1. security security is defined as the “state of being free from danger or injury.” it can also...

SecuritySecurity is defined as the “state of being free from danger or injury.” It can also be defined as “defense against financial failure; financial independence.”

To that point, Hendricks Holding Company and its portfolio companies want our employees to have financial independence and be free from danger or injury in their financial future. That is why we offer our 401(k) program, and the opportunity to defer Pre-Tax and Roth dollars.

In this book you will find the answers you need to get started in our 401(k) program, as well as some important things to consider as you make your investment choices.

If you need more information, please feel free to reach out to Alliance Pension Consultants at (800) 406-4015, your local HR team, or me at (608) 713-4295 or [email protected].

Thank you for all you do for us!

Anne C. Pesik, SPHR, SHRM-SCPManager – Human ResourcesHendricks Holding Company

Table of ContentsImportant Numbers and Contacts……....3Eligibility……………………………………………..3Types of 401(k)s………………………………….4Enrollment…………………........................

..5Mid Year Changes……………………………..11Loans………………..…………………..………….11Hardships………………………………..………..12

Additional ResourcesAdvice to Consider…………………………….

13Glossary…………………………………………….23

2

Please remember: This book is meant as a guide only.

If you have specific questions, please see your local HR department or contact the benefit vendor directly.

For a copy of the Summary Plan Description for this plan please see www.hendricksholdingbenefits.com or the SPD book available from your local HR team. You may also retrieve a copy of the SPD on www.alliance-plan.com under Documents & Reports / Forms & Notices.

3

Alliance Pension Consultants• Customer Service: (800) 406-4015

• Please have your Social Security Number ready

• www.alliance-plan.com • You will be required to set up an account

Financial Advisor: Brett Jacobs• Phone: (630) 282-1777• Email: [email protected]

Plan Administrator: Anne Pesik• Phone: (608) 713-4295• Email: [email protected]

Contacts

EligibilityUnless stated otherwise by your local HR team, all non-union employees of Hendricks Holding company and its portfolio companies are eligible for 401(k) deferrals on 1st of month after 90 days of service.

Your company may make employer matching contributions based on a specific percentage of your deferrals. The Summary Plan Description shows the type of matching contribution your company has selected. You may obtain additional information on the matching formula through your HR department.

4

Types of 401(k)sThe Hendricks Group 401(k) Plan offers two types of 401(k) salary deferral accounts: Pre-Tax and Roth. Listed below are the differences between the two. Please note: company match will be calculated on a combination of your Pre-Tax and Roth contributions but will be distributed as a Pre-Tax amount only.

Pre-Tax 401(k) Roth 401(k)

Contributions Employee election made with before-tax dollars

Employee election made with after-tax dollars

Maximum Election

Contribution (2015)

$18,000 if under age 50$24,000 if age 50 or older

(combined between Pre-Tax and Roth)

Account Grows

Tax Free Tax Free

Employer Match

Made with pre-tax dollars to accumulate in the same account

Made with pre-tax dollars to accumulate in a separate

account and will be taxed as income at withdrawal

Distributions (after age 59

½) Taxed Tax free if you’ve held the

account for 5 years or more

Required Distributions

Must begin no later than age 70 ½, unless still working and not a 5% owner

5

EnrollmentTo enroll for the first time in the Hendricks Group 401(k) Plan please follow these directions.

In your Internet browser, go to www.alliance-plan.com.

Click on “New Web User?/Enroll Now!”

6

Step 2: Enter the requested information:

• Social Security Number

• Birth Date

• Zip Code

Click “Submit”

Step 3: Re-enter your Date of Birth to confirm

Click “Submit”

7

Step 4: Choose 3 alternate identification questions and answer them

Click “Submit”

8

Step 5: Enter all requested personal information

Click “Next”

9

Step 6: Enter information for your beneficiary

Click “Next”

Step 7: Change “Action” to “Change” and enter new contribution amount

Click “Next”

10

Step 8 : Click on the source you want to allocate – if you want all money to go to the same allocations choose “All Sources”. Enter your desired allocation percentages.

Click “Next Step”

Step 9 : You will receive a confirmation screen of everything you’ve just entered. If this is correct you’re done!

