Glossary of Financial Planning Terms
Matching Contributions - A type of contribution that an employer chooses to make to his or her employee's employer-sponsored retirement plan, based on elective deferral contributions made by the employee.
Overcontribution - Any contribution to a tax-deductible retirement savings plan which exceeds the maximum allowed contribution for a given period of time as determined by the retirement plan's registrar; they are usually subject to some form of monetary penalty intended to reduce their occurrences.
Pension Fund - A fund established by an employer to facilitate and organize the investment of employees' retirement funds contributed by both the employer and employees. The fund is a common asset pool meant to generate stable growth over the long term, providing pensions for employees when they reach the end of their working years and begin retirement.
Pension Plan - A retirement plan (often tax exempt) into which an employer makes contributions for his or her employees. Many pension plans are being replaced by the 401(k).
Qualified Retirement Plan - Also known as a Qualified Plan, a plan which meets specific requirements set forth in the Internal Revenue Code and, as a result, is eligible to receive certain tax benefits.
Revocable Trust - A trust in which provisions can be altered or canceled by the grantor. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. This is the opposite of an Irrevocable Trust, which cannot be modified or terminated without the permission of the beneficiary.
Rollover - 1. The process of transferring the holdings of one retirement plan into another without suffering tax consequences. 2. The process of reinvesting funds from a mature security into a new issue of the same or similar security.
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