Glossary R-Z
R
reallocation
A change in the existing allocation which affects future contributions. Reallocation is not the same as fund transfer, which affects existing account balances. The preferred term is investment allocation change. A plan participant may reallocate their future contributions online through VantageLink (www.icmarc.org), by phone VantageLine (1-800-669-7400), or by contacting an Investor Services representative (1-800-669-7400). See also “allocation.”
reamortization
Process used to amend loan features other than the dollar amount of the loan.
rebalancing
Transferring money from one or more funds in your account to another in order to maintain consistent asset allocation and risk exposure regardless of market fluctuations.
refinance
Process wherein a participant who has one outstanding loan requests to borrow an additional amount.
reinvestment
The investment of income or dividend income back into the asset from which it was derived. For example, in a mutual fund, dividend income may be reinvested into more shares of the same mutual fund.
repayment frequency
For loans to active participants, the payroll frequency of the employer. For terminated participants, the repayment frequency will be no less frequent than monthly.
restricted spousal rights
In ICMA-RC’s Profit-Sharing Plan, a participant’s spouse is the beneficiary for 100% of the account, unless waived with spousal consent. The participant is not required to obtain spousal consent for any account withdrawals, including hardships, loans, or retirement benefits.
return
Profit or loss on a security or capital investment, usually expressed as an annual percentage rate.
risk
The measurable probability that an investment will lose value, or fail to gain in value. For investment management, risk also may refer to volatility, which is the amount an investment may fluctuate from a long-term trend. (See also: volatility).
credit risk
The chance that the issuer of a fixed-income security will be unable to meet its financial obligation to pay either interest owed and/or repay principal when due.
currency risk
For international investments, the chance that a loss of value will occur due to foreign currency exchange.
inflation risk
Sometimes called “purchasing power risk,” the chance that the value of an asset or income will be eroded as inflation shrinks the value of a country's money.
interest rate risk
The possibility that a fixed-income debt security (bond) will drop in value due to a rise in interest rates.
liquidity risk
The chance that an investor will not be able to buy or sell a security quickly enough, or in sufficient quantity, due to a lack of buying or selling opportunities.
market risk
The likelihood of a measurable fall in the price of a security attributed to overall market movement, as opposed to any company specific news or policy change.
security-specific risk
The chance that a security of a specific company will lose value based solely on factors pertaining only to that company, as opposed to an overall market decline (see “market risk”).
risk tolerance
An investor’s willingness to take the chance that an investment will devalue or will fluctuate in value. The amount of risk an investor is willing to assume is a determining factor in designing an investment portfolio.
rollover
A participant transfers all or part of their assets from one tax-deferred program to another. If tax-deferred funds are not rolled over into a new tax-deferred account, the participant must pay taxes and, in some cases, a penalty. See also “direct rollover.”
rollover, 60-day
A participant who receives a direct distribution has 60 days to transfer the distributed funds into another qualified plan or an IRA. If this is not done, the participant's withdrawal will be subject to ordinary income taxes and, in some cases, penalties.
S
S&P500
See “Standard & Poor’s 500 Index.”
section 415 limits
Section 415 defines annual qualified plan contribution limits for both employer and employee contributions. Effective Jan. 1, 2002, Section 415 sets this limit at $40,000 or 100% of 415 wages.
security
An instrument signifying ownership in a corporation (stock), or a creditor relationship with a corporation or government (bond) or right to ownership.
share
The portion of a fund held by a person which measures the percentage ownership held by that individual. The number of shares owned will increase/decrease based on contributions, fund transfers into/out of the fund and fund redemptions. See also “share value.”
share accounting
Essential to daily cash processing and settlement, share accounting is an efficient way to track business by centrally storing share prices, changing numbers of shares only with transactions and calculating balances when needed. Share accounting is used across the securities industry.
share price
The current worth of a share in a particular fund, calculated by totaling the market value of all securities owned by the fund, plus cash and other assets, subtracting any liabilities and dividing the result by the number of fund shares outstanding. Share prices increase or decrease based on activity in the underlying securities of the fund. Also called “NAV,” “net asset value” or “share value.”
share value
The current worth of a share in a particular fund, calculated by totaling the market value of all securities owned by the fund, plus cash and other assets, subtracting any liabilities and dividing the result by the number of fund shares outstanding. Share prices increase or decrease based on activity in the underlying securities of the fund. Also called “net asset value,” “NAV” or &“share price.”
short-term
Investment with a maturity of one year or less.
simple interest
Interest calculated only on the original principal amount. Simple interest contrasts with compound interest, which is applied to principal plus accumulated interest.
single life annuity
A single life annuity provides you with regular payments for as long as you live. No amounts are payable to your beneficiary upon your death.
small balance withdrawal (457)
457 accounts of less than $1,000 will be distributed to the participant at ICMA-RC’s discretion if certain conditions have been met (can be prior to separation from service). 457 accounts of $1,000 to $5,000 may be distributed to the participant at the request of the participant or employer if certain conditions have been met (can be prior to separation from service). (See “small balance withdrawals” and “de minimus.”)
spousal consent
The required consent by a spouse before a participant may elect to waive a qualified joint and survivor annuity (QJSA) or a qualified preretirement survivor annuity (QPSA) or take a loan from a qualified plan.
stable value funds
Fixed rate funds invest in negotiated stable value contracts issued directly from financial institutions like insurance companies. The funds provide only interest on principal. Stable value contracts may not be sold in the marketplace; therefore stable value funds do not report a market value and do not fluctuate in price.