More on Alliance-Plan.comCheck out www.alliance-plan.com for more information including:

• Enrollment Kit & Presentation

• Retirement Needs Calculator

• Managing your contributions

• Forms & Plan Documents

• Video Tutorials

• Market Insights

• Loan requests

11

Mid Year ChangesThe 401(k) plan is not like other benefit plans available through Hendricks Holding Company. You may change your elections and contribution rate at any point in time.

Please keep in mind that the best strategy to have a secure future is to “stay the course” and keep your contribution rate steady. Also, please remember that election changes are processed outside of the market trading day, so you won’t see an immediate change in real time after entry.

401(k) LoansThe Hendricks Group 401(k) Plan allows for loans to be taken from your 401(k) deferrals.

Loans are:

• Capped at 50% of your plan available balance

• Required to have a minimum balance of $1,000

• Capped at two loans at any one time

• Paid back with interest

• Subject to an origination fee of $180

Please contact Alliance Pension Consultants at (800) 406-4015 or your local HR team for more information on a 401(k) loan.

12

401(k) HardshipsWhat is a 401(k) financial hardship provision?Your 401(k) plan, through its financial hardship provision, allows an employee to withdraw money from their 401(k) plan for financial hardships. While each person may have their own definition of what a financial hardship is for them, federal law and your plan document define financial hardship as it relates to your 401(k) plan. Any violation could result in severe tax penalties for the person taking the illegal financial hardship withdrawal, and even possible disqualification of the entire 401(k) plan.

What specific events qualify as a “financial hardship?” Assuming your plan utilizes the safe harbor design, six events that qualify under IRS rules as a financial hardship include:*College education (you or your dependents) *Medical expenses (you or your dependents)*Purchase of a primary home *Prevent foreclosure on your primary home *Funeral expenses *Natural catastrophe

Will I have to provide supporting documentation of my hardship?Most likely, yes. The documentation must show expenses that are incurred and explicitly fit one of the listed qualifying events. Examples of these include but are not limited to copies of escrow instructions, unpaid medical bills, copies of college tuition payments, and eviction/foreclosure notices.

Are there any tax consequences for taking a financial hardship withdrawal?You may owe at least three and possibly four different types of taxes on your financial hardship, including federal and state income tax, a 10% federal excise (penalty) tax, and possibly a state excise (penalty) tax. Your financial hardship distribution must be added to your annual income for federal and state income reporting purposes. Failure to do so could result in further penalty taxes by the IRS. You are strongly advised to consult a tax professional regarding these issues.

How much may I withdraw?Your withdrawal, if approved, will be limited to the total of the documentation furnished plus the 10% federal excise (penalty) tax. For example, if you qualify for a $10,000 financial hardship withdrawal, you may withdraw $10,000 + $1,000 that will be used to pay the 10% federal excise (penalty) taxes. Most plans only allow your vested account balance to be withdrawn for a financial hardship. Stated differently, any employer contributions to your 401(k) plan that are not yet vested are not eligible for a financial hardship withdrawal.

May I still participate in the 401(k) plan after taking a financial hardship withdrawal?You will be suspended from participating (making your own contributions) in the 401(k) plan for six months after receiving a financial hardship withdrawal.

What is the process to request a financial hardship withdrawal?Before an employee may request a financial hardship withdrawal, you will be required to exhaust all financial avenues available to you. That means that you must attempt to obtain a loan through commercial means, and if you are unsuccessful on the commercial front, via the loan provision in the 401(k) plan. If you already have an outstanding loan, or you do not qualify for a loan under the terms of your 401(k) plan, you may then pursue a financial hardship withdrawal. The process to complete a financial hardship application varies with each plan. Please check with Human Resources to acquire any necessary direction or documents necessary to acquire a hardship distribution.

Is there anything else I should consider before taking a financial hardship withdrawal?A financial hardship withdrawal should be the last resort to obtain money. Again, you must first consider other methods of borrowing, including bank loans, credit card cash advances, equity home loans, and even the 401(k) loan provision. Please consult your tax advisor or financial planning professional for advice about the most cost effective way to access money that you need for purposes of meeting your financial hardship needs.

13

Advice to ConsiderNo one can make decisions about the best financial plan for your future except for you. However, here are some tips to help you make your decisions.

Are You Saving Enough?According to the U.S. Commerce Department, the net national savings rate is at

its lowest level since the Depression, and it’s falling: it’s now an astonishing -2.5% of national income.

