Financial Definitions

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Numerals

12b-1 Fee - A fee assessed on certain mutual funds or share classes permitted under an SEC rule to help cover the costs associated with marketing and selling the fund; 12b-1 fees may also be used to cover shareholder servicing expenses.

401(a) Plan – A retirement savings plan set up by an employer that allows for contributions by the employee, the employer, or both. Contribution amounts may be dollar-based or percentage-based. The sponsoring employer sets the level of these amounts as well as eligibility and vesting schedule, and may establish more than one plan, each to serve the needs of a distinct group of employees.

401(k) Plan – A defined contribution plan usually sponsored by a private sector employer, governed under Section 401(k) of the Internal Revenue Code, and intended primarily for long-term retirement saving. Typically, employees (“participants”) contribute pre-tax money each payday into an annuity or a custodial trust account set up for them by the 401(k) plan, and invest that money so that it can grow tax-deferred. When a participant withdraws money from the plan, it’s taxed as ordinary income. However, if the plan offers a Roth option, participants may elect to designate some or all of their contributions to be made with after-tax dollars, allowing them to take withdrawals tax-free, subject to certain rules and regulations.

402(f) – Notice that participants taking a systematic withdraw from their plan will receive annually. The plan sends detail options for both Roth and non-Roth rollover distributions, pursuant to the IRS code.

403(b)Plan – A defined contribution plan similar to a 401(k) plan, but one which is sponsored by public schools and universities, some nonprofit employers and cooperative hospital service organizations. It gets its name from the Internal Revenue Code section that governs it. Typically, employees (“participants”) contribute pre-tax money each payday into an annuity or a custodial trust account set up for them by the 403(b) plan, and invest that money so that it can grow tax-deferred. When a participant withdraws money from the plan, it’s taxed as ordinary income. However, if the plan offers a Roth option, participants may elect to designate some or all of their contributions to be made with after-tax dollars, allowing them to take withdrawals tax-free, subject to certain rules and regulations.

403(b) Tax-Sheltered Annuity Plan – A 403(b) plan that uses an annuity to maintain participant accounts.

457(b) Plan – A defined contribution plan for governmental employees that is governed under Section 457(b) of the Internal Revenue Code and commonly known as a governmental deferred compensation plan. Typically, public employees (“participants”) contribute pre-tax money each payday into an annuity or a custodial trust account set up for them by the 457(b) plan, and invest that money so that it can grow tax-deferred. When a participant withdraws money from the plan, it’s taxed as ordinary income. However, if the plan offers a Roth option, participants may elect to designate some or all of their contributions to be made with after-tax dollars, allowing them to take withdrawals tax-free, subject to certain rules and regulations.

Note: Certain non-governmental employers may establish 457(b) plans. However, these plans are under separate rules and regulations and are not interchangeable with governmental 457(b) plans.

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A

Account Accuracy Rule – Relates to the FACTA of 2003, the act that addressed identity theft concerns. FACTA allows consumers to request and obtain a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion).

Active Management - The trading of securities to take advantage of market opportunities as they occur, in contrast to passive management; active managers rely on research, market forecasts, and their own judgment and experience in selecting securities to buy and sell.

Adjustment – Financial transaction initiated by a fund company or employer used to correct a participant's account's balance. Includes the following: daily interest, dividends, capital gains, unit adjustments, bad price or price conversions, payroll adjustments, and fund reimbursements.

Aggressive Growth Fund - An investment fund that takes higher risk of loss in return for potentially higher returns or gains.

Allocation – The way in which deferrals, or contributions, are divided among existing investments.

Allocation Change – When a participant moves future contribution percentages into another fund or mix of funds.

Annual Contribution Limit – Maximum a participant can contribute, or defer, to a 401(k), 403(b) and/or 457(b) plan account(s) or IRA in a tax year. The IRS sets contribution limits annually.

Annual Rate of Return - The annual rate of gain or loss on an investment expressed as a Percentage.

Annual Report - A yearly report or record of an investment’s (e.g., a mutual fund’s or company’s) financial position and operations.

Annuity - A form of insurance contract that provides a stream of periodic payments, typically for life; available in a variety of forms; see also Life Annuity and Joint and Last Survivor Annuity.

Annuity Commencement Date - The date stated in the annuity contract indicating when annuity payments will begin; also known as the annuity start date.

Appreciation - An increase in the value of an investment.

Asset - Anything with commercial or exchange value owned by a business, institution or individual; examples include cash, real estate and investments.

Asset Allocation - A method of investing by which investors include a range of different investment classes — such as stocks, bonds, and cash alternatives or equivalents — in their portfolios; see Diversification.

Asset-based Fees - Expenses that are based on the amount of assets in the plan and are generally charged as percentages or basis points.

Asset Class - A group of securities or investments that have similar characteristics and behave similarly in the marketplace; three common asset classes are equities (e.g., stocks), fixed income (e.g., bonds), and cash alternatives or equivalents (e.g., money market).

Asset Management Charge (AMC) – An administrative charge taken as a percentage of assets held by the retirement plan. The purpose of the charge is to cover the expenses/costs of plan education, marketing, recordkeeping and administration services provided by the recordkeeper, financial advisor and/or third party administrator.

Asset Rebalancing – An investing strategy through which a participant periodically exchanges or moves between funds in their account, in an effort to maintain a specific investment mix.

