Glossary

401k Deferral

Employee contribution withheld from payroll. Can also be contributed out of Self-Employment earnings.

5 Years of Service

The calculations assume 5 years of Past Service. Fewer past years may reduce permissible contribution amounts at older ages.

Age

Age is rounded age as of Beginning of Year.

Defined Benefit Plan (DBP / DB)

Qualified Retirement Plan that projects benefits based on pay and service, then provides actuarially determined contribution levels.

HCE

Highly Compensated Employee–includes all 5% owners.

High 3-Year Average Compensation (Compensation)

DBP benefits are based on the highest average 3-consecutive years of pay. Past pays can be used. Self-Employment earnings can be used after adjusting for Self-Employment Tax and Contribution deductions. Compensation level shown is the minimum to achieve maximum benefits.

Key

Includes all 5% owners.

Level Funding Contribution (Cost of Individual)

Level annual DBP contribution assuming assets earn 5% rate of return.

Lump Sum at Retirement

Projected value of DBP benefit that can be rolled over at retirement age (does not include any PS or 401k account balance projections).

Maximum Deductible DB Plan Contribution

DBP contribution cannot exceed this amount. (10% Excise Tax applies if exceeded.)

Minimum Required Contribution

Amount required for DBP. (10% Excise Tax applies if not met.)

Optional 401k Plan

Qualified Retirement Plan that holds assets in individual accounts, including both 401k and Profit Sharing (PS) accounts.

Percent Owner

Ownership attribution from spouse or parent (etc.) must be taken into account.

Present Value of Accrued Benefit (PVAB)

Value of DBP benefit at end of first year.

Profit Sharing (PS)

Employer contribution, usually as a % of pay.

Projected Annual Benefit at Retirement

Hypothetical DBP annuity that is being funded actuarially.

Retirement Age (Ret Age)

Chosen to produce high contribution levels; may be further tailored in the individual plan-design process.

Solo

1-owner with no employees. (For 2 owners the contribution amounts are additive.)

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Plan Educator

Glossary

401k Deferral

5 Years of Service

Age

Defined Benefit Plan (DBP / DB)

HCE

High 3-Year Average Compensation (Compensation)

Key

Level Funding Contribution (Cost of Individual)

Lump Sum at Retirement

Maximum Deductible DB Plan Contribution

Minimum Required Contribution

Optional 401k Plan

Percent Owner

Present Value of Accrued Benefit (PVAB)

Profit Sharing (PS)

Projected Annual Benefit at Retirement

Retirement Age (Ret Age)

Solo

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