Terminology: Employer-Sponsored Retirement Plans

Many employers offer retirement plans as an employee benefit. An opportunity to participate in one should be seized, even if at its minimum participation requirements. In order to know what youre getting yourself into, you need to be familiar with the terms, provisions, and types of plans you may be offered.

Match the terms relating to the basic terminology and concepts associated with employer-sponsored retirement plans on the left with the descriptions of the terms on the right. Read all descriptions first then make the best match between each description and term. In the Answer column, select the letter corresponding to the terms correct description.

These are not necessarily complete definitions, but there is only one possible answer for each term.

Term	Answer		Description
ERISA		A.	Also known as a pension, this type of plan provides lifetime monthly payments to retirees.
Vested		B.	A plan in which both employees and employers may make contributions.
Noncontributory plan		C.	A completely employer-funded plan that many large companies are changing to due to much lower administrative expenses.
Contributory plan		D.	An employer sponsoring this type of plan enjoys beneficial tax treatment.
Defined-contribution plan		E.	A plan in which employees are not allowed to make contributions.
Defined-benefit plan		F.	A law that establishes parameters for employee eligibility, waiting periods, and vesting in employer-sponsored plans.
Qualified plan		G.	When employees take full possession of their employers contributions to their plan accounts.
Profit-sharing plan		H.	Often referred to as a salary-reduction plan.
Cash-balance plan		I.	Employees should keep a close eye on their accounts in this type of plan, because stock in their company should only comprise up to but no more than 10% of their retirement savings.
ESOP		J.	Funded by employers, contributions are discretionary and primarily depend on how well the company performs each year.