Automatic Asset Rebalancing - An optional service that will periodically exchange money between funds in a participant’s account so as to maintain the investment mix designated by the participant.

Average Annual Total Return - The yearly average percentage increase or decrease in an investment’s value that includes dividends, gains, and changes in share price.

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B

Back-end Load - A fee imposed by some funds when shares are redeemed (sold back to the fund) during the first few years of ownership; also called a contingent deferred sales charge.

Balanced Fund - A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds.

Basis Point - One-hundredth of one percent, or 0.01%, (for example, 20 basis points equal 0.20%); investment expenses, interest rates, and yield differences among bonds are often expressed in basis points.

Benchmark - An unmanaged group of securities whose performance is used as a standard to measure investment performance; some well-known benchmarks are the Dow Jones Industrial Average and the S&P 500 Index.

Beneficiary – The recipient of, or person chosen to receive, designated assets in the event of another’s death.

Bond - A debt security which represents the borrowing of money by a corporation, government, or other entity; the borrowing institution repays the amount of the loan plus a percentage as interest; income funds generally invest in bonds.

Bond Fund - A fund that invests primarily in bonds and other debt instruments.

Bond Rating - A rating or grade that is intended to indicate the credit quality of a bond, considering the financial strength of its issuer and the likelihood that it will repay the debt; agencies such as Standard & Poor’s, Moody’s Investors Service and Fitch issue ratings for different bonds, ranging from AAA (highly unlikely to default) to D (in default).

Broker - A person who acts as an intermediary between the buyer and seller of a security, insurance product, or mutual fund, often paid by commission; the terms broker, broker/dealer, and dealer are sometimes used interchangeably.

Brokerage Window - An optional service which allows a participant to establish a self-directed brokerage account; this option carries distinct charges.

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C

Capitalization (Cap) - The total market value of a company’s outstanding equity.

Capital Appreciation Fund - An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices are expected to rise.

Capital Gain - An increase in the value of an investment, calculated by the difference between the net purchase price and the net sale price.

Capital Loss - The loss in the value of an investment, calculated by the difference between the purchase price and the net sale price.

Capital Preservation - An investment goal or objective to keep the original investment amount (the principal) from decreasing in value.

Cash Alternative or Cash Equivalent - An investment that is short term, highly liquid, and has high credit quality.

Cash Refund Annuity - An annuity that makes periodic payments for the life of an individual and a benefit payable to a beneficiary upon death, equal to the premium(s) paid less payments made to the individual.

Catch-Up Contributions – There are two types - the Age 50+ Catch-Up Provision says 457(b), 403(b) and 401(k) plans may allow participants age 50 and over to contribute up to $5,500 more than the maximum contribution limit annually. As an alternative, 457(b) and 403(b) plans may allow a one-time Special 457(b) Catch-Up contribution. To learn more, visit www.irs.gov.

Class A Shares - Typically impose a front-end sales load and tend to have a lower 12b-1 fee and lower annual expense than other mutual fund share classes; some mutual funds reduce the front-end load as the size of the investment increases.

Class C Shares - These generally have a level load and might include a 12b-1 fee, other annual expenses and either a front- or back-end sales load.

Class I Shares - Are often called “institutional shares” because they’re generally intended for financial institutions purchasing shares for their own clients’ accounts; these shares have no front-end sales charge and cannot be purchased by the general public.

Class R Shares - Typically provided exclusively to retirement plans, charges can vary based on the plan’s requirements and recordkeeping preferences.

COLA – Cost of living adjustments.

Collective Investment Fund - Investments created by a bank or trust company for certain employee benefit plans, such as 401(k) plans, that pool the assets of retirement plans for investment purposes; they are governed by rules and regulations that apply to banks and trust companies instead of being registered with the SEC; also referred to as collective or commingled trusts.

Commission - Compensation paid to a broker or other salesperson for his or her role when investments are bought or sold.

Common Stock - An investment that represents a share of ownership in a corporation.

Company Stock Fund - A fund that invests primarily in employer securities that may also maintain a cash position for liquidity purposes.

Compounding - The cumulative effect that reinvesting an investment’s earnings can have by generating additional earnings of their own.

Conservative - An investment approach that accepts lower rewards in return for potentially lower risks.

Consumer Price Index (CPI) – Also known as the CPI or Cost-of-Living-Index. Released monthly by the US Department of Labors’s Bureau of Labor Statistics, it measures prices of a fixed basket of goods bought by a typical consumer in the United States. Goods include food, transportation, shelter, utilities, clothing, medical care, entertainment, etc.

Contingent Deferred Sales Charge (CDSC) - A fee imposed when shares of a mutual fund or a variable annuity contract are redeemed (sold) during the first few years of ownership; also called a back-end load.

Contribution – Portion of the account holder’s paycheck that is invested into a retirement plan.

Core Account – Portion of a participant’s account that is invested in funds offered by a retirement plan. The term is used primarily by plans that offer a self-directed brokerage option to distinguish assets a participant holds “inside the plan” from assets held in the brokerage account.

Corporate Bond - A bond issued by a corporation, rather than by a government; the credit risk for a corporate bond is based on the re-payment ability of the company that issued the bond.

Correction – A drop in the stock market in a short period of time. A stock market correction typically occurs following a sharp increase or a negative event.

Credit Risk - The risk that a bond issuer will default, meaning not repay principal or interest to the investor as promised; also known as default risk.