Maximize Your 401(k) Deferrals!To ensure a secure financial future, you should defer the maximum amount to your 401(k). If you are unable to do this today, increase your deferrals in small amounts every six months, or with every pay increase. Also, rebalance your account often and keep an eye on your asset allocation, or rather, how you invest your money. The chart below illustrates how much you might need to defer according to your income and age (the sample below assumes you currently have no retirement assets.) If you are not deferring enough, contact the HR Department to find out how you can increase your deferral amount, as well as the dates you are allowed to do so.

AGEINCOME 20 25 30 35 40 45 50 55 60 65

25,000 8.1% 10.1% 12.6% 15.9% 20.2% 26.1% 35.0% 50.4% MAX MAX30,000 8.2% 10.2% 12.8% 16.1% 20.5% 26.6% 35.8% MAX MAX MAX35,000 8.3% 10.3% 12.9% 16.3% 20.9% 27.2% 36.8% MAX MAX MAX40,000 8.3% 10.3% 12.9% 16.4% 20.9% 27.3% 36.9% MAX MAX MAX45,000 8.3% 10.4% 13.1% 16.6% 21.2% 27.7% MAX MAX MAX MAX50,000 8.4% 10.6% 13.3% 16.9% 21.7% 28.4% MAX MAX MAX MAX55,000 8.5% 10.6% 13.4% 17.0% 21.8% MAX MAX MAX MAX MAX60,000 8.5% 10.6% 13.4% 17.0% 21.8% MAX MAX MAX MAX MAX70,000 8.5% 10.7% 13.5% 17.2% MAX MAX MAX MAX MAX MAX80,000 8.6% 10.8% 13.6% 17.3% MAX MAX MAX MAX MAX MAX90,000 8.6% 10.9% 13.7% MAX MAX MAX MAX MAX MAX MAX

100,000 8.7% 11.0% 13.9% MAX MAX MAX MAX MAX MAX MAX120,000 8.8% 11.1% MAX MAX MAX MAX MAX MAX MAX MAX150,000 8.9% MAX MAX MAX MAX MAX MAX MAX MAX MAX

No

Re

tire

me

nt

Ass

ets

(*Assumes a 7.5% annual rate of return; inflation at 2.8% and a retirement age of 67. This table is meant as a guideline and is for illustrative purposes; it makes assumptions that may or may not represent the future.

“MAX” means you should be deferring the maximum amount.)

Ask For Help

The great part about saving for your future is that you don’t have to have to “go it alone.” Talk with a professional financial planner for a strategy that’s right for you.

14

The Importance of Asset Allocation and Diversification

Asset allocation refers to how you mix your investments across the various types of funds or asset classes (e.g., the mix of stocks, bonds and cash in your portfolio). It might surprise you to know that your asset allocation is what ultimately drives the earnings your portfolio achieves!

Asset Allocation Drives ReturnResearch shows that how you allocate your investments across asset classes determines more than 90% of your investment return. In other words, it’s more important to have the right mix of stocks, bonds and cash than to pick Stock Fund A over Stock Fund B. The specific investments you choose, and when you buy and sell – not to mention plain ‘ole luck – don’t have very much to do with overall performance. Rather, these factors are part of the investment manager’s job.

Diversification Lowers RiskAsset allocation not only drives performance, it also helps you reduce risk. You know the old saying, “don’t put all your eggs in one basket?” Well, investing in different funds within each asset class is called diversification. This is the single most important thing you can do to manage investment risk. Diversifying also increases likelihood of achieving long-term goals and enhances potential for long-term gain.

Diversification among Asset Classes“Mixing” your portfolio across asset classes makes you less dependent on performance and risk of any single asset class. Effective diversification requires combining assets that behave differently under various economic or market conditions. Moreover, investing in assets that have dissimilar return behavior may insulate your portfolio from major downswings.

Investing for the Long-TermRemember that for most of us, investing for retirement is a long-term proposition. So don’t overreact to the short-term fluctuations in the market. Stocks go up and down but over the long term, they provide rewards for accepting this inherent risk. Next, don’t forget to rebalance your portfolio! Reassess your situation periodically to determine if personal circumstances warrant a shift in your approach. Remember, diversification and asset allocation does not guarantee a profit, nor do they eliminate the risk of loss of principal.


