Financial Definitions



402(f) – Notice that participants taking withdraws from their plan will receive annually. The plan sends detail options for both Roth and non-Roth rollover distributions, pursuant to the IRS code.

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Adjustment – Financial transaction initiated by a fund company or employer used to correct a participant's account's balance. Includes the following: daily interest, dividends, capital gains, unit adjustments, bad price or price conversions, payroll adjustments, and fund reimbursements.

Allocation – The way in which deferrals, or contributions, are divided among existing investments.

Allocation Change – When a participant modifies future contribution percentages by changing the amount of the allocation or how the contribution is allocated among funds.

Annualized Return – Rate of return for a given period that is less than one year, but computed as if the rate were for a full year.

Asset Allocation – Strategy of spreading investment funds across asset classes, such as cash and fixed income, bonds, and stocks, to help minimize risk. This may help manage the risk of investing in part because these investment categories respond to changing economic and political conditions in different ways. The use of asset allocation does not guarantee returns or protect from potential losses.

Asset Classes (Types) – Types of investments available for participant contributions and assets. In general, asset classes may be divided into stocks, bonds, and cash and cash-like products including money market instruments, Treasury bills and CDs. Retirement plans typically offer mutual funds comprised of stocks, bonds, cash or a mixture of them. Read Asset Class Types in the Learning Center for more information about the types offered by Nationwide®.

Asset Rebalancing – An investing strategy through which a participant periodically exchanges or moves between funds in their account, in an effort to maintain a specific investment mix designated.

Automatic Asset Rebalancing – Optional service offered by Savings Plus that automatically rebalances participant accounts on a quarterly basis.

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Basis Point – Common units of measure when quoting fixed account yields, interest rates and retirement plan charges and expense. One basis point equals .01%, therefore 100 basis points equals 1%.

Beneficiary – The recipient of, or person chosen to receive, designated assets in the event of another’s death.

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COLA – Cost of living adjustments.

Consumer Price Index (CPI) – Also known as the CPI or Cost-of-Living-Index. Released monthly by the US Department of Labors’s Bureau of Labor Statistics, it measures prices of a fixed basket of goods bought by a typical consumer in the United States. Goods include food, transportation, shelter, utilities, clothing, medical care, entertainment, etc.

Contribution – Portion of the account holder’s paycheck that is invested into a retirement plan.

Contribution Change – Modification to a pre-tax or Roth contribution amount that is deposited from a participant's paycheck to invest in a defined contribution account.

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Deferred Compensation – Earned income that, under the terms of the plan, such as a 457(b), 403(b), or a profit sharing plan, is not actually paid until a later date. The income is not taxed and can be invested in either fixed or variable accounts.

Direct Deposit (Electronic Fund Transfer or EFT) – many employers direct deposit employees’ pay into a bank account, rather than issuing paper checks.

Distribution – Amount paid out of plan accounts, also called a payout or payment.

Diversification – Portfolio strategy designed to spread risk by allocating assets among a variety of investments, such as short-term investments, bonds and stocks.

Dollar Cost Averaging – Investment strategy that invests fixed amounts at set intervals, such as monthly or bi-weekly. Over the long term, a particular investment is purchased with a fixed dollar amount on a regular schedule, regardless of the share price. This assumes more shares are purchased when prices are low, and fewer shares are bought when prices are high.

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Earned Income – Money earned from salary, wages, bonuses, commissions and tips, as a result of providing goods and/or services.

Earnings – Money gained on the principal in a financial account.

Eligible Rollover Distribution – A distribution from a 401(k), 403(b), or 457(b) plan or an IRA that is legally eligible to be rolled over to another 401(k), 403(b), or 457(b) plan or an IRA.

End-Result Exchange – Reallocating your current balance changes the investment mix of your portfolio and is sometimes referred to as an end-result exchange. It's an easy way to manually rebalance your entire portfolio without exchanging one fund at a time.

Estate – Legal term for the sum of the assets and liabilities for an individual, generally used after the death of an individual.

Estate Planning – Advance planning for how to manage an estate when the owner dies. This is often done years in advance to ensure that the owner’s wishes are met. It can include setting up trusts, planning a will, buying life insurance to cover expenses triggered at death, and coordination of tax liability.