Current Yield - The current rate of return of an investment calculated by dividing its expected income payments by its current market price.

Custodian - A person or entity (e.g., bank, trust company, or other organization) responsible for holding financial assets.

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D

Deferred Annuity - An annuity contract where periodic income payments begin at a future date; see Annuity Commencement Date.

Deferred Compensation Plan – A type of retirement plan in which a portion of an employee’s earned income is paid out at a later date. The employer allows employees to contribute a portion of their income to invest in options offered by the plan. Contributions can grow tax-deferred until withdrawal, when the money is taxed as ordinary income. The primary benefit of most deferred compensation is the deferral of tax to the date(s) at which the employee actually receives the income.

Defined Benefit Plan – Employer-sponsored retirement plan that promises to pay a specified benefit to each person who retires after a set number of years of service. These plans do not pay taxes on their investments and in some cases, employees contribute.

Defined Contribution Plan – Employer-sponsored retirement plan in which the amount of the annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts plus any investment earnings on the money in the account. In defined contribution plans, future benefits fluctuate on the basis of investment earnings.

Deflation - The opposite of inflation — a decline in the prices of goods and services.

Depreciation - A decrease in the value of an investment.

Depression – A severe and prolonged recession; a depression is an economic condition characterized by falling prices, excess of supply over demand, rising unemployment, accumulating inventories, decrease in purchase power and general public fear.

Designated Investment Alternative - The investment options picked by the plan into which participants can direct the investment of their plan accounts.

Direct Deposit (Electronic Fund Transfer or ETF) – the process by which an employee’s pay check is deposited into the employees’ bank account, rather than receiving payment by paper checks.

Distribution – Amount paid out of plan accounts, also called a payout or payment.

Diversification - The practice of investing in multiple asset classes and securities with different risk characteristics to reduce the risk of owning any single investment.

Dividend - Money an investment fund or company pays to its stockholders, typically from profits; the amount is usually expressed on a per-share basis.

Dividend Yield – Portion of what a mutual fund earns from its holdings, stated as an annualized percentage of the fund’s current market price. A quarterly dividend would be equal to one-fourth of the percentage stated in an investment report or prospectus.

Dollar Cost Averaging – Investment strategy that invests fixed amounts at set intervals, such as monthly or bi-weekly. Over the long term, a particular investment is purchased with a fixed dollar amount on a regular schedule, regardless of the share price. This assumes more shares are purchased when prices are low, and fewer shares are bought when prices are high.

Dow Jones Industrial Average (Dow or DJIA) - A widely followed price-weighted index of 30 of the largest, most widely held U.S. stocks

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E

Earned Income – Money earned from salary, wages, bonuses, commissions and tips, as a result of providing goods and/or services.

Earnings – Money gained on the principal in a financial account.

Earnings Per Share – Portion of a company's profits allocated to each outstanding share of common stock — it’s generally calculated quarterly and determined after payment of company bonds and preferred stock (if any). Earnings are a primary driver of a stock's value.

Effective Date – Date on which an agreement or transaction, such as a contract or insurance policy, takes effect. With transactions, some companies require that they must be submitted by the close of the New York Stock Exchange (NYSE) – normally 4 p.m., ET to be effective on that day. After that time, transactions are usually not effective until the next business day in which the NYSE is open.

Eligible Rollover Distribution – A distribution from a 401(k), 403(b), or 457(b) plan or an IRA that is legally eligible to be rolled over to another 401(k), 403(b), or 457(b) plan or an IRA.

Emerging Market - Generally, economies that are in the process of growth and industrialization, such as in Africa, Asia, Eastern Europe, the Far East, Latin America, and the Middle East which, while relatively undeveloped, may hold significant growth potential in the future; investing in these economies may provide significant rewards, and significant risks; also known as developing market.

Emerging Market Fund - A fund that invests primarily in emerging market countries.

Employee Retirement Income Security Act of 1974 (ERISA) - A federal law that imposes various requirements on voluntarily established retirement plans in the private industry and establishes standards in order to provide protection for plan participants. For more information, visit https://www.dol.gov/general/topic/health-plans/erisa.

Employer Contributions – Contributions made by the employer for the employee. Includes Employer Discretionary Account, Employer Match and Employer Money Purchase.

End-Result Exchange – Reallocating your current balance changes the investment mix of your portfolio and is sometimes referred to as an end-result exchange. It's an easy way to manually rebalance your entire portfolio without exchanging one fund at a time.

Equity - A security or investment representing ownership in a corporation, unlike a bond, which represents a loan to a borrower; often used interchangeably with stock.

Equity Fund - A fund that invests primarily in equities.

Equity Wash Restriction - A provision in certain stable value or fixed income products under which transfers made from these products are required to be directed to an equity fund or other noncompeting investment option of the plan for a stated period of time (usually 90 days) before those funds may be invested in any other plan-provided competing fixed income fund (such as a money market fund).

Estate – Legal term for the sum of the assets and liabilities for an individual, generally used after the death of an individual.

Estate Planning – Advance planning for how to manage an estate when the owner dies. This is often done years in advance to ensure that the owner’s wishes are met. It can include setting up trusts, planning a will, buying life insurance to cover expenses triggered at death, and coordination of tax liability.

Exchange – Moving the current account balance from one investment choice to another choice(s) available through the same plan.

Exchange Traded Fund (ETF) - An investment company, such as a mutual fund, whose shares are traded throughout the day on stock exchanges at market-determined prices.