Standard & Poor’s
An investment services company providing bond ratings, the Standard & Poor's 500 Stock Index, and a wide variety of other investment guides and services. It is a subsidiary of McGraw-Hill, Inc.
Standard & Poor’s 500 Index
A measure of stock price changes based on the performance of 500 selected common stocks. The average takes into account not only the price of the stocks but also the number of outstanding shares. Abbreviated S&P 500, it is a broader market indicator than the Dow, which consists of only 30 stocks.
stock
Stocks represent an ownership interest in the issuing company; the greater the number of shares held, the larger the proportionate ownership. Owners of common stock are entitled to dividends, if any, paid by the company.
stock fund
An investment vehicle with assets primarily in equities. See “equity.”
subadviser
A term used by RC to describe the registered investment advisers who do the actual security selection of and investing for the total return funds of the ICMA Retirement Trust.
T
term certain/joint life annuity
This type of annuity provides you or your joint annuitant with regular payments for as long as you or your joint annuitant live. If you and your joint annuitant should die before the specified period of time (term certain), payments will continue to your beneficiary for the balance of the period. For example, a 10-year term certain/joint life annuity will provide your named beneficiary with regular payments for the remaining 4 years of the 10-year term certain if you and your joint annuitant should die after receiving regular payments for only 6 years.
term certain/single life annuity
This type of annuity provides you with regular payments for as long as you live. If you should die before the specified period of time (term certain), payments will continue to your beneficiary for the balance of the period. For example, a 10-year term certain/single life annuity will provide your named beneficiary with regular payments for the remaining 8 years of the 10-year term certain if you die after receiving regular payments for only 2 years.
toll-free lines
RC offers a number of toll-free telephone Investor Services numbers. Participants performing transactions or requiring assistance in English or Spanish can call Investor Services at 1-800-669-7400 or TDD at 1-800-669-7471. Employers can call the Employer Services Unit at 1-800-326-7272.
total return
A fund’s total return includes change in value of assets due to capital appreciation and loss and income from dividends or interest.
total return funds
Comprised of portfolios of publicly traded securities that can be expected to vary in value over time, as income (dividends or interest) and capital gains and losses (appreciation or depreciation) occur.
Treasury securities
Negotiable debt obligations of the U.S. government, secured by its full faith and credit, issued at various schedules and maturities.
Treasury bills
Short-term securities with maturities of one year or less.
Treasury notes
Intermediate term securities with maturities of one to 10 years.
Treasury bonds
Long-term debt obligation issued with maturities of 10 years or longer.
trustee
The employer is normally the plan trustee for the 401 and 457 plans.
trustee-to-trustee transfer
The transfer of funds in a qualified plan or an IRA directly from one plan’s trustee to another. See “direct rollover.”
R S T U V W XYZ A-H I-Q
U
unforeseeable emergency withdrawal
A strictly defined Internal Revenue Code provision allowing 457 plan participants to withdraw some or all their account assets to cover the cost of the emergency and any tax liabilities incurred by the withdrawal. The emergency must meet criteria determining that it was unforeseeable and has created severe financial hardship. (See “emergency withdrawal.”)
V
VantageLine (VL)
Our free 24-hour automated phone service available to all ICMA Retirement Corporation participants to check current account balances, obtain current statements, execute fund transfers and investment allocation changes, obtain Internet (Account Access) passwords, or obtain literature. The toll-free number is 1-800-669-7400.
VantageLink
ICMA-RC’s web site at www.icmarc.org, which supports participant Account Access for checking balances and making fund transfers and reallocations.
vesting
The extent to which a participant has a right to contributions and benefits derived from plan contributions made by the employer.
vesting schedule
The rate at which employer contributions (made on behalf of participants) become an asset of the participant. This schedule is designated by the employer in the adoption agreement.
voluntary after-tax
A contribution source which, if selected by employers in their 401 Adoption Agreements, allows participants to have up to 25 percent of their earnings contributed to the plan on an after-tax basis.
W
waiver of joint and survivor annuity
Form on which married 401(a) plan participants and their spouses acknowledge they are not selecting the federally required qualified joint and survivor annuity payment option. This form must be completed to select any other distribution option. (See also “qualified joint and survivor annuity.”)
XYZ
yield
Generally, the return of an investor’s capital investment. For bonds, the coupon rate of interest divided by the purchase price, is called the current yield. Also, the percentage of the current stock price that is paid in the form of dividends. See also “earnings.”