- 12b-1 Distribution Fees
- Charged by some provider companies to cover marketing costs and expenses for distributing their product.
- Acquired Fund Fees and Expenses
- Line item in a fund-of-funds prospectus that shows the operating expenses of the underlying funds.
- 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.
- Annual Rate of Return
- The annual rate of gain or loss on an investment expressed as a percentage.
- Asset Allocation
- A method of investing by which investors include a range of different investment classes, such as stocks, bonds and cash equivalents, in their portfolios.
- Asset Class
- A group of securities of 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 equivalents (e.g., money market funds).
- 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, 5 basis points (bps) equal 0.05%. An investment with an expense ratio of 5bps would charge $0.50 per $1,000 invested on an annual basis. Investment expenses, interest rates and yield differences among bonds are often expressed in basis points.
- 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.
- Your primary beneficiary is the first individual or entity that will receive the balance/benefits of your account upon your death. The contingent beneficiary will receive the balance/benefit of your account if you and your primary beneficiary die at the same time or if he or she dies before you. You can name multiple primary and contingent beneficiaries and designate a percentage that should go to each.
- A debt security that 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.
- Capital Preservation
- An investment goal or objective to keep the original investment amount (the principal) from decreasing in value.
- Cash Equivalent
- An investment that is short term, highly liquid and has high credit quality.
- Competing Funds
- A fixed income fund (usually a money market or bond fund that has little, if any, market volatility) with characteristics similar to a stable value option and for which certain exchange restrictions exist with respect to a stable value option. This type of restriction may also be referred to as an equity wash. For example, direct exchanges between the Fidelity Managed Income Portfolio and the Fidelity Retirement Government Money Market Portfolio or the Fidelity Freedom Income Fund (considered “competing funds”) is not permitted. Before exchanging between these funds, you must first exchange to a “noncompeting” fund for 90 days.
- The practice of investing in multiple asset classes and securities with different risk characteristics to reduce the risk of owning any single investment. Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets.
- 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 Wash Restriction
- A provision in certain stable value or fixed income products under which transfers made from the stable value or fixed income product are required to be directed to an equity fund or other non-competing 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 fund (such as a money market fund).
- Expense Ratio
- A measure of what it costs to operate an investment, expressed as a percentage of its assets or in basis points. For investments available in the ORPHE, the expense ratio includes the cost to the provider for record keeping, communications and other costs associated with maintaining the plan. These are costs the investor pays through a reduction in the investment’s rate of return.
- Fixed Annuity
- A traditional insurance investment vehicle, often used for retirement accounts, which guarantees principal and a specific interest rate and may also offer dividends.
- Fund expense ratios
- (also known as total fund operating expenses) - Ongoing asset-based (annualized) expenses that can change from time to time, expressed as a ratio (expenses divided by net assets). For example, a fund with a total annual operating expense of 0.08 percent means you pay $0.80 per every $1,000. Expense ratios can be broken down into several potential underlying components, depending upon the type of investment and/or provider chosen. Various funds can have different underlying fee components even though their expense ratios may be the same.
- 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.
- Group Life Insurance (GLI)
- You qualify to continue your GLI in retirement if you meet the age and service requirements. If you are covered by ORPHE Plan 1 (employment date prior to July 1, 2010), you must be age 50 with 10 years of service or age 55 with five years of service. If you are covered by ORPHE Plan 2 (employment date July 1, 2010 or later), you must be age 60 with 10 years of service or your age plus service must equal 90 to continue your GLI when you leave employment. While you are employed your GLI is your salary rounded to the next $1,000 and doubled. In retirement your GLI coverage reduces by 25 percent per year until it reaches 25 percent of the coverage just prior to your retirement date. If you take a full distribution of your ORPHE account balance and your balance goes to $0.00 or if your annuity expires, then your GLI benefit ceases.
- Health Insurance Credit (HIC)
- The HIC is a payment to state retirees to help offset the cost of their health insurance in retirement. You qualify if you have 15 years of state service, pay for your own health insurance and receive regular periodic distributions from your ORPHE account. You must also meet the age requirement. If you are covered by ORPHE Plan 1 (employment date before July 1, 2010), you must be at least age 50. If you are covered by ORPHE Plan 2 (employment date on or after July 1, 2010), you must be age 60.
- An unmanaged group of securities whose overall performance is used as a benchmark against which financial or economic performance may be measured, such as the S&P 500.
