GLOSSARY

A - L

Blackout Period
Department of Labor regulations define a Blackout Period as “any time period during which (1) a right to direct plan investments or diversify plan assets within a self-directed account; (2) a right to obtain a plan loan, or (3) a right to obtain a plan distribution, is temporarily suspended, limited or restricted for more than three consecutive business days. “

The blackout period encompasses two distinct elements:

• Freeze period (from the date at which the outgoing recordkeeper freezes accounts to the receipt of good order data and fund transfer by the incoming provider),
• Installation period (from the receipt of good order data and fund transfer to the complete release of account data to participants).

Collective Investment Trust (CIT)
While mutual funds are available to retail investors, Collective Investment Trusts (CIT) are only available to institutional investors such as 401(k) plans.  Unlike mutual funds, which are regulated by the Investment Company Act of 1940, CITs are exclusively offered to institutional investors and are governed by the Employee Retirement Income Security Act (ERISA).

CITs typically offer greater fee flexibility. While mutual fund fees are standardized across share classes regardless of investment size, CIT fees can be negotiated based on the total assets of the participating plan. This often results in lower costs and expenses for larger plans, making CITs an attractive option for institutions seeking cost-efficient investment solutions.

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Think of a Collective Investment Trust as the VIP lounge of investing—no retail foot traffic allowed. It’s a private club where only institutional investors like 401(k) plans get past the velvet rope. Inside this exclusive club, fees aren’t fixed—they’re negotiable. The bigger your plan’s assets, the better your deal. CITs often serve up the same investment flavors as mutual funds, but at a discount. No frills, lower expenses, and a tailored experience for those with serious investing clout.

Equity Wash
An equity wash is a rule that requires a plan participant to move money from a stable value fund to a non-competing fund (like an equity fund) for a set period (usually 90 days) before it  can be exchanged into a competing option (like a money market fund or short-term bond). It is designed to protect both participants and the stable value fund from the impact of “yield chasing” between investment options

Fund Mapping
In a service provider transition, fund mapping is the process or formula to allocate plan assets among the investment options available in the plan at the new retirement plan service provider based on the allocation of plan assets at the former service provider.

Group Annuity Contract
A Group Annuity Contract is a financial agreement between an insurance company and an employer or retirement plan sponsor, designed to provide retirement benefits to a group of participants—typically employees in a defined contribution or defined benefit plan. Rather than issuing individual policies, the insurer manages a pooled investment account under one contract that covers all eligible participants.

These contracts can offer a range of features, including guaranteed income options, fixed or variable returns, and investment management services. They’re often used in 401(k), 403(b), to help participants accumulate retirement savings or convert those savings into lifetime income. The terms—including fees, guarantees, and payout structures—are negotiated at the group level, which can result in cost efficiencies and simplified administration.

Whimsical definition for social media post:

A Group Annuity Contract is like a financial carousel built for a crowd by an insurance company that promises the ride won’t stop when the paychecks do. It’s a collective agreement, usually set up by an employer or retirement plan sponsor, where participants pool their retirement savings into one big account managed by an insurer. The magic happens when retirement rolls around: the insurer can transform those savings into a steady stream of income, like tickets that keep coming long after the fair closes. The contract is designed to keep the income flowing, often for life. It’s structured, secure, and built for the long haul—like a well-oiled ride that trades thrills for peace of mind.

In-kind Transfer Conversion Strategy
In the case of a plan sponsor electing an in-kind transfer conversion strategy, the prior service provider and the incoming service provider re-register the actual securities held in trust for the plan. Participants in a plan that elects an in-kind conversion strategy remain invested through the blackout period and are never out of the market. Other options include the “mapping” and the “re-enrollment” conversion strategies.

M - Z

Mapping Conversion Strategy
A mapping conversion strategy is a type of service provider transition allocating account balances among the investment options available in the plan at the new provider based on the investment allocation of current plan assets at the former service provider. The allocation of account balances is mapped from the prior provider (elections mapping process). A mapping conversions strategy does not require participant direction. Other options include the “in-kind transfer” and the “re-enrollment” strategies.