Exchange – Moving the current account balance from one investment choice to another choice(s) available through the same plan.

Expense Ratio – The expense ratio is the annual fee that funds charge their shareholders. It expresses the percentage of assets deducted each fiscal year for fund expenses, including management fees, administrative fees, operating costs, and all other asset-based costs incurred by the mutual fund. 

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Fund Expense Ratio – See Expense Ratio.

Fund Fact Sheets – A document providing the investment objectives, strategy, fees and expenses, and past performance of the fund options offered by Savings Plus. Fact sheets are provided in lieu of a fund prospectus for separate accounts, collective trust funds, and fund-of-fund options.

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Gross Domestic Product (GDP) - Total value of goods and services produced in a country in one year.

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Hardship - an immediate and heavy financial need for which Savings Plus 401(k) participants may request a 401(k) Hardship Withdrawal when no other funds (including Savings Plus loans) are available. Eligible hardships can include:

  • Medical, disability and funeral expenses
  • Housing repair and stopping an eviction
  • Post-secondary education tuition 

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Index – A stock market index is a benchmark that provides a point of reference for evaluating performance of a portfolio. Some of the more common indices include the S&P 500 and the Dow Jones Industrial Average.

Index Fund – Index funds seek to match the overall performance of a market or some segment of a market by investing in many or all securities (stocks or bonds) that comprise that index.  For example, the Large Cap Index Fund offered by Savings Plus seeks to match the returns of the S&P 500 Index.

Individual Retirement Account (IRA) – Retirement accounts owned and funded by an individual. Two common types of IRAs are traditional IRAs and Roth IRAs. Contributions to a traditional IRA are eligible for a credit when the individual files a federal income tax return. Withdrawals are taxed as ordinary income. Contributions to a Roth IRA are not eligible for a tax credit, but withdrawals may be taken tax-free (subject to certain conditions and restrictions).

Interest – Fee charged by a lender to a borrower for the use of borrowed money. It’s commonly expressed as an annual percentage of the principal, and is determined by the time value of the money, the perceived credit risk of the borrower, and the projected rate of inflation.

Internal Revenue Code (IRC) – Body of law containing federal tax provisions, including those that govern or impact 457(b), 403(b), 401(k) and 401(a) plans, IRAs and defined benefit pension plans.

Internal Revenue Service (IRS) – The U.S. government agency responsible for tax collection and tax law enforcement.

Investment Objective – Defines a fund's investment goals. Investment objectives can be found on Fund Fact Sheets.

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Loan – An optional provision available to retirement plan sponsors. If adopted by the sponsor, participants may request to borrow money from their retirement account. Repayment is typically made through Automated Clearing House (ACH) directly from the participant’s bank account to the retirement account.

Loan Principal – The amount borrowed – interest is calculated on the principal.

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Mandatory Employee Pre-Tax Contribution – Employee’s contribution made upon condition of employment and managed by the employer under IRC Section 414 (h), e.g. the Alternate Retirement Program (ARP).

Maximum Deferral – Largest amount a participant can invest annually. These limits are established by the IRS.

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Nationwide ProAccount® – An option, for-fee, professional money management service offered to participants of 457(b) and 401(k) plans provided by Nationwide Retirement Plans. The service is offered through Nationwide Investment Advisors, LLC, a broker/dealer affiliate of Nationwide Retirement Plans, which has retained Wilshire Associates as the independent financial expert, to select and monitor investments so that participants do not have to. Based on a participant’s personal profile, age and risk tolerance, ProAccount will create an investment strategy that seeks to enhance diversification, increase returns and control risk.

Net Asset Value (NAV) – The market value, or price, of a share. It’s calculated daily by dividing the total net assets of the mutual fund by the number of shares outstanding.

Normal Retirement Age (NRA) – Age at which a participant in a retirement plan can retire and receive unreduced benefits.

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PST Employees Retirement Program – Mandatory Savings Plus retirement program for part-time, seasonal and temporary (PST) state employees who are not covered by CalPERS or Social Security. 

Payroll Frequency – How often your regular paycheck is issued – daily, weekly, bi-weekly (once every two weeks), bi-monthly (twice per month), etc.