15

Are you on track to enjoy your retirement? As you begin to think about your retirement, you might want to consider the following planning steps to help ensure a successful transition to your new lifestyle.

YEARS

BEFORE RETIREMENT

Build up your retirement savings: One rule of thumb is to have 1.5 times your annual salary in retirement savings when you are between the ages of 35 and 45; 3 times that amount for ages 45 to 55 range; and 6 times that amount if you are age 55 and older.

Increase tax-deferred contributions: Take advantage of provisions that allow those persons age 50 and older to contribute an additional $1,000 annually to individual retirement accounts and $5,500 annually to 401(k) plans.

5 YEARS

BEFORE RETIREMENT

Ask yourself the big question: “In five years, will I have saved enough money to retire?” If your answer is no, consider making a list of the reasons why and start evaluating each one to see where you can make changes to help achieve your retirement goal.

Pay off any debt: Start small and work up to higher balance debts.

MAKE SURE YOU ARE ON TRACK GET YOUR FINANCES IN ORDER

10

3 YEARS

BEFORE RETIREMENT

CREATE A REALISTIC BUDGET Create a budget: As you near

retirement, you’ll need a more precise measure of the amount of income you’ll need. Look through your current expenses and note what will change when you retire, such as where you’ll live, taxes you’ll pay, any travel expenses, health care needs and

other things that might affect how you live in retirement. Start practicing your new lifestyle a few years before retiring, while there’s room for error with potential expenses.

1 YEAR

BEFORE RETIREMENT

TIE UP THE LOOSE ENDS Examine future insurance

needs: You may want to consider purchasing a long-term care insurance policy to protect against one of the biggest potential threats to your retirement savings. If your mortgage is paid off and your kids are established in their own careers, you may no longer need life insurance. You may also consider any discounted car insurance options once you’re no longer driving to work every day.

RETIRED PROCEED AS PLANNED Set up accounts: Make fewer trips to the bank by setting up automatic deposit of your Social

Security and retirement account checks. Finalized important documents: Have your lawyer and/or financial planner review your will,

trust, powers of attorney, beneficiary designations and investment plans to make sure that you and your beneficiaries are appropriately protected.

This memo is an adaptation of Ivy Funds Retirement Resources, A Pre-Retirement Checklist.

Advice to ConsiderNo one can make decisions about the best financial plan for your future except for you . However, here are some tips to help you make your decisions.

16

With a 401(k) plan loan, you pay yourself back the amount plus interest. But the true cost can be shown with the loss in your retirement savings. You lose money when

you borrow from your retirement account for several reasons:

Borrowing Against Your 401(k): More Costly Than You Think

Participating in the Hendricks Group 401(k) plan is a smart (and important) decision. Smart because you are putting away small amounts today for a comfortable retirement later.

As your account begins to grow, it may be tempting to “dip into” your retirement savings by taking a loan against your 401(k) plan to pay your annual taxes, repair a leaking roof, catch up on your everyday pile of bills, and so on. While the decision to take a plan loan is yours to make, we want to make sure that you consider what it will really cost.

You lose making money on the earnings, or compounding of those earnings. You repay the loan with after-tax dollars. There is an origination fee. Most employees decrease the amount they are contributing in order to compensate for the loan

payment. You may not be paying yourself back the same amount you would have earned if you left the

money invested (you pay yourself 7% but could make 10%).

To further illustrate the costliness of taking a plan loan, consider the following hypothetical example*: Jane took a $10,000 loan at 7% interest from her retirement account; her account balance before the loan was $20,000. She previously made contributions of $150 per paycheck (including the employer match). Because she had to repay the loan, she decreased her contribution to $50. Additionally, prior to the loan, she was earning a 10% return. Now she will repay the loan over five years. If you take into account loss of interest, compounding, and tax on repayments, the actual 401(k) loan is costing Jane 13.77%! And don’t forget about those decreased contributions, which can add up to hundreds of thousands of dollars over many years.

*This example is hypothetical and intended for illustrative purposes only.

Advice to ConsiderNo one can make decisions about the best financial plan for your future except for you . However, here are some tips to help you make your decisions.