Mutual Fund
A mutual fund is a professionally managed investment vehicle that pools money from multiple shareholders to invest in a diversified portfolio of securities—such as stocks, bonds, and money market instruments. The fund is overseen by a fund manager, whose role is to select and manage investments in line with the fund’s objectives.

Each investor owns shares in the fund and benefits proportionally from any gains or losses, based on the amount they’ve invested. The value of each share is known as the Net Asset Value (NAV), which is calculated by dividing the total value of the fund’s assets (minus liabilities) by the number of outstanding shares. Mutual funds are regulated by the U.S. Securities and Exchange Commission (SEC), ensuring transparency, accountability, and investor protection.

Mutual funds come in multiple share classes (or price level) depending on

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A financial potluck where everyone brings money to the table, and a professional chef (aka fund manager) whips up a diversified investment feast. You don’t have to pick the ingredients—just enjoy a slice of the returns (or losses) based on how much you chipped in.

Put
put op·tion /ˈpo͝ot ˌäpSHən/ noun

In the 401(k) plan investment arena, a put option or wait period is a common feature of stable value options. When a plan sponsor wants to transition their plan to another recordkeeper, or to swap out their stable value investment for another option, most stable value pooled funds require a 12-month advance notice (wait period) before the transfer of stable value assets.
A "put" allows the plan sponsor to exit the fund at contract value (or book value) on a specified date, regardless of the market value of the underlying fund. A put option protects the principal amount of the plan sponsor’s investment, ensuring that the value of the investment pool doesn’t fall below a certain level. Put options facilitate an orderly withdrawal from the fund and protect the remaining plans, plan participants, and wrap issuers from the negative impact of an abrupt liquidation of fund assets, especially when the fund’s market-value-falls below the-contract-value.
To think of it another way, a put option is like the certainty of selling a home at a specified price on a set future date, regardless of the market value of the home. You may sell the home at market value now or you may hold off until the set date to receive the specified price.

Re-enrollment Conversion Strategy
A re-enrollment conversion strategy requires participants to make new investment elections. Participant account balances are invested at the new service provider based on new investment allocations elected by the participant. In the absence of participant direction, account balances are invested in the default election selected by the plan sponsor. A re-enrollment strategy does not require fund mapping; it can be implemented even if the allocation of funds at the prior service provider is not available. A re-enrollment strategy gives inactive participants an additional opportunity to join the plan. Other options include the “in-kind transfer” and the “mapping” conversion strategies.

Re-enrollment Conversion Strategy
A re-enrollment conversion strategy requires participants to make new investment elections. Participant account balances are invested at the new service provider based on new investment allocations elected by the participant. In the absence of participant direction, account balances are invested in the default election selected by the plan sponsor. A re-enrollment strategy does not require fund mapping; it can be implemented even if the allocation of funds at the prior service provider is not available. A re-enrollment strategy gives inactive participants an additional opportunity to join the plan. Other options include the “in-kind transfer” and the “mapping” conversion strategies.

Wrap (Stable Value Wrap)
Wrap as in “stable value wrap” is an insurance contract. A Stable Value wrap provides a layer of protection for an investment portfolio (typically a bond portfolio), so the value of your investment remains stable and secure, regardless of market volatility.  The quality of the wrap is a function of the insurance company’s financial ratings.

Four main categories of stable value contracts provide a guarantee of principal

1. Group Annuity General Account: : Funds invested in this type of contract are part of the insurance company’s general account, and subject to the company’s financial stability.
2. Group Annuity Separate Account: Funds invested in this type of contract are segregated from the firm's general account, and earmarked solely to the benefit of participants.
3. Guaranteed Investment Contract (GIC): A GIC is a stand-alone contract offering a specific credit rate for a specific time for one specific plan.
4. Wrap Contract : Funds invested in this type of contract are held by the plan in a Collective Investment Trust (CIT), managed account, or insurance separate account, with an insurance wrap (or guarantee) issued by an insurance company.

Like all the ingredients in your lunch sandwich are held together by a tortilla wrap, all the investments in your stable value fund are held together by a stable value wrap that protects the book value of the portfolio, regardless of its market value.  So, next time you enjoy a delicious sandwich, remember that a stable value wrap holds your investments together, secure and stable.