Pension Terms I - L
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IAS: International Accounting Standards
IAS 19: International Accounting Standard No. 19
Identifiable Costs: Known plan costs such as trustee fees, recordkeeping charges, compliance costs, and investment management fees.
Imputed Compensation: Compensation that is not actually earned but rather credited as the result of disability or some other determination of compensation other than the amount actually paid to an employee.
Imputed Disparity: The process of adjusting a participant's account and/or benefit to reflect the fact that the benefit or contribution formula could have taken into account the permitted disparity rules of Code Section 401(l).
Includible Compensation: For the purpose of calculating the overall limitation for the limitation year for a 403(b) plan, the amount of compensation received that is includible in gross income for the most recent period that may be counted as one year of service.
Income Fund: A mutual fund that seeks current income rather than growth of capital. Income funds typically invest in bonds or high-yielding stocks or both.
Independent Contractor: An individual who performs services for an entity but not under an employer/employee relationship.
Index: An indicator that reflects the value of a representative grouping of securities. For example, Dow Jones Industrial Average or Standard & Poor Index of 500 Industrial Stocks.
Index Fund: A mutual fund that seeks to parallel the performance of a particular stock or bond market index.
Index Investing: An investment strategy that structures a portfolio so that its holdings replicate a specific stock or bond market index and are thus expected to provide a return that tracks with that specific benchmark. Index funds offer investors a passive approach to investing; advantages associated with passive management are low investment costs and minimal portfolio turnover. (Compare to Active Management.)
Individual Account Plan: A plan that provides for an individual account for each participant and in which benefits are based solely on the amount contributed to an account and any income, expenses, gains, losses, and forfeitures allocated to the account.
Individually Designed Plan: A plan tailored specifically to an individual employer that is not part of a master or prototype plan or volume submitter program.
Inflation Risk: The possibility that increases in the cost of living will reduce or eliminate the real returns on a particular investment.
Inherited IRA: An IRA becomes an inherited IRA after the death of the IRA owner unless the sole beneficiary is the IRA owner's surviving spouse. The nonspouse beneficiary cannot make a tax-deductible contribution to an inherited IRA, and distributions from an inherited IRA do not qualify for rollover treatment.
In-House Administration: The performance of plan administration services by employees of the entity sponsoring the plan.
In-Service Withdrawal: A withdrawal of plan benefits prior to separation from service with the employer.
Insured Plan: A plan funded exclusively by insurance contracts.
Integrated Plan: See Permitted Disparity.
Integration: The concept of adjusting contributions or benefits to reflect the disparity in Social Security taxes.
Interested Parties: Generally, all employees of the employer at the time the employer applies for a determination letter. IRS requires that interested parties be notified when the application is made.
Interest Rate Risk: The risk that a security will decline in price because of changes in market interest rates.
International Fund: A mutual fund that invests in securities traded in markets primarily outside the United States. (Contrast with Global Fund.)
Investment Policy: A statement that sets forth investment objectives and constraints as well as the methods by which those objectives will be attained and measured. (See also Funding Policy.)
Investment Style: A broad indicator of a mutual fund's investment emphasis. For U.S. stock funds investment style usually indicates whether a fund emphasizes stocks of large-, medium-, or small-capitalization companies and whether it emphasizes stocks with growth or value characteristics or a blend of those characteristics.
IRA: Individual retirement account or individual retirement annuity. Any working person and certain divorced spouses receiving alimony may establish IRAs and gain deductions for contributions to the IRAs and tax deferrals on the earnings.
IRB: Internal Revenue Bulletin. A weekly collection of materials published by IRS. See also CB.
IRC: Internal Revenue Code of 1986 as amended. The basic federal tax law.
IRS: Internal Revenue Service. An agency of the Treasury Department, headed by the Commissioner of Internal Revenue, charged with primary responsibility for administering, interpreting, and enforcing the Code. (Note, however, that the Secretary of the Treasury, not IRS, issues regulations under the Code.)
IRS Coordinated Issue Papers: IRS releases coordinated issue papers, which are reviewed by the Office of Chief Counsel, to achieve uniformity in application of the law and to provide guidance to IRS examiners. Although issue papers are not official pronouncements on the issues, they do set forth the current views of IRS.
IRS Restructuring and Reform Act of 1998 (IRRA): Act containing technical corrections to TRA '97 and SBJPA, many of which deal with Roth IRAs.