17


Monthly deferral Unit Price Number of Units$100 $10 high 10.0$100 $7 14.3$100 $6 low 16.7$100 $8 12.5$100 $9 11.1

Total: $500 $40 64.6

Lump Sum Dollar Cost AverageTotal Invested $500 $500

Average Unit Cost $10 $7.74 ($500/64.6)Number of Units 50 64.6

Dollar Cost Averaging: Take Advantage of Volatility

Any long term investment plan will most likely have to weather market ups and downs. One technique to “stay the course” is Dollar Cost Averaging, or, making periodic investments of the same amount of money in the same stock, regardless of whether the price is declining or ascending. Hypothetically Speaking:Consider the following example using five $100 investments. An investor can accumulate more units at a lower cost than if the $500 had been invested in a single lump sum at the original $10 unit price.

This example is hypothetical and intended for illustrative purposes only. Dollar Cost Averaging does not assure profit and does not protect against loss in declining markets. It involves continued investment regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low price levels.Remember, maintaining a regular investment program and balancing your portfolio to account for a level of risk you find comfortable are important to the overall success of your financial strategies.

18


Increase Your Deferral Percentage Today ...

So you may have more money tomorrow

With much attention being paid to the market and investment gains and losses, it is not uncommon to forget the most important factor when determining if you will have enough to retire your deferral percentage!

Your deferral percentage is the amount you contribute each pay period to your retirement plan.

Ask yourself “When was the last time I evaluated or changed my deferral percentage? Do I know what my target percentage should be?”

Reality is, if your deferral isn’t appropriate, investment selection plays a very minimal role in reaching retirement readiness.

There are a number of tools and resources to help participants examine appropriate deferral percentages and income replacement ratios so you know how much to save today for a meaningful retirement tomorrow. Our plan provider’s website (www.alliance-plan.com) is a good place to start. The guidelines below will also help you get started (and keep going) in the right direction.

How much should I contribute?•With most of us not saving enough, outliving retirement savings is a very real concern. As you set your retirement savings goals, a general rule of thumb is that most retirees will need about 80% of their annual pre-retirement income in retirement.* (source: Employee Benefit Research Institute)

•To ensure a successful financial future, you should defer the maximum amount to your 401(k) plan ($18,000 for 2015; this amount increases to $24,000 for 2015 if you are age 50 or older).

•At the very least, you should contribute enough to be eligible for the company match, if one is offered.

•If you are unable to take these steps today, increase your deferrals in small amounts every six months, or with every pay increase.

Why wait? Go online to www.alliance-plan.com to increase your deferral amount today!

19

Rebalancing Your Portfolio

Example:

Suppose you enrolled in the plan at the beginning of last year and allocated 40 percent of your portfolio to bond funds and 60 percent to equity funds. Further suppose that when you got your year-end statement, it shows that 70 percent of your assets are in equity funds and 30 percent are in bond funds.

To stay within your acceptable risk level (which is what you determined before entering into the plan), you should sell enough equity funds to bring that back to 60 percent of your assets and buy enough bond funds to bring them up to 40 percent of assets.

Investment Direction (after one year in account)

30%

70%

Bonds

Equities

Initial Investment Direction

Investment Allocation After One Year


40%

60%

Bonds

Equities

Equities

Bonds

Example:

Suppose you enrolled in the plan at the beginning of last year and allocated 40 percent of your portfolio to bond funds and 60 percent to equity funds. Further suppose that when you got your year-end statement, it shows that 70 percent of your assets are in equity funds and 30 percent are in bond funds.

To stay within your acceptable risk level (which is what you determined before entering into the plan), you should sell enough equity funds to bring that back to 60 percent of your assets and buy enough bond funds to bring them up to 40 percent of assets.

Investment Direction (after one year in account)

30%

70%

Bonds

Equities


Investment Allocation After One Year


40%

60%

Bonds

Equities

Equities

Bonds

As a participant in the company’s retirement plan, you are already serious about saving for your future. But whether you are retiring in a few weeks or a few decades you need to protect your investment. A healthy way to do this is to rebalance your portfolio. What is rebalancing?Rebalancing is simply readjusting your portfolio back to the original asset allocation that took into account your risk tolerance and your time horizon. Put another way, rebalancing forces you to adhere to your investment strategy. You rebalance by selling assets that make up too large a proportion of your portfolio and using the proceeds to buy back those that have become too small a proportion. The net effect is to “sell high and buy low.” Ultimately, regular rebalancing increases the overall return of your portfolio over time.

