in assets that have dissimilar
return behavior may insulate your portfolio from major downswings.
 Investing for the Long-Term
Remember that for most of us, investing for retirement is a long-term proposition. So don’t
overreact to the short-term fluctuations in the market. Stocks go up and down but over the long
term, they provide rewards for accepting this inherent risk. Next, don’t forget to rebalance your
portfolio! Reassess your situation periodically to determine if personal circumstances warrant a
shift in your approach. Remember, diversification and asset allocation does not guarantee a profit,
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nor do they eliminate the risk of loss of principal.
Advice to Consider
No one can make decisions about the best financial plan for your future except
for you . However, here are some tips to help you make your decisions.
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you . However, here are some tips to help you make your decisions.
Borrowing Against Your 401(k):
More Costly Than You Think
Participating in the Hendricks Group 401(k) plan is a smart (and important) decision. Smart because
you are putting away small amounts today for a comfortable retirement later.
As your account begins to grow, it may be tempting to “dip into” your retirement savings by taking a
loan against your 401(k) plan to pay your annual taxes, repair a leaking roof, catch up on your
everyday pile of bills, and so on. While the decision to take a plan loan is yours to make, we want to
make sure that you consider what it will really cost.
With a 401(k) plan loan, you pay yourself back the amount plus interest. But the
true cost can be shown with the loss in your retirement savings. You lose money
when you borrow from your retirement account for several reasons:
 You lose making money on the earnings, or compounding of those earnings.
 You repay the loan with after-tax dollars.
 There is an origination fee.
 Most employees decrease the amount they are contributing in order to compensate for the loan
payment.
 You may not be paying yourself back the same amount you would have earned if you left the
money invested (you pay yourself 7% but could make 10%).
To further illustrate the costliness of taking a plan loan, consider the following hypothetical example*:
Jane took a $10,000 loan at 7% interest from her retirement account; her account balance before the
loan was $20,000. She previously made contributions of $150 per paycheck (including the employer
match). Because she had to repay the loan, she decreased her contribution to $50. Additionally, prior
to the loan, she was earning a 10% return. Now she will repay the loan over five years. If you take into
account loss of interest, compounding, and tax on repayments, the actual 401(k) loan is costing Jane
13.77%! And don’t forget about those decreased contributions, which can add up to hundreds of
thousands of dollars over many years.
*This example is hypothetical and intended for illustrative purposes only.
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
Dollar Cost Averaging:
Take Advantage of Volatility
Any long term investment plan will most likely have to weather market ups and downs. One
technique to “stay the course” is Dollar Cost Averaging, or, making periodic investments of
the same amount of money in the same stock, regardless of whether the price is declining or
ascending.
Hypothetically Speaking:
Consider the following example using five $100 investments. An investor can accumulate
more units at a lower cost than if the $500 had been invested in a single lump sum at the
original $10 unit price.
Monthly deferral
$100
$100
$100
$100
$100
Total: $500
Unit Price
$10 high
$7
$6 low
$8
$9
$40
Number of Units
10.0
14.3
16.7
12.5
11.1
64.6
Total Invested
Average Unit Cost
Number of Units
Lump Sum
$500
$10
50
Dollar Cost Average
$500
$7.74 ($500/64.6)
64.6
This example is hypothetical and intended for illustrative purposes only. Dollar Cost
Averaging does not assure profit and does not protect against loss in declining markets. It
involves continued investment regardless of fluctuating price levels. Investors should
consider their financial ability to continue purchases through periods of low price levels.
Remember, maintaining a regular investment program and balancing your portfolio to
account for a level of risk you find comfortable are important to the overall success of your
financial strategies.
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
Increase Your Deferral Percentage Today ...
So you may have more money tomorrow
With much attention being paid to the market and investment gains and losses, it is not
uncommon to forget the most important factor when determining if you will have enough to
retire your deferral percentage!
