Elective deferrals include deferrals under a 401(k), 403(b), SARSEP and SIMPLE IRA plan.Įmployee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets standards of protection for individuals in most voluntarily established, private-sector retirement plans. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans and profit-sharing plans.Įlective Deferrals are amounts contributed to a plan by the employer at the employee's election and which, except to the extent they are designated Roth contributions, are excludable from the employee's gross income. The value of the account will change based on contributions and the value and performance of the investments. Generally, the contributions and earnings are not taxed until distribution. The amount in the account at distribution includes the contributions and investment gains or losses, minus any investment and administrative fees. Or, more commonly, it may calculate a benefit through a plan formula that considers such factors as salary and service.ĭefined Contribution Plan is a retirement plan in which the employee and/or the employer contribute to the employee’s individual account under the plan.
The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Often, the benefit is based on factors such as the participant’s salary, age and the number of years he or she worked for the employer. Cash balance plans are more likely than traditional defined benefit plans to make lump sum distributions.ĭefined Benefit Plan, also known as a traditional pension plan, promises the participant a specified monthly benefit at retirement.
To pass the test, the ADP of the HCE group may not exceed the ADP for the NHCE group by 1.25 percent or the lesser of 2 percentage points and two times the NHCE ADP.Īnnual additions are the total of all employer contributions, employee contributions (not including rollovers), and forfeitures allocated to a participant's account in a year.Īnnuity – A series of payments under a contract that are made at regular intervals and over a period of more than one year.Ĭash Balance Plan – A type of defined benefit plan that includes some elements that are similar to a defined contribution plan because the benefit amount is computed based on a formula using contribution and earning credits, and each participant has a hypothetical account. The deferral percentages of the HCEs and NHCEs are then averaged to determine the ADP of each group. Each employee’s deferral percentage is the percentage of compensation that has been deferred to the 401(k) plan. Generally, these annuities are funded by elective deferrals made under salary reduction agreements and nonelective employer contributions.ĪDP or Actual Deferral Percentage is an annual test in a 401(k) plan that compares the average salary deferrals of highly compensated employees to that of nonhighly compensated employees. An individual’s 403(b) annuity can be obtained only under an employer’s TSA plan. SIMPLE and safe harbor 401(k) plans have mandatory employer contributions.Ĥ03(b) Tax-Sheltered Annuity (TSA) Plan is a retirement plan offered by public schools and certain tax-exempt organizations. In some plans, the employer also makes contributions such as matching the employee’s contributions up to a certain percentage. The contributions go into a 401(k) account, with the employee often choosing the investments based on options provided under the plan. System of National Accounts (SNA), 2008, 9.2 - 9.7.401(k) Plan is a defined contribution plan where an employee can make contributions from his or her paycheck either before or after-tax, depending on the options offered in the plan.
A measure of the individual goods and services that households actually consume as opposed to what they actually purchase.Įurostat, OECD, 2007, Eurostat-OECD Methodological Manual on Purchasing Power Parities, OECD, Paris – Annex VII, Glossary of terms and abbreviations. The total value of the individual consumption expenditures by households, NPISHs and general government. Equivalent: Consommation individuelle effectiveĪctual individual consumption (also called Household actual final consumption) is the sum of the total value of household final consumption expenditure, non-profit institutions serving households (NPISHs) final consumption expenditure and government expenditure on individual consumption goods and services.