403(b) Tax Deferred Savings Plan Glossary of Terms

An insurance contract qualified to operate under Code Section 403(b)(1), under which certain benefits are payable to the annuitant (the participant). Annuities under the Plan may offer fixed accounts with guarantees of both principal and interest; and variable investments with no guarantees. Annuity contracts may offer a variety of benefit payment options.

A Provider holding a current contract with the Commonwealth of Massachusetts to provide 403(b) accounts under the Plan. Contract Providers may accept new enrollments, receive current contributions, receive intra-plan transfers, accept rollover amounts, make loans and hardship withdrawals, and make all forms of distributions. Contract Providers are “Payroll Slot Providers”.

A mutual fund account qualified to operate under Code Section 403(b)(7). These accounts offer variable investments with no guarantees. Custodial Accounts offer a variety of benefit payment options.

The defaulted loan balance of a participant who has not met a trigger event to distribute funds from the plan to pay-off the defaulted loan. Once a trigger event has been met, the defaulted loan balance is distributed from the Plan and taxable to the participant.

A loan from the Plan where a scheduled repayment has been missed, and not made within the allowable “cure” (grace) period. The grace period ends with the last day of the calendar quarter following the date of the missed repayment.

Existence of a defaulted loan, that has not been paid-off prohibits the participant from obtaining another loan.

Any payment from a participant’s account under the Plan to either the participant or their beneficiary. Distributions are normally payable upon the following events: termination of employment with the Commonwealth (not just your department), attainment of age 59 ½ (even if still employed), upon becoming disabled, upon the participant’s death. Hardship Withdrawals are also distributions from the Plan.

Employee, voluntary after taxed contribution under the Plan.

Employee, voluntary tax-deferred contribution under the Plan.

A transfer of Plan assets from one account with a Provider to another account with a different Provider. Only Contract Providers may accept exchanges into the Plan. No exchanges may be made to non-Contract Providers.

An exchange of accounts between Contract Providers under the Plan. No Employer Authorization is required, to the extent the Plan’s Contract Providers acknowledge the other Providers.

An agreement between the Commonwealth and a Provider to share certain information about participants in order to ensure the accurate administration of the Plan’s assets. Non-contract providers must hold a valid ISA in order to accept exchanges into their products. This is not possible under the Plan because only Contract Providers may accept exchanges of Plan assets. The Commonwealth is not compelled to maintain ISAs with Contract Providers because, as Payroll Slot Providers, they and the Commonwealth are deemed to share information with each other.

Is a Provider eligible to receive current contributions under the Plan. These are our Contract Providers.

Is either an insurance company (annuities) or an investment company (mutual funds) that holds plan assets in their product(s).

Is the tax-free movement of an eligible distribution from the Plan to an eligible account, either an Individual retirement account (IRA) or another employer’s plan. Eligible distributions are typically single sum payments, or a stream of generally equal payments for a period of less than ten years.

Internal Revenue Service (IRS) rules governing the administration of Hardship Withdrawals, which when followed, ensure compliance on the part of the Plan Sponsor. The Commonwealth’s Section 403(b) Plan is intended to operate in compliance with this Safe Harbor. This means that participants’ needs must meet one of the seven reasons noted by the IRS: they must utilize all loans available from the Commonwealth’s plans and suspend their contributions for six months.

An agreement (contract) between the Commonwealth and an eligible employee to reduce the employee’s pay by a certain amount, and remit that amount to a Contract Provider’s account on behalf of the employee.

Is the transfer of a participant’s assets under one employer’s 403(b) plan to that of another employer. These are typically encountered when one employer assumes control of another, and assets are consolidated in the controlling employer’s plan.

The Section of the Internal Revenue Code allowing the tax-deferral of certain amounts of compensation for employees of Eligible Employers. Sub section 403(b)(1) describes annuity contracts that may be made available to employees under a Section 403(b) plan. Sub section 403(b)(7) describes custodial accounts (mutual funds) that may be made available to employees under a Section 403(b) plan.

The Section of the Internal Revenue Code allowing the after tax  of certain amounts of compensation for employees of Eligible Employers. Sub section 403(b)(1) describes annuity contracts that may be made available to employees under a Section 403(b) plan. Sub section 403(b)(7) describes custodial accounts (mutual funds) that may be made available to employees under a Section 403(b) plan.