Financial terms can get murky at times. So let’s clear some critical ones up. Specifically:
Finance-to-English Translation Guide
Your estate is the collection of property and money left behind when you die.
This is a person or an organization (like, say, a charity) that you choose to receive money, or even property, after you die.
It’s critical to declare a beneficiary (or multiple beneficiaries) for all of your accounts and policies. Life insurance is the most obvious policy that needs a beneficiary. But what if you have money in a savings account, like a 401(k) or HSA? You’ll want to make sure you declare where that money is supposed to go. (You can even declare your own estate as a beneficiary. Though you may want to have other plans in place for how your estate itself will be handled.)
It’s also pretty wise to double-check every year to make sure you have everything set to go where you want it to. Relationships can change, and it may make sense sometimes to adjust your beneficiaries accordingly.
You register your beneficiaries for all your plans by going to WatersBenefitsNow.com, www.401k.com, for your 401(k) and HSA beneficiaries, and www.Fidelity.com for any Waters Equity Plans you may have.
You can enter, review, or update your beneficiary choices at any time.
Salaries can change over the year; for example, you might get a raise. And sometimes, depending on the type of company you work for and your position, a salary can be made up of different types of pay, like base pay, bonuses, commissions, and overtime.
The trick is, certain benefits are based off of the amount of your salary. And in order to account for all the kinds of variability a salary can have, you need a defined way of calculating what your salary is. That defined way of calculating your salary is called your “benefit salary.”
At Waters, your benefit salary is:
- Your base pay, as of the prior September 1st (or as of your first day, if you started after September 1st)
- Your average annual commission in the two, full calendar years prior to September 1st
- Your target bonus under the Waters Annual Incentive Plan
Let’s look at what Hannah’s benefit salary will be for the upcoming year.
Step 1 is to figure out Hannah’s base pay.
Hannah started off the year making $35,000 in base pay, but got a raise in March to $38,000. Since the raise came before September 1st, her benefit salary will be $38,000 for the upcoming year.
In some cases, benefit salary can include your annual bonus target or an average of your annual commissions. When that’s the case, we move on to Step 2.
Since Hannah in in sales, Step 2 is to calculate her commission average. (If Hannah did NOT make a commission, we’d just look at her target bonus for the year.)
Last year, Hannah made $14,000 in commissions. And the year before that, she made $12,500. The commission number is determined by averaging those two years: ($14,000 + $12,500)/2 = $13,250.
We then add the base pay to the commission average: $38,000 + $13,250 = $51,250.
In certain situations, your company may give you money (like a match to a savings account) or other assets (like stock options), but require you to work for the company for a certain amount of time before you qualify to keep the money or assets. This process is called vesting.
Sometimes vesting comes in multiple steps, qualifying you to keep a growing percentage of the money or assets, year after year.
At Jun’s last job, he received $5,000 in stock options. However, those options required 5 years of vesting for Jun to keep 100% off the options. Each year he worked for the company increased the amount he was eligible for by 20%.
Here’s how vesting broke down for Jun in this case:
- At the end of his first year, Jun was entitled to 20% his stock options ($1,000)
- At the end of his second year, Jun was entitled to 40% ($2,000)
- At three years, Jun was entitled to 60% ($3,000)
- At four years, Jun was entitled to 80% ($5,000)
- And at 5 years, he was fully vested, so he was entitled to 100% of his options ($5,000)
Vesting can also come in just one step, meaning that you go from 0% vested to 100% just by reaching a single milestone.
And in some cases, vesting is immediate, from the day you start. Meaning you are 100% vested from the day you begin working for the company.