Page 22 - 000 Complete EBook - 403(b) & 457(b) Test 12202017 1

Glossary of Terms

ACGI - Advanced Consulting Group, Inc. - Plan Administrator for your employer

AFC - Average Final Compensation - The average of an employee's highest three years of salary earned during
current employment
Annuity - This is a contract between an insurance company and an individual that generally guarantees a lifetime
income option, usually at retirement, in return for either a lump sum or periodic premium payments. See fixed
annuity and variable annuity.

ATRS - Arkansas Teacher Retirement System

COLA - Cost of Living Adjustment - An annual retirement income benefit increase (currently 3% under ATRS defined
benefit plan)

Defined Benefit Plans - Provides specified retirement benefits per Internal Revenue Code Section 414(j)

Defined Contribution Plans - Employer makes a specific contribution on behalf of each participant per Internal Revenue
Code Section 414(i)
Fixed annuity - This is an annuity that guarantees a minimum return for a specific period, as specified in the
contract with the insurance company.

Fixed Indexed Annuity - A type of fixed annuity with interest crediting options that include interest tied to a
particular market index. Indexed annuities are NOT equities and are not invested in securities. Their results
commonly include a fixed interest account and other options tied to a market index, such as the Standard & Poor's
500 Index (S&P 500).

EGTRRA - Economic Growth and Tax Relief Reconciliation Act of 2001

ERISA - Employee Retirement Income Security Act

IRC Sections 403(b), 403(b)(7), 401(a), 401(k) 402(g), 415, 457(b) - Sections of the Internal Revenue Code
SRA - Salary Reduction Agreement (form) - A written agreement between an employee and the employer used to establish
or change salary deferrals to a 403(b) or 457(b) account

SSA - Social Security Administration
TAX DEFERRED (tax deferral) - Income placed in a tax deferred account defers taxes on any gains or interest until
taken from the account. Taxes are thus deferred allowing additional interest to be earned on the deferred taxes. This is
a major benefit of traditional 403(b) and 457 plans, it allows funds within the plan to grow without being reduced
each year by taxes. Taxes are paid at ordinary income tax rates when distributions begin at retirement.

TAX SHELTER - Deferrals into a tax shelter requires no income tax to be paid at time of deferral on the contribution.
Taxes will be paid on the full amount at retirement or distribution including gains. Death benefits are fully taxable until
the future tax liability is paid in most cases.

TDROP - Teacher Deferred Retirement Option Program

TRUST - Section 457(b) Small Business Job Protection Act requires that a Trust or Custodial Account be established to
hold the assets of employees deferrals for the exclusive benefit of Plan Participants and their Beneficiaries.

TSA - Tax Sheltered Account - An account that qualifies under Internal Revenue Code Section 403(b) or 403(b)(7) for
salary deferrals by public education employees
Variable annuity - This is an annuity (contract with an insurance company) in which the performance of
investments in a subaccount determines the return.

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