Job Creation and Worker Assistance Act of 2002 (JCWAA 2002): Enacted on March 9, 2002. This act contains changes to the funding rules for defined benefit plans and makes a number of technical corrections to provisions relating to qualified retirement plans that were enacted by EGTRRA 2001.
John Doe Submission: A submission procedure under the Voluntary Compliance Program that allows plan sponsors to submit a request on an anonymous basis.
Joint and Survivor Annuity: An annuity that is paid for the life of a participant, with a survivor annuity available for the life of his or her spouse. A qualified joint and survivor annuity must offer a survivor benefit that is not less than 50 percent nor more than 100 percent of the annuity received by the participant.
Joint Venture: An informal arrangement in which two entities are brought together for a specific purpose.
Katrina Emergency Tax Relief Act of 2005 (KETRA): On September 23, 2005, the Katrina Emergency Tax Relief Act of 2005 was signed into law. KETRA modified existing rules governing retirement plan withdrawals and loans in order to free up additional funds for Hurricane Katrina victims.
Keogh Plan: A qualified retirement plan, either a defined contribution plan or a defined benefit plan, that covers a self-employed person. (Other employees might also be covered.)
Key Employee: A participant who, at any time during the plan year is (1) an officer having annual compensation greater than $130,000 (subject to cost-of-living adjustments), (2) a more-than-5-percent owner of the employer, or (3) a more-than-1-percent owner whose annual compensation exceeds $150,000. See also 5 Percent Owner, Officer, 1 Percent Owner, and Top-Heavy Plan.
KSOP: A stock bonus plan in which elective contributions and/or employer contributions may be invested in employer stock.
LDI: liability driven investing
Leased Employee: An individual who performs services for another person (the recipient) under an arrangement between the recipient and a third person (the leasing organization) who is otherwise treated as the individual's employer. The services performed by an individual for the recipient must be under the primary direction or control of the recipient.
Leased Owner: An individual who, under an agreement between a leasing company and a recipient, performs services for the recipient other than as an employee of the recipient and is, at the time such services are performed, a more-than-5-percent owner of the recipient.
Letter Ruling: A written statement issued to a taxpayer by the Internal Revenue Service's Employee Plans Technical office or Exempt organizations Technical office (within the Tax and Government Entities Division) that interprets and applies the tax laws or any non-tax laws applicable to employee benefit plans and exempt organizations to the taxpayer's specific set of facts.
Leveling: The process of determining how much money will need to be refunded to HCEs in order to pass either the ADP or the ACP test.
Leveraged ESOP: An employee stock ownership plan that borrows to acquire employer company stock. See also Employee Stock Ownership Plan.
Life Cycle Plan: See Retirement Bonus Plan.
Limitation Year: With respect to any qualified retirement plan maintained by an employer, the calendar year. However, instead of using the calendar year, an employer may elect to use any other consecutive 12-month period as the limitation year.
Limited Liability Company (LLC): An entity designed to be taxed as a partnership. For 401(k) plan purposes, the members of the LLC are treated like partners and the non-members are treated like partnership employees.
Limited Participant: An employee who has not yet met a plan's specific eligibility requirements but who is permitted to make rollover contributions to the plan.
Line of Business (LOB): The portion of an employer that is identified by the specific property and services it provides in the ordinary course of the conduct of a trade or business. The employer is generally given wide latitude and flexibility in designating its lines of business and is allowed to designate its own lines of business, provided the designation is reasonable.
Lookback Rules: Rules used in determining who is a highly compensated or key employee. Under the highly compensated employee rules, the lookback period is one year. For key employees, the lookback period is also one year. Employees who meet the definition of a highly compensated or key employee for a lookback year will be counted as highly compensated or key employees in the current year.
Look-Through Fund: A fund in which the underlying assets of a pooled fund are taken into account in determining whether ERISA's diversification requirements have been satisfied.
Lump-Sum Distribution: A type of distribution that is required for purposes of using the forward averaging method in computing the income tax that is due and to defer income tax relating to net unrealized appreciation on employer securities. The basic requirements to qualify as a lump-sum distribution are (1) the distribution must be made within one taxable year of the recipient; (2) it must include the entire balance credited to an employee's account; and (3) it must be made on account of an employee's death, separation from service (except in the case of a self-employed person), or attainment of age 591/2 (or, in the case of a self-employed person only, on account of disability).
Lump-Sum Plan: See Retirement Bonus Plan.