Expense Ratio - A measure of what it costs to operate an investment, expressed as a percentage of its assets or in basis points; the investor pays for these costs through a reduction in the investment’s rate of return; see Operating Expense and Total Annual Operating Expense.

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F

FDIC Insured – Refers to accounts that are insured by the Federal Deposit Insurance Corporation, a U.S. government agency that insures cash deposits placed in member institutions. The basic insured amount for each depositor is capped at $250,000 for losses of cash in all accounts the depositor has with the member institution where the loss occurred.

Federal Deposit Insurance Corporation (FDIC) - A federal agency that insures money on deposit in member banks and thrift institutions.

Fiduciary - Any person or party who exercises any discretionary authority or control over the management of a plan, or any authority or control over the management or disposition of its assets; renders investment advice for a fee with respect to the funds or property of the plan, or has the authority to do so; has any discretionary authority or discretionary responsibility in the administration of the plan.

Financial Industry Regulatory Authority (FINRA) - A self-regulatory organization for brokerage firms doing business in the United States, operating under the supervision of the SEC ; the organization’s objectives are to protect investors and ensure market integrity.

Financial Statement - The written record of the financial status of a fund or company, usually published in the annual report; generally includes a balance sheet, income statement, and other financial statements and disclosures.

Fixed Annuity - An annuity contract in which the insurance company makes fixed or guaranteed payments to an individual for the term of the contract.

Fixed Income Fund - A fund that invests primarily in bonds and other fixed-income securities, often to provide shareholders with current income.

Fixed Return Investment - An investment that provides a specific rate of return to the investor.

Flat Rate Expenses - Base fees charged to a plan, regardless of the number of participants, and may or may not include preparation of the Form 5500, discrimination testing, vesting calculation, etc.

Front-End Load - A sales charge on mutual funds or annuities assessed at the time of purchase to cover selling costs.

Fund Expense Ratio – See Expense Ratio.

Fund Family - A group or “complex” of mutual funds, each typically with its own investment objective, and managed and distributed by the same company; also refers to a group of collective investment funds or a group of separate accounts managed and distributed by the same company.

Fund Window - A plan feature that permits participants to purchase investments that are not included among the plan’s general menu of designated investment alternatives.

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G

Glide Path - The change over time in a target date fund’s asset allocation mix to shift from a focus on growth to a focus on income.

Global Fund - A fund that invests primarily in securities anywhere in the world, including the United States.

Government Securities - Any debt obligations issued by a government or its agencies (e.g., Treasury Bills issued by the United States).

Gross Domestic Product (GDP) – Total value of goods and services produced in a country in one year.

Group Annuity Contract - An annuity contract entered into between an insurance company and an owner for the benefit of a designated group, such as retirement plan participants.

Growth Fund - A fund that invests primarily in the stocks of companies with above-average risk in return for potentially above-average gains; these companies often pay small to no dividends and their stock prices tend to have the most ups and downs from day to day.

Growth and Income Fund - A fund that has a dual strategy of growth or capital appreciation and current income generation through dividends or interest payments.

Guaranteed Interest Account - An account within a fixed or variable annuity that is guaranteed by the insurance company to earn at least a minimum rate of interest while invested in the contract.

Guaranteed Investment Contract - A contract issued by an insurance company that guarantees a specific rate of return on an investment over a certain time period.

Guaranteed Lifetime Withdrawal Benefit - A feature sometimes offered in an annuity contract where the insurance company allows an individual to withdraw a specified amount from an account — even if the account balance is reduced to zero — for the life of the individual, the joint lives of two individuals (e.g., the individual and spouse) or for a specified period of time; also known as a Guaranteed Minimum Withdrawal Benefit.

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I

Immediate Annuity - An annuity contract under which periodic income payments begin within 12 months of purchase.

Inception Date - The date on which a fund’s operations begin.

Income Fund - A fund that primarily seeks current income rather than capital appreciation.

In-Service Withdrawal – Withdrawal from a retirement plan that occurs before retirement. Most companies charge a penalty fee for in-service withdrawals to discourage plan participants from taking money out of their plan before retirement.

Index - A benchmark used to evaluate a fund’s performance; the most common indexes for stock funds are the Dow Jones Industrial Average and the Standard & Poor’s 500 Index.

Index Fund - An investment fund that seeks to parallel the performance of a particular stock market or bond market index; often referred to as passively managed investments.

Individual Annuity Contract - An annuity contract generally entered into between an insurance company and a person or persons.

Individual Retirement Account (IRA) – Retirement accounts owned and funded by an individual. Two common types of IRAs are traditional IRAs and Roth IRAs. Contributions to a traditional IRA are eligible for a credit when the individual files a federal income tax return. Withdrawals are taxed as ordinary income. Contributions to a Roth IRA are not eligible for a tax credit, but withdrawals may be taken tax-free (subject to certain conditions and restrictions).

Individual Service Expenses - Charges applied individually to those participants who take advantage of special plan features, such as participant loans.

Inflation - The general upward price movement of goods and services in an economy; generally one of the major risks to investors over the long term because it erodes the purchasing power of their savings.

Interest/Interest Rate - The fee charged by a lender to a borrower, usually expressed as an annual percentage of the principal; for example, someone investing in bonds will receive interest payments from the bond’s issuer.

