Glossary of Payroll Terms

401(a)

This is a qualified pension plan if certain federal requirements are met. These include minimum participation requirement, minimum vesting standards, contribution limits, and nondiscrimination rules.

401(k)

Cash or Deferred Arrangements (CODA). An optional means of saving money for retirement. Money is deducted from each paycheck, pre-tax, and deposited in an account that is set aside until the employee retires. PERA, 401(k) Voluntary Investment Program (VIP) (PERA members only) is a 401(k). The current annual maximum contribution: $10,500 or 23% of eligible income, whichever is less (subject to change annually). Example: John has designated that 12% of his gross earnings will be deducted from his paycheck and deposited in his 401(k) account. He does not pay any taxes on the money until he withdraws it. Money from the account is then invested in a number of interest accruing funds.

403(b)

Tax Sheltered Annuities. This is an annuity contract that is purchased under a qualified plan covering employees of an education institution designated under federal law. There are specific requirements in order to make sure the plan is qualified, which are also described by federal law.

457

Deferred Compensation Plan. A retirement plan in the form of an annuity or mutual fund for the employees of public-sector employers such as employees of state and local governments and for tax-exempt organizations. A 457 plan is offered by the State of Colorado.

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