- The overall general upward price movement of goods and services in an economy. Inflation is 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 issuer.
- Investment Management Expense
- Generally includes investment management activities, portfolio accounting and custodial services.
- Investment Option Performance (IOP)
- Listing of core investments available in the Plans comparing performance to benchmarks, performance over time and expense ratios.
- Junk Bond
- Another term for high-yield bond, which is a bond issued by a corporation that is deemed a high credit risk. These bonds offer the potential for higher returns because the issuing companies have a higher risk of defaulting on the bonds.
- Lifetime Annuity
- An annuity that pays for your lifetime or that of your survivor. A lifetime annuity may be purchased within your ORPHE to ensure you do not deplete your Plan account balance.
- The ease with which 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 of sale for redemption.
- Market Capitalization (Market Cap)
- The market value of a company’s outstanding securities. 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.
- Mortality and Expense (M&E) Fees
- These fees are charged by insurance providers to cover the cost of a variable annuity contract, which can include the guarantee of a lifetime income stream, interest and expense guarantees and provided benefits. Acquired fund fees and expenses that represent expenses incurred indirectly by a fund through its ownership of shares/units of other funds or investment companies.
- Mutual Fund
- An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
- Passive Management
- The process or approach to operating or managing a fund in a passive or non-active 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.
- Plan Administration/Record-keeping Fees
- The expenses for operating and administering retirement plans may be passed along to participants. These expenses may be in addition to the annual operating expenses of the investments.
- Power Of Attorney (POA)
- A legal document giving an individual or organization the authority to obtain information on your accounts, transact business and act on your behalf.
- Proprietary vs. Non-Proprietary Funds
- Proprietary funds are ones that a financial institution sells and also manages. Non-proprietary funds are funds offered on a financial institution investment platform that are not their own funds.
- Record Keeper
- A company or individual that tracks the status of your retirement benefits.
- Required Minimum Distribution (RMD)
- The IRS requires that you begin withdrawing funds from your employer-sponsored retirement plans and IRAs. In the case of your ORPHE, you must begin your RMD when you reach age 70 ½, unless you continue to be employed in a position eligible for retirement benefits through a plan administered or authorized by VRS.
- Retirement Annuity/Group Retirement Annuity (RA/GRA)
- Retirement Annuity and Group Retirement Annuity are terms used by TIAA and refer to the base retirement annuities available in the Plan.
- The potential for investors to lose some or all the amounts invested or to fail to achieve their investment objectives.
- A general term for stocks, bonds, mutual funds and other investments.
- Self-Directed Brokerage Account
- A plan feature that permits participants to purchase investments that are not included among the plan’s general menu of designated investment alternatives.
- Short-Term Trading/Redemption Fees
- These fees are used to limit short-term trading in a fund. It is an amount charged to an investor by a fund company when money is withdrawn from a fund within a short period of time, typically 30, 90, 180 or 365 days. These fees are not considered to be sales loads because the fees recouped by the fund company are paid back into that same fund to compensate for the cost of the short-term trading activity.
- A security that represents an ownership interest in a corporation.
- Surrender and Transfer Fees
- These fees are charged by an insurance company when an investor desires to withdraw a certain dollar amount from a fund before the expiration of a stated period.
- 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.” The Fidelity Freedom Funds are target date funds.
- Tax-Deferred Investment
- An investment where taxes on pre-tax contributions and earnings are postponed (or deferred) until withdrawn. Plans such as 401(k), 403(b), and 457 plans traditional IRAs, and your 401(a) ORPHE are examples of tax-deferred investments.
- Time Horizon
- The amount of time that an investor expects to hold an investment before taking money out.
- Total Return
- Return on an investment over a specific period of time. Total return includes income and share price appreciation and depreciation. Total return assumes that all dividends and capital gains paid during the period are reinvested to buy additional shares.
- Transfer Payment Annuity
- TIAA enables you to withdraw or transfer your TIAA Traditional Annuity balance in 10 approximately equal annual installments. When using this type of annuity, consider whether it will result in depletion of your account balance and loss of group life insurance and the retiree health insurance credit.
- A representation of ownership in an investment that does not issue shares. Most collective investment funds, such as those offered in the VRS Plans, are divided into units instead of shares.
- Unit Value
- The dollar value of each unit on a given date.
- Variable Annuity
- An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio.
- 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.
- 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. Wrap fees for stable value funds allow for the protection of principal.