Your deferral percentage is the amount you contribute each pay period to your retirement
plan.
Ask yourself “When was the last time I evaluated or changed my deferral percentage? Do I
know what my target percentage should be?”
Reality is, if your deferral isn’t appropriate, investment selection plays a very minimal role in
reaching retirement readiness.
There are a number of tools and resources to help participants examine appropriate deferral
percentages and income replacement ratios so you know how much to save today for a
meaningful retirement tomorrow. Our plan provider’s website (www.alliance-plan.com) is a
good place to start. The guidelines below will also help you get started (and keep going) in
the right direction.
How much should I contribute?
•With most of us not saving enough, outliving retirement savings is a very real concern.
As you set your retirement savings goals, a general rule of thumb is that most retirees will
need about 80% of their annual pre-retirement income in retirement.* (source: Employee
Benefit Research Institute)
•To ensure a successful financial future, you should defer the maximum amount to your
401(k) plan ($18,000 for 2015; this amount increases to $24,000 for 2015 if you are age 50
or older).
•At the very least, you should contribute enough to be eligible for the company match, if
one is offered.
•If you are unable to take these steps today, increase your deferrals in small amounts every
six months, or with every pay increase.
Why wait? Go online to www.alliance-plan.com to increase your deferral amount today!
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
Rebalancing Your Portfolio
As a participant in the company’s retirement plan, you are
already serious about saving for your future. But whether you are
retiring in a few weeks or a few decades you need to protect your
investment. A healthy way to do this is to rebalance your
portfolio.
What is rebalancing?
Rebalancing is simply readjusting your portfolio back to the
original asset allocation that took into account your risk
tolerance and your time horizon. Put another way, rebalancing
forces you to adhere to your investment strategy.
You rebalance by selling assets that make up too large a
proportion of your portfolio and using the proceeds to buy back
those that have become too small a proportion. The net effect is
to “sell high and buy low.” Ultimately, regular rebalancing
increases the overall return of your portfolio over time.
Keeping in-check
Financial planners recommend you rebalance at least once a year
and no more than four times a year. Consider this a good
opportunity to evaluate if your investment strategy is still in-line
with your original goals. The start of a new year also means that
you can contribute even more to your retirement account so
consider increasing your deferral amount to further grow your
nest egg.
If you have questions or require further assistance, please
contact your local HR team or call Alliance Pension Consultants at
(800) 406-4015.
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
Question: Is it too late to start saving for
retirement?
Answer: No! It’s never too late to start saving.
Perhaps you haven’t started saving as early as you would have hoped, but as the old adage
goes, “better late than never.” It’s true. You can make good progress on reaching your
savings goals by the time you retire  but you have to start as soon as possible.
Here are a few reasons why enrolling in your employer’s retirement plan is a great idea:
•It’s Easy & Convenient. Your contribution is automatically deducted from your pay and
deposited into your account. What’s more, your employer may match your contributions,
which is literally free money!
•Tax-Deferred Savings. Money is put into your retirement account before federal (and most
state) taxes. That means you don’t pay taxes on it until you take the money out.
•Portability. No matter where your career takes you, the money you put into the plan is
yours which means changing jobs or moving across country won’t hinder your progress.
•You’re in Control. You decide how much to contribute. Start small and try increasing a
little bit every year (try to time your increases around your annual pay raise). Little by little
your balance will grow and you will be closer to your goal.
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
WHAT HAPPENS TO MY 401(K) WHEN I LEAVE
THE COMPANY?
When you leave an employer, you generally have four options for handling the money in
your retirement plan:
1. LEAVE THE MONEY IN YOUR FORMER EMPLOYER’S PLAN. (Note: be aware of forced distribution
options for balances less than $1,000).
2. TRANSFER THE MONEY TO YOUR NEW EMPLOYER’S PLAN. Check with your new employer, as each
plan has its own rules for what assets it will accept.