Keeping in-checkFinancial planners recommend you rebalance at least once a year and no more than four times a year. Consider this a good opportunity to evaluate if your investment strategy is still in-line with your original goals. The start of a new year also means that you can contribute even more to your retirement account so consider increasing your deferral amount to further grow your nest egg.

If you have questions or require further assistance, please contact your local HR team or call Alliance Pension Consultants at (800) 406-4015.


20


Question: Is it too late to start saving for retirement?

Answer: No! It’s never too late to start saving.

Perhaps you haven’t started saving as early as you would have hoped, but as the old adage goes, “better late than never.” It’s true. You can make good progress on reaching your savings goals by the time you retire but you have to start as soon as possible.

Here are a few reasons why enrolling in your employer’s retirement plan is a great idea:

•It’s Easy & Convenient. Your contribution is automatically deducted from your pay and deposited into your account. What’s more, your employer may match your contributions, which is literally free money!

•Tax-Deferred Savings. Money is put into your retirement account before federal (and most state) taxes. That means you don’t pay taxes on it until you take the money out.

•Portability. No matter where your career takes you, the money you put into the plan is yours which means changing jobs or moving across country won’t hinder your progress.

•You’re in Control. You decide how much to contribute. Start small and try increasing a little bit every year (try to time your increases around your annual pay raise). Little by little your balance will grow and you will be closer to your goal.

21


WHAT HAPPENS TO MY 401(K) WHEN I LEAVE THE COMPANY?

When you leave an employer, you generally have four options for handling the money in your retirement plan:

1. LEAVE THE MONEY IN YOUR FORMER EMPLOYER’S PLAN. (Note: be aware of forced distribution options for balances less than $1,000).

2. TRANSFER THE MONEY TO YOUR NEW EMPLOYER’S PLAN. Check with your new employer, as each plan has its own rules for what assets it will accept.

3. TAKE THE MONEY AS CASH. The downside is that you’ll pay substantial taxes, including a 10% penalty tax if you’re under age 59½ not to mention putting your future retirement needs at risk. Cashing out prior to retirement is highly discouraged.

4. ROLL OVER THE MONEY INTO AN INDIVIDUAL RETIREMENT ACCOUNT (IRA). With an IRA tax benefits are preserved (i.e., taxes on your earnings are deferred until withdrawals taken at retirement).

Receiving your money back from the Hendricks Group 401(k) Plan upon leaving the company is easier than you think! You’ll automatically be sent distribution paperwork upon termination and if you choose to take your money out you’ll only have to fill out and return the paperwork. We’ll handle the rest!

22

If You Think … Then Consider …

“I don’t make enough money.”Your company match and tax savings. Your contribution is taken out before taxes, so the amount you pay taxes on is lower. Plus, your employer may make a matching contribution.

“I’m too young to worry about it right now; time is on my side.”

The magic of compounding. When you give your money more time to accumulate, the earnings on your investments—and the annual compounding of those earnings—can make a big difference in your final return.

“I’m too old, it’s too late.”It’s never too late. If you’re 50 years old or older, you can contribute a catch-up deferral (check your plan limits for the amount, as it is subject to change each year). You still have time to put your money to work for you.

“Stocks, bonds … it’s too confusing!”

There is an easier way! Your plan may have the option to invest your money in a “pre-set” asset allocation or lifestyle model that takes into account your expected retirement date or age. It’s a “set it and forget it” approach and works well for the less sophisticated investor.

“I’ll still have my Social Security.”Don’t count on it. A dwindling workforce means fewer tax dollars down the road. In just a few years there will be 2 workers per every 1 retiree.

“I just don’t know how to get started.”

Help is available. Understanding how to begin saving for retirement might be overwhelming, but it’s easier than you think. Contact human resources for enrollment instructions or contact Alliance Pension Consultants at (800) 406-4015 for more information.

No More Excuses! Participate in the retirement plan

today.


23

GlossaryAccrued Interest– The amount credited to a bond or other fixed-income security between the last payment and when the security is sold, or any intermediate date. The buyer usually pays the seller the security’s price plus accrued interest.

Actual Deferral Percentage (ADP) – This is the proportion of a plan participant’s compensation that is contributed to a 401(k) plan as an employee elective deferral.

Annual Defined Contribution Limit– The maximum 401(k) contribution limit that applies to all employee and employer 401(k) contributions in a calendar year. This limit is the lesser of 100% of the employee’s total pre-tax compensation or a fixed amount that can change annually.