Personal Choice Retirement Account (PCRA) – Self-directed brokerage account provided by Charles Schwab & Co., Inc., and offered through the Savings Plus Program.

Performance Benchmark – Index used to evaluate a mutual fund’s performance.

Plan Document – A document or collection of documents that officially define the plan and specify how it is to be governed and operated.

Post-tax – Paycheck contribution made to a retirement plan after taxes have been paid on the amount.

Pre-Tax – Paycheck contribution made to a retirement plan prior to taxes being paid on it.

Prime Rate – Interest rate commercial banks charge their best clients -- generally large corporations. Many consumer loans, such as mortgages, automobile and credit card loans are tied to the prime rate.

Principal – Money contributed to a financial account, such as a 457(b) or 401(k) plan.

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Qualified Domestic Relations Order (QDRO) - Divorce judgment, decree or order that relates to the provision of child support, alimony payments or marital property rights. This judgment may include a spouse, former spouse, child or other dependent of the employee, and may affect the disposition of or rights to assets in a participant's 457(b), 403(b) or 401(k) plan account.

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Rate of Return – Percentage of change in an investment, including appreciation or depreciation and dividends or interest, over a given time period. Most rates of return of funds within a retirement plan are expressed on an annual basis (“annualized”), unless stated otherwise.

Reallocate – Process of rebalancing the investment mix of an entire portfolio instead of exchanging one mutual fund at a time.

Rebalance – A strategy to sell investments that have been performing well and invest more into those that have fallen behind – a buy low, sell high approach. It won't change how future contributions are invested and is sometimes referred to as an end-result exchange.

Risk Tolerance – Degree of uncertainty that an investor can handle in regards to a negative change in the value of his or her portfolio.

Roth Contributions – Roth contributions are designated employee after-tax pay that’s contributed to a participant’s 401(k), 403(b) or governmental 457(b) plan account. Subject to certain restrictions, distributions of earnings from the Roth account may be taken tax-free.

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Separate Account – Privately managed investment account that uses pooled money to buy individual assets. It is similar to a mutual fund. However, in a retirement-plan context, while a mutual fund is available to the general public, a separate account is available only to participants of the plan that sponsors it.

Share – Unit of ownership, referring to stocks or mutual funds.

Short Term Redemption Fee – Redemption charge common in mutual funds (especially International funds). It usually lasts for 3, 6, or 12 months from the time shares are purchased and commonly is limited to a small amount (1, 2, or 3%) if shares are sold within that timeframe.

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Tax-Deferral – Pre-tax money invested now to grow tax-free until money is withdrawn, at which point taxes will be assessed. Used to help people save for retirement in both the public and private sector.

Time Horizon – The number of years until a participant retires and/or begins to take distributions from their retirement plan.

Total Return – Return on an investment, including income from dividends and interest. Includes appreciation or depreciation in the price of the security, over a given time period

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Unforeseeable Emergency – A severe financial hardship, as defined by a governmental 457(b) deferred compensation plan. While the plan document may add further criteria, an unforeseeable emergency must be defined in the plan as (1) a severe financial hardship of the participant that results from illnesses or accidents of the participant, their spouse or a dependent, (2) unreimbursable loss of the participant’s property due to casualty, or (3) other similar extraordinary and unforeseeable circumstances that arise as a result of events beyond the participant’s control.

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Voice Response System (VRS or VRU) – Automated phone system that allows you to access your account information, perform account transactions, and request materials. Account access requires a personal identification number (PIN).

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Withdrawal – Also called a distribution, a withdrawal is money taken from a financial account, such as 457(b), 403(b) or 401(k) plan account or an IRA. In most situations, participants of a 457(b) plan who have left employment of the plan sponsor may take distributions from their plan without penalty, regardless of age. Distributions from 401(k) and 403(b) plans made prior to age 59½ may be subject to a tax penalty

Withdrawal Schedule – Plan where a fixed dollar amount or percentage is redeemed from a retirement account at regular intervals (monthly, quarterly, etc.). This plan is popular with retirees who will have a certain amount redeemed from a mutual fund or retirement plan on a regular basis, while keeping their remaining assets in the fund or plan.

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