Interest Rate Risk - The possibility that the market value of a bond or bond fund will decrease due to rising interest rates; when interest rates (and bond yields) go up, bond prices usually go down and vice versa.

Internal Revenue Code (IRC) – Body of law containing federal tax provisions, including those that govern or impact 457(b), 403(b), 401(k) and 401(a) plans, IRAs and defined benefit pension plans. References to specific section numbers in more formal documents are often preceded by §, as in IRC §403(b) for Section 403(b) of the Internal Revenue Code.

Internal Revenue Service (IRS) – The U.S. government agency responsible for tax collection and tax law enforcement.

International Fund - A fund that invests primarily in the securities of companies located outside of, or with revenues derived from, the United States.

Investment Adviser - A person or organization hired by an investment fund or an individual to give professional advice on investments and asset management practices.

Investment Company - A corporation or trust that invests pooled shareholder dollars in securities appropriate to the organization’s objective; the most common type of investment company, commonly called a mutual fund, stands ready to buy back its shares at their current net asset value.

Investment Objective - The goal that an investment fund or investor seeks to achieve (e.g., growth or income).

Investment Return - The gain or loss on an investment over a certain period, expressed as a percentage; income and capital gains or losses are included in calculating the investment return.

Investment Risk - The possibility of losing some or all of the amounts invested, or not gaining value in an investment.

IRA Transfer – Custodian-to-custodian transfer of an IRA. The owner does not take possession of the assets – they’re transferred directly from one plan custodian to another.

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J

Joint Account – Account where two or more individuals exercise some control over the account. It must be registered as either Joint Tenants in Common or Joint Tenants with Right of Survivorship.

Joint and Last Survivor Annuity - An annuity that provides periodic payments for the joint lives of two individuals with benefits payable upon the death of one individual to the surviving individual at a percentage of the original payment amount, depending upon the terms of the contract.

Joint Tenants in Common – Type of joint account registration where the percentage of the account owned by a person is distributed to his estate upon his death. Example: Person A and Person B own a joint tenants in common account. If person A dies, then 50% of the account is included in Person A’s estate.

Joint Tenants with Right of Survivorship – Type of joint account where the deceased owner’s percentage of the account passes to the other surviving owner(s), commonly used between husband and wife.

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L

Large Capitalization (Cap) - A reference to either a large company stock or an investment fund that invests in the stocks of large companies.

Large-Cap Fund - A fund that invests primarily in large-cap stocks.

Large-Cap Stock - Stock of a company with a large market capitalization; large caps tend to be well-established companies, so their stocks typically entail less risk than smaller caps, but large caps also offer less potential for dramatic growth.

Life Annuity - An annuity that makes periodic payments only for the life of one individual; also known as single life annuity.

Lifecycle Fund - A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor’s age or target retirement date through a mix of asset classes; the mix changes over time to become less focused on growth and more focused on income; also known as target date retirement or age-based funds.

Lifestyle Fund - A fund that maintains a predetermined risk level and generally uses words such as “conservative,” “moderate” or “aggressive” in its name to indicate the fund’s risk level; used interchangeably with target risk fund.

Liquid Asset – An asset, such as a bank savings account, that can be converted into cash quickly and with minimal impact to the price received.

Liquidity - The ease that an investment can be converted into cash; if a security is very liquid, it can be bought or sold easily; if a security is not liquid, it may take additional time and/or a lower price to sell it

Loan – An optional provision available to retirement plan sponsors. If adopted by the sponsor, participants may request to borrow money from their retirement account. Repayment is typically made through Automated Clearing House (ACH) directly from the participant’s bank account or payroll to the retirement account.

Loan Principal – The amount borrowed – interest is calculated on the principal.

Long-Term Gain – Profit earned from the sale of a security held longer than 12 months.

Longevity Risk - The risk that you will live longer than expected with the potential result that you run out of money before you die.

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M

Management Fee - A fee or charge paid to an investment manager for its services.

Mandatory Employee Pre-Tax Contribution – Employee’s contribution made upon condition of employment and picked up by the employer under IRC Section 414 (h).

Market Capitalization or Market Cap - The market value of a company; market capitalization can be determined by multiplying the number of outstanding shares of a company’s stock by the stock’s current market price per share.

Market Risk - The possibility that the value of an investment will fall because of a general decline in the financial markets.

Market Timing – The frequent movement between and among mutual funds to potentially capitalize on perceived or anticipated market trends. Market timing does not ensure profitability and, because it often operates to the detriment of other investors, fund managers may assess fees on sales of funds held for short periods.

Matching Contribution – A contribution made by an employer to an employee's defined contribution retirement plan account. Typically, the employer makes the contribution to a 401(a) plan account in the employee's name, based on elective deferral contributions made by the employee to a 457(b), 403(b) or 401(k) account. This arrangement preserves the employee’s ability to make maximum contributions to his plan account regardless of any employer contribution.

Maturity Date - The date on which the principal amount of a loan, bond, or any other debt becomes due and is to be paid in full.

Maximum Deferral – Largest amount a participant can invest annually. These limits are established by the IRS.

Mid Capitalization (Cap) - A reference to either a medium-sized company stock or an investment fund that invests in the stocks of medium-sized companies.

Mid-cap Fund - A fund that invests primarily in mid-cap stocks.

Mid-cap Stocks - Stocks of companies with a medium market capitalization; mid caps are often considered to offer more growth potential than larger caps (but less than small caps) and less risk than small caps (but more than large caps).

