PENSIONS, 401(K)S, 403(B)S, AND KEOGHS
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These terms refer to both specific plans and types of plans.
plan: An employer-sponsored retirement plan that is usually funded by
personal, non-taxable contributions from an employee's earnings as well as by
contributions from the employer. There are limits to how much the employer and
employees can contribute.
? 403(b) plan: A retirement plan for employees in
nonprofit organizations. It invests employee contributions and lets them grow
tax-deferred until withdrawal.
? Defined benefit plan: A type of pension plan in
which the amount paid to the pension holder is determined by a formula.
? Keogh plan (HR-10): A retirement plan for
self-employed individuals or non-incorporated businesses.
? Pension funds: Funds set aside by employers to
provide for their workers' retirements. The establishment and maintenance of
pension funds are regulated.
? Qualified pension plan: A pension plan that meets
Internal Revenue Code requirements for tax advantages, such as deferral of
income taxation on contributions made from earned income, and tax deferral of
? SARSEP: Salary reduction simplified employee
pension. An employee pension, some of the contributions of which are deducted
from the employee's paycheck. The employer also makes contributions. This was
replaced by the SIMPLE-IRA for plans established after 1996.
? SIMPLE: Savings incentive match plan for employees.
A simplified employee pension plan that has low operating costs and reporting
requirements. It can be set up as a SIMPLE 401(k) or SIMPLE-IRA plan. The
SIMPLE-IRA replaces the SARSEP for plans established after 1996.
Annuities are our next subject.