Key Terms & Definitions

Traditional 403(b): A retirement vehicle that provides you with the opportunity to save for retirement on a tax-deferred basis.

Eligibility: You are eligible to participate in the Plan once you satisfy the Plan’s eligibility conditions. Then you may elect to have your compensation reduced by a specific percentage and have the amount contributed to the Plan as a salary deferral.

Deferral Amount: Once you are eligible you may elect to defer an amount of your compensation each year instead of receiving that amount in cash. This is called your election deferral. The amount you elect to defer may be made on a pre-tax basis (traditional 403(b)) or on a post-tax basis (Roth 403(b)).

Asset Allocation: The assignment of investment funds to broad categories of assets. For example, an individual allocates funds to bonds and equities. Likewise, an investor may allocate funds to common stocks representing various industries. Two components combine to create an asset allocation plan: your own financial situation and risk tolerance, coupled with historic and expected investment performance by asset class. A diversified portfolio protects you from market swings, as is likely to happen over time.

Mutual Fund: An investment company that continually offers new shares and buys existing shares back at the request of the shareholder and uses its capital to invest in diversified securities of other companies. Pre-determined investment goals are defined for each mutual fund. The numbers of shareholders in each mutual fund provides benefits that an individual working alone, might not be able to receive.

Diversification: The acquisition of a group of assets in which returns on the assets are not directly related over time. An investor seeking diversification for a securities portfolio would purchase securities of firms that are not similarly affected by the same variables. Proper investment diversification, requiring a sufficient number of different assets, is intended to reduce the risk inherent in particular securities. Owning shares in mutual funds allows an investor to participate in a diversified portfolio.

Dollar Cost Averaging: An investment strategy designed to reduce volatility in which securities, typically mutual funds, are purchased in fixed dollar amounts at regular intervals, regardless of what direction the market is moving. Thus, as prices of securities rise, fewer units are bought, and as prices fall, more units are bought.

Qualified Distribution from Roth 403(b): This is a distribution that satisfies the "5-year" rule and is made after you have attained age 59 ½, become permanently disabled, or have deceased. The 5-year rule is met by waiting five taxable years from the time you made your first Roth 403(b) contribution.

Roth 403(b): Roth 403(b) contributions are made on an after-tax basis, meaning you pay taxes at the time you make the contribution. At the time you elect to take a distribution (withdrawal) from the Roth 403(b) account, you will not owe any tax on the contributions (you have already been taxed on them) and further if the distribution is a "qualified distribution" you will not pay any tax on the earnings associated with the Roth 403(b) contributions.