Money Market Fund - A mutual fund that invests in short-term, high-grade fixed-income securities, and seeks the highest level of income consistent with preservation of capital (i.e., maintaining a stable share price).

Money Source – Original contribution made to a retirement plan. The source may affect how an asset is treated within a plan type. Examples include rollovers , salary reductions, contributions , health care insurance premiums, employer money purchase and more.

Morningstar - A leading mutual fund research and tracking firm that categorizes funds by objective and size, then ranks fund performance within those categories.

Mutual Fund - An investment company registered with the SEC that buys a portfolio of securities selected by a professional investment adviser to meet a specified financial goal (investment objective); mutual funds can have actively managed portfolios, where a professional investment adviser creates a unique mix of investments to meet a particular investment objective, or passively managed portfolios, in which the adviser seeks to parallel the performance of a selected benchmark or index.

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N

National Association of Securities Dealers Automated Quotation (NASDAQ) - A composite index that measures the performance of more than 5,000 U.S. and non-U.S. companies traded “over the counter” through NASDAQ.

Net Asset Value (NAV) - The net dollar value of a single investment fund share or unit that is calculated by the fund on a daily basis.

New York Stock Exchange (NYSE) - The oldest and largest stock exchange in the United States, founded in 1792.

No-Load Fund - A mutual fund whose shares are sold without a sales commission and which does not charge a combined 12b-1 fee and service fee of more than 25 basis points or 0.25% per year.

Normal Retirement Age (NRA) – Age at which a participant in a retirement plan can retire and receive unreduced benefits.

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O

Operating Expense - Costs associated with running or operating an investment fund; may include custody fees, management fees, and transfer agent fees; see also Expense Ratio and Total Annual Operating Expense.

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P

Passive Management - The process or approach to operating or managing a fund in a passive or nonactive manner, typically with the goal of mirroring an index; these funds are often referred to as index funds and differ from investment funds that are actively managed.

Payout – Payment from a 457(b), 403(b) or 401(k) plan or a defined benefit pension plan – also called a distribution. Examples include disbursements, loans, rollovers to another plan and separation from service payments.

Payroll Frequency – How often your regular paycheck is issued – daily, weekly, bi-weekly (once every two weeks), bi-monthly (twice per month), etc.

Per Participant Charges - Charges are based on the total number of eligible employees or actual participants in the plan.

Performance Benchmark – Index used to evaluate a mutual fund’s performance.

Period Certain - A payment feature that may be available in an annuity contract which guarantees periodic payments for no less than a set period of time; for example, in a life annuity, periodic payments would be made to the individual or beneficiary for the longer of either the guaranteed period or the life of the individual.

Plan Administrative Expenses - Charges used to cover services provided for the day-to-day operations of the plan, such as recordkeeping, accounting, customer service support, daily valuation, etc.

Plan Document – A collection of documents that, taken together, officially define the plan and specify how it is to be governed and operated.

Pooled Guaranteed Investment Contract (GIC) Fund Charges - Charges for a common fixed income investment option that includes a number of contracts issued by an insurance company or bank which pays an interest rate; includes investment management and administrative fees.

Portfolio - A collection of investments, such as stocks and bonds owned by an individual, organization or investment fund.

Portfolio Manager - The individual, team, or firm making the investment decisions for an investment fund, including the selection of the individual investments.

Portfolio Turnover Rate - A measure of how frequently investments are bought and sold within an investment fund during a year; the portfolio turnover rate is usually expressed as a percentage of the total value of an investment fund.

Post-Tax – Paycheck contribution made to a retirement plan after taxes have been paid on the amount.

Pre-Tax – Paycheck contribution made to a retirement plan prior to taxes being paid on it.

Principal - The original dollar amount of an investment; also refers to the face value or original amount of a bond.

Prospectus - The official document that describes certain investments, such as mutual funds, to prospective investors; the prospectus contains information required by the SEC, such as investment objectives and policies, risks, services and fees.

Provider/Recordkeeping Expenses - These expenses are a combination of various charges that are combined into one; also known as an asset management charge or wrap charge.

Purchase Block – An action taken by a mutual fund manager to prevent certain investors, including retirement plan participants, who move $5000 or more out of its mutual fund in a single day (by way of exchange or restructure), from moving $5000 or more back into the same mutual fund for a period of 30 days. This is to prevent frequent trading, which tends to increase costs to all investors in the fund.

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Q

Qualified Domestic Relations Order (QDRO) – Divorce judgment, decree or order that relates to the provision of child support, alimony payments, or marital property rights. This judgment may include a spouse, former spouse, child, or other dependent of the employee, and may affect the disposition of or rights to assets in a participant’s 457(b), 403(b) or 401(k) plan account.

Qualified Plan – Defined benefit and defined contribution plans that meet the requirements of 401(a) of the Internal Revenue Code. A key IRC provision governing these plans is that they must exist and operate "for the exclusive benefit of participants or their beneficiaries." Employer-sponsored qualified plans include 401(k) and 401(a) plans.

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R

Rate of Return - The gain or loss on an investment over a period of time; the rate of return is typically reported on an annual basis and expressed as a percentage.

Real Rate of Return - The rate of return on an investment adjusted for inflation.

Reallocate – Process of rebalancing the investment mix of an entire portfolio instead of exchanging one mutual fund at a time. Participants may reallocate their account when they get closer to retirement, to potentially invest in less aggressive mutual funds, for instance.