3. TAKE THE MONEY AS CASH. The downside is that you’ll pay substantial taxes, including a
10% penalty tax if you’re under age 59½ not to mention putting your future retirement
needs at risk. Cashing out prior to retirement is highly discouraged.
4. ROLL OVER THE MONEY INTO AN INDIVIDUAL RETIREMENT ACCOUNT (IRA). With an IRA tax
benefits are preserved (i.e., taxes on your earnings are deferred until withdrawals taken
at retirement).
Receiving your money back from the Hendricks Group 401(k) Plan upon
leaving the company is easier than you think! You’ll automatically be sent
distribution paperwork upon termination and if you choose to take your
money out you’ll only have to fill out and return the paperwork. We’ll handle
the rest!
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Advice to Consider
No one can make decisions about the best financial plan for your future except
for you. However, here are some tips to help you make your decisions.
No More Excuses!
Participate in the retirement plan today.
If You Think …
Then Consider …
“I don’t make enough money.”
Your company match and tax savings. Your contribution is taken
out before taxes, so the amount you pay taxes on is lower. Plus,
your employer may make a matching contribution.
“I’m too young to worry about it
right now; time is on my side.”
The magic of compounding. When you give your money more
time to accumulate, the earnings on your investments—and
the annual compounding of those earnings—can make a big
difference in your final return.
“I’m too old, it’s too late.”
It’s never too late. If you’re 50 years old or older, you can
contribute a catch-up deferral (check your plan limits for the
amount, as it is subject to change each year). You still have time
to put your money to work for you.
“Stocks, bonds … it’s too
confusing!”
There is an easier way! Your plan may have the option to invest
your money in a “pre-set” asset allocation or lifestyle model
that takes into account your expected retirement date or age.
It’s a “set it and forget it” approach and works well for the less
sophisticated investor.
“I’ll still have my Social Security.”
Don’t count on it. A dwindling workforce means fewer tax
dollars down the road. In just a few years there will be 2
workers per every 1 retiree.
“I just don’t know how to
get started.”
Help is available. Understanding how to begin saving for
retirement might be overwhelming, but it’s easier than you
think. Contact human resources for enrollment instructions or
contact Alliance Pension Consultants at (800) 406-4015 for
more information.
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Glossary
Accrued Interest– The amount credited to a bond
or other fixed-income security between the last
payment and when the security is sold, or any
intermediate date. The buyer usually pays the
seller the security’s price plus accrued interest.
Actual Deferral Percentage (ADP) – This is the
proportion of a plan participant’s compensation
that is 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 in a calendar year. This limit is the
lesser of 100% of the employee’s total pre-tax
compensation or a fixed amount that can change
annually.
Appreciation- Increase in the value of an
investment over time
Asset Allocation Fund - A common trust fund or
mutual fund that spreads its portfolio among a
wide variety of investments, including domestic
and foreign stocks and bonds, government
securities and real estate stocks. This gives small
investors far more diversification than they could
get allocating money on their own.
Asset – A resource that has economic value to its
owner. Examples are: cash, accounts receivable,
inventory, real estate, and securities.
Beta – A measure of a stock’s risk relative to the
market. The market’s beta is always 1.0; a beta
higher than 1.0 indicates that, on average, when
the market rises, the stock will rise to a greater
extent, and vice versa when the market falls. A
beta lower than 1.0 indicates, that on average,
the stock will move to a lesser extent than the
market. The higher the beta the greater the risk.
Bond – A certificate of debt issued by a company
or the government. Bonds generally pay a specific
rate of interest and pay back the original
investment over a specified period of time.
Book Value Per Share – The accounting value of a
share of common stock. It is determined by
dividing the net worth of the company (common
stock + retained earnings) by the number of
shares outstanding.
Capital Gain – An increase in the value of a
capital asset such as common stock. If the asset
is sold, the gain is “realized” capital gain. The
capital gain may be short term (less than 1 year)
or long term (1 year+)
Catch Up Provision – The provision that allows
employees who are at least 50 years old to make
higher annual contributions in the years prior to
retirement.
