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Glossary

This glossary is intended solely as an informal aid to help you understand some terms commonly used in the life insurance industry. The definitions in the glossary do not modify or supersede the terms of any annuity contract or any life, disability income, or long-term care insurance policy issued by MassMutual or any of its affiliates. Please consult the contract or policy issued to you for the specific definitions applicable under that contract or policy.

 

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 1



A

Accumulation Phase
The period of time during which a deferred annuity’s contract value has the opportunity to grow.

 

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.

 

Aggressive
An investment approach that accepts above-average risk of loss in return for potentially above-average investment returns.

 

Aggressive Growth Fund
An investment fund that takes higher risk of loss in return for potentially higher returns or gains.

 

Annual Rate of Return
The annual rate of gain or loss on an investment expressed as a percentage.

 

Annual Report
A yearly report or record of an investment’s (e.g., a mutual fund’s or company’s) financial position and operations.

 

Annuitant
The person whose life is used to determine the benefits payable under an annuity contract. Frequently, this person is also the annuity owner.

 

Annuity
A contract where an individual makes one or more purchase payments to a life insurance company in exchange for the company's commitment to pay a stream of income for a specific period of time or for the annuitant’s lifetime. There are a variety of annuities. Some annuities pay income immediately and others allow the payment of income to be deferred. Within each of these categories, there are also fixed annuities and variable annuities. A fixed annuity contract offers a fixed interest rate guaranteed for a set period of time on each purchase payment. Any interest rate applied to a purchase payment will never be less than the minimum allowed by law in the state where the contract was issued. A variable annuity offers investment choices to which the contract owner can allocate purchase payments.

 

Annuity Commencement Date
The date set forth in the annuity contract on which annuity payments will start. Also known as the “annuity start date.”

 

Annuity Owner
The person who has the right to make decisions about an annuity contract. Frequently, this person is also the annuitant.

 

Appreciation
An increase in the value of an investment.

 

Asset
Anything with commercial or exchange value owned by a business, institution or individual. Examples include cash, real estate and investments.

 

Asset Allocation
The spreading of investments among different asset classes, such as stocks, bonds, and cash reserves. The goal of asset allocation is to optimize the risk/reward tradeoff based on specific situations and goals of the investor and/or the mutual fund. Many financial professionals believe that the mix of asset classes has a greater impact on long-term portfolio results than does the performance of any individual investment.

 

Asset Charge
A fee charged by the plan and borne by plan participants to cover expenses associated with the operation of the plan. On a per-participant basis, plans typically charge an amount representing a pre-stated percentage of the overall value of a participant’s investment accounts within the plan. Not all retirement plans impose asset charges.

 

Asset Class
A group of securities or 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).

 

Average Annual Total Return
The yearly average percentage increase or decrease in an investment’s value that includes dividends, gains, and changes in share price.

 



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B

Back-end Load
A fee imposed by some funds when shares are redeemed (sold back to the fund) during the first few years of ownership. Also called a contingent deferred sales charge.

 

Balanced Fund
A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds.

 

Bank Owned Life Insurance (BOLI)
Generally permanent life insurance purchased by a bank on the lives of its employees or directors to fund the liabilities arising from its employee benefit programs, such as deferred compensation, supplemental retirement income, and post retirement medical benefits. The bank is the owner and beneficiary of a BOLI policy.

 

Barclay’s Capital U.S. Aggregate Bond Index
A common index widely used to measure performance of U.S. bond funds.

 

Basis Point
One-hundredth of one percent, or 0.01%. For example, 20 basis points equal 0.20%. Investment expenses, interest rates, and yield differences among bonds are often expressed in basis points.

 

Benchmark
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.

 

Beneficiary
The person or entity named in a life insurance policy, a qualified retirement plan, or an annuity who, by the terms of such a policy, contract or plan, is entitled to receive proceeds payable upon the death of the insured, annuitant or the plan participant.

 

Board of Directors
An elected group of individuals who govern a corporation, setting company policy and procedures, as well as appointing senior officers. The board of directors must abide by and execute the company's charter. A board member may be unaffiliated with the corporation, representing community interests, professional organizations, or industry establishments.

 

Bond
A debt security issued by a corporation, government, or governmental agency that obligates the issuer to pay interest at pre-determined rates and intervals and repay the principal at maturity. Every bond has a set face value, also known as a par value, which specifies the amount of money the bondholder will receive when the bond reaches maturity. The face value will never change, but the market value of a bond may fluctuate. If a bondholder sells a bond before its date of maturity, he or she may receive more or less than the face value.

 

Bond Fund
A fund that invests primarily in bonds and other debt instruments.

 

Bond Rating
A rating or grade that is intended to indicate the credit quality of a bond, considering the financial strength of its issuer and the likelihood that it will repay the debt. Agencies such as Standard & Poor’s, Moody’s Investors Service, and Fitch issue ratings for different bonds, ranging from AAA (highly unlikely to default) to D (in default).

 

Broker
A person who acts as an intermediary between the buyer and seller of a security, insurance product, or mutual fund, often paid by commission. The terms broker, broker/dealer, and dealer are sometimes used interchangeably.

 

Brokerage Window
A plan feature that permits participants to purchase investments that are not included among the plan’s general menu of designated investment alternatives.

 

Business Succession
The prearranged process that addresses the orderly transfer of control of a business entity in the event of retirement, termination or death of key persons who manage or own the business. Business succession broadly involves legal, financial, tax, and family concerns.

 

Buy-Sell Agreement
A written, legal contract that provides for the purchase of a business from an owner who wishes to sell, wants to terminate involvement, is permanently disabled, or has died. A buy-sell agreement generally allows for a different, future ownership structure. The agreement may be funded with life and disability income insurance, and it may contain specific purchase arrangements.

