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February 16, 2009

Pro rata allocation



Allocation method where allocations are made to participants as a percentage of compensation, with each participant receiving the same percentage or being charged the same percentage. For instance,  if each employee receives 15% of eligible compensation as a contribution to the plan, contributions have been allocated on a pro-rata  basis.

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Additional Helpful Information

    • Under Revenue Ruling 2004-10, a defined contribution plan under which the accounts of former employees are charged a pro rata share of the plan’s reasonable administrative expenses, but the accounts of current employees are not charged those expenses, fail to satisfy the requirements of § 411(a)(11) of the Internal

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Qualified Charitable Distribution (QCD)

Definition A distribution that is excludable from the distributee’s income, as a result of meeting the following requirements: It is made after the distributee reaches

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Catch-up Contribution

Definition An additional contribution that can be made to a retirement plan by a participant who is at least age-50 by the end of the

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