Cliff Vesting – A 401(k) plan that vests 100% of
employer contributions after a specified number
of years of service.
Common Stock – An investment representing
ownership in a company
Compounding – The ability of an asset to
generate earnings that are reinvested and
generate their own earnings (earnings on
earnings)
Contingent Beneficiary – Person who stands
second in line, behind the primary beneficiary, to
inherit assets of a retirement plan.
Current Ratio - Current assets, including cash,
accounts receivable and inventory, divided by
current liabilities including all short-term debt. A
rough measure of financial risk. The smaller the 23
ratio the greater risk of credit failure.
Glossary (cont.)
Depreciation – Decrease in the value of an
investment over time
Expected Return – The average of a probability
distribution of possible returns
Direct Rollover – A tax-deferred transfer of assets
from one qualified retirement plan to another
qualified retirement plan or IRA. The transfer is
made without funds being sent directly to the
participant.
Expense Ratio – The ratio of total expenses to net
assets of a mutual fund. Expenses include
management fees, 12(b)1 charges, if any, the cost
of administrative mailings. The ratio is listed in a
fund’s prospectus. Expense ratios may be a
function a fund’s size rather than its success of
controlling expenses.
Distribution and Withdrawals – When money is
drawn from a 401(k) plan, the withdrawal is a
distribution. 401(k) assets can be withdrawn
without penalty at age 59 ½. Employees are
required to start taking distributions at age 70 ½.
Diversification – The practice of spreading risk by
investing a number of securities that have
different return patterns over time. When one
investment is yielding a low or negative rate of
return in a diversified portfolio, another
investment may be enjoying positive or abovenormal returns.
Dividend – Payments by a company to its
stakeholders. A dividend is usually a portion of
the profits. Payment of dividends on common
stock is usually discretionary.
Dollar-Cost Averaging – A process of buying
securities at regular intervals and a fixed dollar
amount. When prices are lower, the investor
buys more shares. When prices are higher the
investor buys less shares. Over time, this typically
results in a better average price of all units
purchased.
Earnings per Share – The net income of the firm
divided by the number of common stock shares
outstanding.
Employer Matching Contribution – the amount,
if any, that the employer contributes to the
401(k) account.
Fiduciary – An individual or institution charged
with the duty of acting for the benefit of another
party as to matters coming within the scope of
the relationship between them. A fiduciary is to
act solely in the interest of the plan participants
and their beneficiaries.
Hardship Withdrawal – An in-service distribution
from the plan which is made because the
participant has suffered severe financial difficulty
or an extraordinary event as defined by the plan
document.
Income Fund – A common trust fund or mutual
fund that seeks to mirror general stock-market
performance by matching its portfolio to a boardbased index, most often the S&P 500.
Index – The net income of the firm divided by the
number of common stock shares outstanding.
In-service Withdrawal – A withdrawal from a
401(k) account by a participant who remains
employed. In-service withdrawals are severely
restricted by law.
Interest – What a borrower pays for use of the
money. This is the income you receive from a
bond, note, certificate of deposit or other form of
IOU.
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Glossary (cont.)
Investment Adviser – A person who manages
assets, making portfolio composition and
individual security selection decisions, for a fee,
usually a percentage of assets invested.
Investment Risk – This is the risk that an
investment may not generate the desired returns
over time, and may even result in the loss of any
initial capital invested
Lifestyle Fund – A mutual fund that maintains an
asset allocation based on the expected
retirement age of the investor; generally, the
investor’s portfolio will be shifted into less-risky
assets as s/he grows older, or closer to the time
when s/he wants to withdraw the investment.
Lump sum – The distribution, in a single
payment, of a participant’s entire vested accrued
benefit under the plan (or what remains of the
participant’s vested benefit at the time of the
single-sum distribution)
Market Risk – The volatility of a stock price
relative to the overall market or index as
indicated by beta.