Rebalance – A strategy to sell investments that have been performing well and invest more into those that have fallen behind – a buy low, sell high approach. It won't change how future contributions are invested and is sometimes referred to as an end-result exchange.

Recession – General economic decline that generally lasts from six to eighteen months.

Redemption - The selling of fund shares back to the fund; may also refer to the repayment of a bond on or before the agreed upon pay-off date.

Redemption Fee - A fee, generally charged by a mutual fund, to discourage certain trading practices by investors, such as short-term or excessive trading; if a redemption fee is charged, it is done when the investment is redeemed or sold.

Required Minimum Distribution (RMD)Distribution amount that must be paid to a participant in a retirement plan. U.S. Dept. of Treasury and IRS regulations generally require that participants begin taking an annual RMD by April 1 of the year after they reach age 70½ or the year in which they retire, whichever is later. There are also RMD requirements for beneficiaries.

Return - The gain or loss on an investment; a positive return indicates a gain, while a negative return indicates a loss

Risk - The potential for investors to lose some or all of their investments or to fail to achieve their investment objectives.

Risk-Based Funds – Mutual funds that include an asset mix (stocks, bonds, cash and cash-like products) based on a participant’s investment style and tolerance for risk (e.g., moderately conservative)

Risk Tolerance - An investor’s ability and willingness to lose some or all of an investment in exchange for greater potential returns.

Rollover (Pre-Tax) – Amounts transferred to the plan from an eligible retirement plan or IRA. Reinvestment of assets into an IRA that an individual receives from a qualified tax-deferred retirement plan. It must be reinvested into an IRA within 60 days to avoid tax and penalties.

Roth Contributions – Roth contributions are designated employee after-tax pay that is contributed to a participant’s 401(k), 403(b) or governmental 457(b) plan account. Subject to certain restrictions, distributions of earnings from the Roth account may be taken tax-free. There are several different types of Roth accounts: IRAs, 457(b), 401(k) and more.

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S

Salary Reduction – Contributions an employee makes to an employer-sponsored retirement plan.

Sales Charge - A charge for buying an investment.

Sector Fund - A fund that invests in a particular or specialized segment of the marketplace, such as stocks of companies in the software, healthcare, or real estate industries.

Securities and Exchange Commission (SEC) - Government agency created by Congress in 1934 to regulate the securities industry and to help protect investors; it is responsible for ensuring that the securities markets operate fairly and honestly.

Security - A general term for stocks, bonds, mutual funds, and other investments.

Separate Account - An insurance company account that is segregated or separated from the insurance company’s general assets; also refers to a fund managed by an investment adviser for a single plan.

Share - A representation of ownership in a company or investment fund.

Share Class - Some investment funds and companies offer more than one type or group of shares, each of which is considered a class (e.g., “Class A,” “Advisor” or “Institutional” shares); for most investment funds; each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives.

Shareholder - An owner of shares in an investment fund or corporation.

Shareholder-Type Fees - Any fee charged against an investment for purchase and sale, other than the total annual operating expense.

Short-Term Redemption Fee – Redemption charge common in mutual funds (especially International funds). It usually lasts for 3, 6, or 12 months from the time shares are purchased and commonly is limited to a small amount (1, 2, or 3%) if shares are sold within that timeframe.

Short-Term Capital Gains – Profits from the sale of a stock and/or bond held for one year or less.

Short-Term Investments – Investments which include two basic underlying asset types: (1) cash, which refers to short term securities, such as bank certificates of deposit (CDs) and money market funds and (2) fixed income, which includes securities issued by the U.S. Government, U.S. Agencies, corporate bonds, residential and commercial mortgage-backed securities, and other asset-backed securities. Typically, short-term investments encounter less market risk than do stocks, diversified real return, and bonds because of their short duration. Therefore, they usually provide a lower rate of return than investments in those categories.

Single Premium Deferred Annuity (SPDA) – Type of annuity contract that is established with a single lump-sum payment by the owner which may grow on a tax-deferred basis until annuitized. An SDPA may be either fixed or variable, distributions are only taxed when a participant takes them and there are no investment limits.

Small Capitalization (Cap) - Refers to either a small company stock or an investment fund that invests in the stocks of small companies.

Small-Cap Fund - A fund that invests primarily in small-cap stocks.

Small-Cap Stocks - Stocks of companies with smaller market capitalization; often considered to offer more growth potential than large and mid caps but may come with more risk.

Specialty Stock Funds – Funds that invest in a specific market sector or type of security from a similar industry or market sector. These investments generally bear a higher level of risk than other asset classes because they are not usually diversified outside their market sector.

Spousal IRA – An IRA account set up for a non-working spouse (no earned income) of a working spouse. Up to $5,000 a year can be contributed to this account.

Stable Value Fund - An investment fund that seeks to preserve principal, provide consistent returns and liquidity; includes collective investment funds sponsored by banks or trust companies or contracts issued by insurance companies.

Standard & Poor’s 500 Stock Index (S&P 500) - An index comprised of 500 widely held common stocks considered to be representative of the U.S. stock market in general; often used as a benchmark for equity fund performance.

Stock - A security that represents an ownership interest in a corporation.

Stock Fund - A fund that invests primarily in stocks.