Appreciation- Increase in the value of an investment over time

Asset Allocation Fund - A common trust fund or mutual fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities and real estate stocks. This gives small investors far more diversification than they could get allocating money on their own.

Asset – A resource that has economic value to its owner. Examples are: cash, accounts receivable, inventory, real estate, and securities.

Beta – A measure of a stock’s risk relative to the market. The market’s beta is always 1.0; a beta higher than 1.0 indicates that, on average, when the market rises, the stock will rise to a greater extent, and vice versa when the market falls. A beta lower than 1.0 indicates, that on average, the stock will move to a lesser extent than the market. The higher the beta the greater the risk.

Bond – A certificate of debt issued by a company or the government. Bonds generally pay a specific rate of interest and pay back the original investment over a specified period of time.

Book Value Per Share – The accounting value of a share of common stock. It is determined by dividing the net worth of the company (common stock + retained earnings) by the number of shares outstanding.

Capital Gain – An increase in the value of a capital asset such as common stock. If the asset is sold, the gain is “realized” capital gain. The capital gain may be short term (less than 1 year) or long term (1 year+)

Catch Up Provision – The provision that allows employees who are at least 50 years old to make higher annual contributions in the years prior to retirement.

Cliff Vesting – A 401(k) plan that vests 100% of employer contributions after a specified number of years of service.

Common Stock – An investment representing ownership in a company

Compounding – The ability of an asset to generate earnings that are reinvested and generate their own earnings (earnings on earnings)

Contingent Beneficiary – Person who stands second in line, behind the primary beneficiary, to inherit assets of a retirement plan.

Current Ratio - Current assets, including cash, accounts receivable and inventory, divided by current liabilities including all short-term debt. A rough measure of financial risk. The smaller the ratio the greater risk of credit failure.

24

Glossary (cont.)

Depreciation – Decrease in the value of an investment over time

Direct Rollover – A tax-deferred transfer of assets from one qualified retirement plan to another qualified retirement plan or IRA. The transfer is made without funds being sent directly to the participant.

Distribution and Withdrawals – When money is drawn from a 401(k) plan, the withdrawal is a distribution. 401(k) assets can be withdrawn without penalty at age 59 ½. Employees are required to start taking distributions at age 70 ½.

Diversification – The practice of spreading risk by investing a number of securities that have different return patterns over time. When one investment is yielding a low or negative rate of return in a diversified portfolio, another investment may be enjoying positive or above-normal returns.

Dividend – Payments by a company to its stakeholders. A dividend is usually a portion of the profits. Payment of dividends on common stock is usually discretionary.

Dollar-Cost Averaging – A process of buying securities at regular intervals and a fixed dollar amount. When prices are lower, the investor buys more shares. When prices are higher the investor buys less shares. Over time, this typically results in a better average price of all units purchased.

Earnings per Share – The net income of the firm divided by the number of common stock shares outstanding.

Employer Matching Contribution – the amount, if any, that the employer contributes to the 401(k) account.

Expected Return – The average of a probability distribution of possible returns

Expense Ratio – The ratio of total expenses to net assets of a mutual fund. Expenses include management fees, 12(b)1 charges, if any, the cost of administrative mailings. The ratio is listed in a fund’s prospectus. Expense ratios may be a function a fund’s size rather than its success of controlling expenses.

Fiduciary – An individual or institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them. A fiduciary is to act solely in the interest of the plan participants and their beneficiaries.

Hardship Withdrawal – An in-service distribution from the plan which is made because the participant has suffered severe financial difficulty or an extraordinary event as defined by the plan document.

Income Fund – A common trust fund or mutual fund that seeks to mirror general stock-market performance by matching its portfolio to a board-based index, most often the S&P 500.

Index – The net income of the firm divided by the number of common stock shares outstanding.

In-service Withdrawal – A withdrawal from a 401(k) account by a participant who remains employed. In-service withdrawals are severely restricted by law.

Interest – What a borrower pays for use of the money. This is the income you receive from a bond, note, certificate of deposit or other form of IOU.

25

Glossary (cont.)

Investment Adviser – A person who manages assets, making portfolio composition and individual security selection decisions, for a fee, usually a percentage of assets invested.

