The accelerated benefits employees receive as they increase the duration of their service to an employer. A vesting schedule is mandated by federal law for the employers' contribution portion of private retirement plans. It specifies the minimum number of years a company may require employees to work in order to earn the vested right to all or part of the employer contributions. A graduated vesting schedule for a defined benefit plan requires an employee to have worked for a certain number of years in order to be 100% vested in the employer funded benefits. For example, an employee may have to work for seven years to become fully vested, but will be 20% vested after three years, 40% vested after four years, 60% after five years, and 80% after six years of service.
For employer-sponsored, tax-advantaged retirement plan purposes, anyone who is a 5% owner of a company or who received more than $110,000 in compensation in 2010 (the compensation limit is adjusted annually). If the employer chooses, a highly compensated employee may also be defined as any employee whose pay is in the top 20% of compensation for that company. When a company contributes to a defined-benefit or defined-contribution plan for its employees and those contributions are based on the employee's compensation, the Internal Revenue Service wants the company to minimize the discrepancy between the retirement benefits received by highly compensated and lower compensated employees. If the difference is too great, the company can lose the tax deduction it gets for the retirement plan.
A person who inherits some or all of the estate of a recently deceased person. The legal successor is usually selected because he or she is related to the deceased by a direct bloodline or has been designated in a will or by a legal authority. Originating in feudal times, the heir was usually the oldest male child in the family.
An emergency withdrawal from a retirement plan that may be subject to certain tax or account penalties. In the United States, funds withdrawn prior to the age of 59.5 are typically subject to a 10% Internal Revenue Service (IRS) early withdrawal penalty, as well as standard income taxes. Hardship withdrawals from a retirement plan such as a 401(k) can't be replaced. The money that is withdrawn is permanently removed from the account, and only scheduled future contributions are permitted.The stiff penalties and criteria for hardship withdrawals are meant to deter investors from using this option except as a last resort. The ability to have money free from future income taxes and capital gains taxes (a trait of most retirement accounts) is an extremely valuable asset, and is necessary for many people to achieve a stable retirement.
As a result of changes to tax law in the United States, employers and retirement plan sponsors are required to complete new Adoption Agreements and restate their prototype qualified plans. In order for plans to maintain their qualified status, they must meet different statutory regulations. GUST comes from the combination of: General Agreements on Tariffs and Trade (GATT), the Uniformed Services Employment Rights Act of 1994 (USERRA), the Small Business Job Protection Act of 1996 (SBA-96), and the Taxpayer Relief Act of 1997 (TRA-97).
An IRA held in the name of a legal guardian or parent on behalf of either a child under the age of 18-21 (depending on state legislation) or an individual who is incapable of handling finances due to physical or mental disability. The guardian is responsible for signing documents on behalf of the minor or special-needs adult. The responsibilities of the guardian cease once the child is no longer a minor or until the adult is able to handle his or her finances.
Pensions earned while working in the United Kingdom's public sector between 1978 and 1997. During those years, the UK’s public sector pension plan was contracted out and the pensions earned are handled differently than other years. The amount of pension earned during these years is supposed to be roughly equivalent to the amount an employee would have otherwise earned. The guaranteed minimum pension applies only to pensions earned during the specified years. If a public sector employee earned income before or after the specified years, in addition to during the specified years, the different time periods of the pension will be calculated separately. After April 6, 1997, guaranteed minimum pensions no longer accumulated and the system was replaced.
A rider on a variable annuity, which guarantees the minimum amount received by the annuitant after the accumulation period, or a set period of time, is either the amount invested or is locked in gain. This protects the value of the annuity and the annuitant from market fluctuations. This benefit is optional to an annuity for an added cost, which varies by each firm. The GMAB will be used only if the market value of the annuity is below the minimum guaranteed value. In some cases, the cumulative costs of the benefit are returned to the annuity if the annuity value is higher than the minimum, removing the need to use the rider.
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