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Early (or Premature) Distribution A distribution from a qualified plan, an IRA, or a 401(k), Keogh, or similar plan that takes place before the recipient has reached age 59 ½ and is not associated with a rollover. A 10% penalty is assessed to the amount that is distributed from a plan unless the distribution is made to a beneficiary after the death of the employee, attributable to the employee's disability, a 72(t) distribution or, for qualified plans, made to an employee after separation of service and after attainment of age 55. Early (or Premature) Withdrawal A distribution from an IRA or other tax-favored retirement plan by a participant prior to the age of 59 ½ that is not associated with a rollover. Earnings Multiplier An estimated price-earnings ratio adjusted for the current level of interest rates. Used to determine the value of a stock, based on Graham's formula relating value to recent earnings and expected earnings growth rates. Earnings per Share The net income of the firm divided by the number of common stock shares outstanding. Earnings Yield Earnings per share for the most recent 12 months divided by market price per share. Relates the generation of earnings to share price. It is the inverse of the price-earnings ratio. Education IRA A special type of nondeductible IRA to which taxpayers can contribute up to $500 per year per beneficiary, beginning in 1998. The Education IRA was established under the taxpayer Relief Act of 1997. To be considered tax free, the money withdrawn from this IRA must be allocated for qualified higher-education expenses. Elective Contribution A contribution made to a 401(k) by an employer on an employee's behalf pursuant to the agreement for salary deferral. Elective Deferral A deferral of compensation made by the employee participant of a CODA plan. Employee Contribution The amount of money an employee puts into a qualified retirement plan by having a certain amount deducted from his or her paycheck. Employee Stock Ownership Plan A profit sharing or stock bonus plan in which the funds must be invested primarily in the employer's securities. An ESOP may borrow to obtain the company stock. Employer Contributions Elective deferrals, nonelective contributions, and discretionary profit sharing contributions to a qualified plan. Employer Manual A manual that is prepared for the Plan Sponsor that provides the administrative procedures for the plan. It usually will provide all forms and instructions necessary for complete administration. Employer Matching Contribution The amount, if any, that the employer contributes to the employee's 401(k) account. Matching contributions are usually configured to provide a set percentage of an employee's contribution up to a fixed limit. Equities Investment in which the investors obtain a portion of ownership. Real estate and common stocks represent equity instruments. Usually, their chief benefit is potential growth in value. It is another word for stock. Equity Risk Premium An extra return that the stock market must provide over the rate on Treasury bills to compensate for market risk. ERISA Employee Retirement Income Security Act of 1974 - was developed to protect the rights of participants (and their beneficiaries) in qualified plans. Excess Contributions The excess of the elective contributions made to a 401(k) plan for highly compensated employees for the plan year over the maximum amount of such contributions permitted under the ADP test for the year. Excess Distribution The total distributions made to an individual in a given year which exceed $155, 000 (in 1996, or $112,500 as indexed for inflation). A 15% excise tax is applied to this excess amount. If special averaging is elected with respect to a lump sum distribution, the lump sum distribution is treated separately for purposes of applying the penalty tax, and the annual limitation discussed above is 5 times the otherwise applicable limit or $775,000 (in 1996, or $562,500 as indexed for inflation). Excess Retirement Accumulation Tax The estate of a participant may be subject to an additional estate tax equal to 15% of the deceased participant's excess retirement accumulation. The excess retirement accumulation means the excess of: 1) The value of the deceased participant's aggregate balance in all plans and IRAs OVER 2) The present value of a single life annuity with annual payments equal to the excess distribution annual threshold amount ($155,000 as indexed in 1996). Excess Returns Returns in excess of the risk-free rate or in excess of a market measure such as the S&P 500 index. Exclusion Allowance One of the contribution limit tests applicable to 403(b) plans. The actual exclusion allowance for a particular employee is determined through a set of calculations that consider the individual's includible compensation, years of service, and amounts previously excluded. Expected Return The average of a probability distribution of possible returns. Expense Ratio The ratio of total expenses to net assets of a mutual fund. Expenses include management fees, 12(b)1 charges, if any, the cost of shareholder mailings and other administrative expenses. The ratio is listed in a fund's prospectus. Expense ratios may be a function of a fund's size rather than of its success in controlling expenses.