Stock Market – Commonly referred to in the singular form "market", all stock markets are auctions, where traders come together to buy and sell ownership shares in companies, investment bonds, and other investment items. Some of the largest stock markets include The New York Stock Exchange, The Chicago Mercantile Exchange, The NASDAQ and The London Stock Exchange. Similar to most auctions, prices are driven by supply and demand, the real or perceived value of the item and/or emotion. It's for this reason that prices continually change on the market.

Stock Symbol - An abbreviation using letters and numbers assigned to securities to identify them; see Ticker Symbol.

Summary Prospectus - A short-form prospectus that mutual funds may use with investors if they make the long-form prospectus and additional information available online or on paper upon request.

Systematic Withdrawal Plan – Plan where a fixed dollar amount or percentage is redeemed from a retirement account at regular intervals (monthly, quarterly, etc.). This plan is popular with retirees who will have a certain amount redeemed from a mutual fund or retirement plan on a regular basis, while keeping their remaining assets in the fund or plan.

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T

Target Date Fund - A fund designed to provide varying degrees of long-term appreciation and capital preservation based on an investor’s age or target retirement date through a mix of asset classes; the mix changes over time to become less focused on growth and more focused on income; also known as a lifecycle fund.

Target Risk Fund - A fund that maintains a predetermined asset mix and generally uses words such as “conservative,” “moderate” or “aggressive” in its name to indicate the fund’s risk level; also known as a lifestyle fund.

Tax-Deferral – Pre-tax money invested now to grow tax-free until money is withdrawn, at which point taxes will be assessed.

Term Life Insurance - Policy with a set coverage period or duration. There is no cash value and no underlying investment.

Ticker Symbol - An abbreviation using letters and numbers assigned to securities and indexes to identify them; see Stock Symbol

Time Horizon - The amount of time that an investor expects to hold an investment before taking money out.

Total Annual Operating Expense - A measure of what it costs to operate an investment, normally expressed as a percentage of its assets, a dollar amount, or in basis points; these are costs the investor pays through a reduction in the investment’s rate of return; see Expense Ratio and Operating Expense

Total Return – Return on an investment, including income from dividends and interest. Includes appreciation or depreciation in the price of the security, over a given time period.

Transaction-Based Expenses - Fees based on the execution of a particular plan service or transaction.

Transaction Types – Identifies how money came into or moved out of a defined contribution account, such as contributions, exchanges, distributions, fees, loan repayments and more.

Trust – Legal arrangement through which title to assets is given to one party to manage for the benefit of others. Under Internal Revenue Code regulations, defined contribution retirement plan assets must be held in a trust or an annuity established for the benefit of participants or their beneficiaries.

Trustee - A person or entity (e.g., bank, trust company or other organization) responsible for the holding and safekeeping of trust assets and may also have other duties, such as investment management; a trustee serving as a “directed trustee” is responsible for the safekeeping of trust assets but has no discretionary investment management duties or authority over the assets.

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U

Underlying Funds – The investments in a mutual fund, a variable annuity's separate account fund or other fund.

Unearned Income – Income from sources other than salary or wages from employment. They include interest income and capital gains, among other forms income.

Unit – A representation of ownership in an investment that does not issue shares; most collective investment funds are divided into units instead of share.

Unitholder – An owner of units in an investment; see Shareholder.

Unit Class – Investment funds divided into units (e.g., collective investment funds) instead of shares and may offer more than one type or group of units, each of which is considered a class (e.g., “Class A”); for most investment funds, each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives.

Unit Value - The dollar value of each unit on a given date.

U.S. Treasury Securities - Debt securities issued by the U.S. government and secured by its full faith and credits; the debt financing instruments of the U.S. Federal government; often referred to as Treasuries.

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V

Value Fund - A fund that invests primarily in stocks that are believed to be priced below what they are really worth.

Variable Annuity - An annuity contract where the insurance company promises to make payments beginning immediately or at some future date; the value of the annuity and amount of the benefits paid by the insurance company will vary depending on the performance of the investment options.

Variable Annuity Charges - Costs for investments offered by insurance companies which include investment management and administrative fees, insurance-related charges such sales expenses, and surrender and transfer charges when an employee is terminated or withdraws from the plan’s investment.

Variable Return Investment - Investments for which the return is not fixed; includes stock and bond funds and investments seeking to preserve principal but not guaranteeing a particular return (e.g., money market funds and stable value funds)

Voice Response System or Voice Response Unit (VRS or VRU) – Automated phone system that allows a participant to access his or her account information, perform account transactions, and request materials. Account access requires a personal identification number (PIN).

Volatility - The amount and frequency of fluctuations in the price of a security, commodity or a market within a specified time period; generally, an investment with high volatility is said to have higher risk since there is an increased chance that the price of the security will have fallen when an investor wants to sell.

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W

Whole Life Insurance - A life insurance contract with both an insurance and an investment component. The insurance component may pay a stated amount upon death of the insured; the investment component accumulates a cash value that the policyholder can withdraw or borrow against.

Withdrawal – Also called a distribution, money taken from a financial account, such as 457(b), 403(b) or 401(k) plan account or an IRA. Distributions from 401(k) and 403(b) plans made prior to age 59½ may be subject to a tax penalty.

Wrap Fee - A fee or expense that is added to or “wrapped around” an investment to pay for one or more product features or services.

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Y

Yield - The value of interest or dividend payments from an investment, usually stated as a percentage of the investment price.

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NRW-3077OH-OS
NRW-3077OH-OS
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