Investment Risk – This is the risk that an investment may not generate the desired returns over time, and may even result in the loss of any initial capital invested

Lifestyle Fund – A mutual fund that maintains an asset allocation based on the expected retirement age of the investor; generally, the investor’s portfolio will be shifted into less-risky assets as s/he grows older, or closer to the time when s/he wants to withdraw the investment.

Lump sum – The distribution, in a single payment, of a participant’s entire vested accrued benefit under the plan (or what remains of the participant’s vested benefit at the time of the single-sum distribution)

Market Risk – The volatility of a stock price relative to the overall market or index as indicated by beta.

Matching Contribution – Employer contributions that are made on account of elective deferrals or employee after-tax contributions.

Mutual Fund – An open-end investment company that buys back or redeems its shares at current net asset value. Most mutual funds continually offer new shares to investors.

Net Asset Value – The current market worth of a mutual fund share. Calculated by taking the funds total assets, securities, cash, and any accrued earnings deducting liabilities and dividing the remainder by the number of shares outstanding.

Odd Lot – A transaction involving fewer shares than in a “round” lot, which for most stocks is 100.

Participant – An employee who is eligible to either make contributions to the retirement plan or to share in employer contributions the plan.

Participant Directed Account – A plan that allows participants to select their own investment options.

Plan Administrator – The individual, group, or corporation, as responsible for day to day operations.

Plan Document – A written instrument under which the plan is established and operated.

Portability – This occurs when, upon termination of employment, an employee transfers pension funds from one employer’s plan to another with no penalties.

Price-Earnings Ratio – Market price per share divided by the firm’s earnings per share. A measure of how the market currently values the firm’s earnings growth and risk prospects.

Prospectus – The written statement that discloses the terms of a securities offering or a mutual fund. Strict rules govern information that must be disclosed to investors in the prospectus. You should always read the prospectus on any mutual fund before investing.

26

Glossary (cont.)

Qualified Default Investment Alternative - An investment option a plan sponsor may use for 401(k) plan contributions in the absence of direction from a plan participant.

Qualified Domestic Relations Order – A judgement, decree, or order that creates or recognizes an alternate payee’s (such as former spouse or child, etc.) right to receive all or a portion of a participant’s retirement plan benefits.

Qualified Plan – A private retirement plan that meets the rules and regulations of the IRS. Contributions to such plans are usually tax-deductible; earnings on such contributions are always tax sheltered until withdrawal.

Real Rate of Return – The annual percentage return realized on an investment, adjusted for changes in the price level due to inflation or deflation.

Return on Equity – A ratio calculated by dividing common stock equity (net worth) at the beginning of the accounting period into net income for the period after preferred stock dividends, but before common stock dividends. ROE tells common stockholders how effectively their money is being employed.

Risk Tolerance – The extent to which an investor will accept risk in the pursuit of a financial reward. The greater the investor’s tolerance, the more risk s/he will accept in order to reach their goal.

Rollover – An employee’s transfer of retirement funds from one retirement plan to another plan of the same type or to an IRA without incurring a tax liability. The law requires 20% federal income tax withholding on money eligible for rollover if it is not moved directly to the second plan or an investment company.

Roth 401(k) - A plan that allows employees to make after-tax contributions. Withdrawals after age 59 ½ are generally tax-free.

Safe Harbor 401(k) – A safe harbor 401(k) is similar to a traditional 401(k) plan, but the employer is required to make a defined contribution for each employee who participates in the plan.

Summary Plan Description – A document explaining the plan in common English to participants.

Target Date Fund – A mutual fund that automatically reduces the risk within its portfolio by resetting the asset mix between stocks, bonds, and cash to be more conservative based on the number of years to a target date.

Total Debt to Total Assets – Short-term and long-term debt divided by total assets of the firm. A measure of the company’s financial risk that indicates how much of the assets the firm have been financed by debt.

Vesting – The period of time an employee must work at a firm before gaining access to employer-contributed pension income. For 401(k) plans, employee contributions are immediately vested, but employer contributions may be vested over a period of several years.

Yield – The amount of interest paid on a bond divided by the price. A measure of the income generated by a bond. A yield is not a total return measure because it does not include capital gains or losses.

.

1. security security is defined as the “state of being free from danger or injury.” it can also...

Documents

pretax dollars

roth dollars

company match

roth account

local hr team

local hr department

roth contributions

account financial advisor