Matching Contribution – Employer contributions
that are made on account of elective deferrals or
employee after-tax contributions.
Mutual Fund – An open-end investment company
that buys back or redeems its shares at current
net asset value. Most mutual funds continually
offer new shares to investors.
Net Asset Value – The current market worth of a
mutual fund share. Calculated by taking the
funds total assets, securities, cash, and any
accrued earnings deducting liabilities and dividing
the remainder by the number of shares
outstanding.
Odd Lot – A transaction involving fewer shares
than in a “round” lot, which for most stocks is
100.
Participant – An employee who is eligible to
either make contributions to the retirement plan
or to share in employer contributions the plan.
Participant Directed Account – A plan that allows
participants to select their own investment
options.
Plan Administrator – The individual, group, or
corporation, as responsible for day to day
operations.
Plan Document – A written instrument under
which the plan is established and operated.
Portability – This occurs when, upon termination
of employment, an employee transfers pension
funds from one employer’s plan to another with
no penalties.
Price-Earnings Ratio – Market price per share
divided by the firm’s earnings per share. A
measure of how the market currently values the
firm’s earnings growth and risk prospects.
Prospectus – The written statement that
discloses the terms of a securities offering or a
mutual fund. Strict rules govern information that
must be disclosed to investors in the prospectus.
You should always read the prospectus on any
mutual fund before investing.
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Glossary (cont.)
Qualified Default Investment Alternative - An
investment option a plan sponsor may use for
401(k) plan contributions in the absence of
direction from a plan participant.
Qualified Domestic Relations Order – A
judgement, decree, or order that creates or
recognizes an alternate payee’s (such as former
spouse or child, etc.) right to receive all or a
portion of a participant’s retirement plan
benefits.
Qualified Plan – A private retirement plan that
meets the rules and regulations of the IRS.
Contributions to such plans are usually taxdeductible; earnings on such contributions are
always tax sheltered until withdrawal.
Real Rate of Return – The annual percentage
return realized on an investment, adjusted for
changes in the price level due to inflation or
deflation.
Return on Equity – A ratio calculated by dividing
common stock equity (net worth) at the
beginning of the accounting period into net
income for the period after preferred stock
dividends, but before common stock dividends.
ROE tells common stockholders how effectively
their money is being employed.
Risk Tolerance – The extent to which an investor
will accept risk in the pursuit of a financial
reward. The greater the investor’s tolerance, the
more risk s/he will accept in order to reach their
goal.
Rollover – An employee’s transfer of retirement
funds from one retirement plan to another plan
of the same type or to an IRA without incurring a
tax liability. The law requires 20% federal income
tax withholding on money eligible for rollover if it
is not moved directly to the second plan or an
investment company.
Roth 401(k) - A plan that allows employees to
make after-tax contributions. Withdrawals after
age 59 ½ are generally tax-free.
Safe Harbor 401(k) – A safe harbor 401(k) is
similar to a traditional 401(k) plan, but the
employer is required to make a defined
contribution for each employee who participates
in the plan.
Summary Plan Description – A document
explaining the plan in common English to
participants.
Target Date Fund – A mutual fund that
automatically reduces the risk within its portfolio
by resetting the asset mix between stocks, bonds,
and cash to be more conservative based on the
number of years to a target date.
Total Debt to Total Assets – Short-term and longterm debt divided by total assets of the firm. A
measure of the company’s financial risk that
indicates how much of the assets the firm have
been financed by debt.
Vesting – The period of time an employee must
work at a firm before gaining access to employercontributed pension income. For 401(k) plans,
employee contributions are immediately vested,
but employer contributions may be vested over a
period of several years.
Yield – The amount of interest paid on a bond
divided by the price. A measure of the income
generated by a bond. A yield is not a total return
measure because it does not include capital gains
or losses.
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