 



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C

Capital Appreciation Fund
An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices are expected to rise.

 

Capital Gain
An increase in the value of an investment, calculated by the difference between the net purchase price and the net sale price.

 

Capital Loss
The loss in the value of an investment, calculated by the difference between the purchase price and the net sale price.

 

Capital Preservation
An investment goal or objective to keep the original investment amount (the principal) from decreasing in value.

 

Capitalization (Cap)
The total market value of a company's outstanding equity.

 

Cash Equivalent
An investment that is short term, highly liquid, and has high credit quality.

 

Cash Value
The accumulated cash buildup in a permanent life insurance policy or a deferred annuity contract that the policy or contract owner receives if the policy/contract is surrendered. Cash values paid to the owner are reduced by any outstanding debt and, if applicable, surrender charges.

 

Cash Value Life Insurance
Also known as permanent or ordinary life insurance. Life insurance that offers a cash value, such as whole life, universal or variable universal life. Cash value life insurance generally refers to most forms of life insurance other than term.

 

Certified Financial Planner (CFP)
One who has successfully passed the exams of the Certified Financial Planner Board of Standards Inc., earning certification as a financial advisor. Areas of expertise generally include banking, investments, retirement, estate planning, insurance, and taxes.

 

Claim
A request for payment under the terms of an insurance policy or contract.

 

Claims-Paying Ability Rating
Provides an assessment of an insurance company's ability to pay claims, relative to other insurance companies.

 

Collective Investment Fund
Investments created by a bank or trust company for employee benefit plans, such as 401(k) plans, that pool the assets of retirement plans for investment purposes. They are governed by rules and regulations that apply to banks and trust companies instead of being registered with the SEC. These funds are also referred to as collective or commingled trusts.

 

Commission
Compensation paid to a broker or other salesperson for his or her role when investments are bought or sold.

 

Common Stock
An investment that represents a share of ownership in a corporation.

 

Company Stock Fund
A fund that invests primarily in employer securities that may also maintain a cash position for liquidity purposes.

 

Competing Funds
An investment fund that is identified by the investment manager of another fund and which is subject to special rules relating to an investor’s ability to buy and sell investments between the two funds. See Equity Wash Restriction.

 

Compounding
The cumulative effect that reinvesting an investment’s earnings can have by generating additional earnings of their own.

 

Conservative
An investment approach that accepts lower rewards in return for potentially lower risks.

 

Contingent Beneficiary
On most insurance applications, owners have the option to name a primary beneficiary and a contingent, or secondary, beneficiary. At the death of the insured, a death benefit of an in force contract is payable to a beneficiary. The primary beneficiary is the beneficiary who will receive the proceeds upon death of the insured. If, at the death of the insured, the primary beneficiary is ineligible or is deceased, the named contingent beneficiary will then receive the proceeds.

 

Contingent Deferred Sales Charge (CDSC)
A fee imposed when shares of a mutual fund or a variable annuity contract are redeemed (sold) during the first few years of ownership. Also called a back-end load.

 

Convertible Term Insurance
Life insurance that provides the policyholder with a right (as described in the policy) to convert the face amount of term insurance to a guaranteed issue identical face amount of permanent life insurance depending on the product.

 

Corporate Bond
A bond issued by a corporation, rather than by a government. The credit risk for a corporate bond is based on the re-payment ability of the company that issued the bond.

 

Corporate Owned Life Insurance (COLI)
Generally permanent life insurance purchased by an employer on the lives of its employees or directors to fund the liabilities arising from its employee benefit programs, like deferred compensation, supplemental retirement income, and post retirement medical benefits. The employer is the owner and beneficiary of a COLI policy.

 

Credit Risk
The risk that a bond issuer will default, meaning not repay principal or interest to the investor as promised. Credit risk is also known as "default risk."

 

Current Yield
The current rate of return of an investment calculated by dividing its expected income payments by its current market price.

 

Custodian
A person or entity (e.g., bank, trust company, or other organization) responsible for holding financial assets.

 



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D

Death Benefits
Payments from an insurance policy, annuity contract or an Individual Retirement Account (IRA) to a beneficiary upon the death of the insured, annuitant or plan participant.

 

Decreasing Term Insurance
This term insurance policy has a death benefit that decreases over time. Decreasing term insurance is often used in conjunction with a mortgage or other amortized debt. For example, a holder of a 30-year mortgage may also hold a 30-year decreasing term insurance policy to cover the mortgage if he or she dies before it is paid off.

 

Deferred Annuity
A long-term contract designed to accumulate assets for retirement and turn those assets into a predictable stream of income at some point in the future.

 

Deferred Compensation
The deferral of receipt of current earned income or compensation to a later date, usually retirement. The intent is to defer receipt to a date when the recipient might be subject to a lower marginal tax rate.

 

Defined Benefit Plan
This employer-funded retirement plan is designed to pay a predetermined benefit to an employee based on years of service and salary or wages. Employer contributions adjust annually on an actuarial basis, and the employer is responsible for all investment selections and decisions. Generally, defined benefit plans provide eligible participants with a fixed monthly benefit for life. These benefits are the obligations of the company providing the plan and insured by a government agency - the Pension Benefit Guaranty Corporation (PBGC).

 

Defined Contribution Plan
Defined Contribution Plans, such as 401(k) plans, offer tax deferred retirement savings that depend on the amount contributed by the employee/employer and any earnings. Up to certain limits, these contributions are not currently taxed and the earnings on them are also tax deferred until received.

 

Deflation
The opposite of inflation — a decline in the prices of goods and services.

 

Depreciation
A decrease in the value of an investment.

 

Designated Investment Alternative
The investment options picked by your plan into which participants can direct the investment of their plan accounts.

 

Direct Rollover
A tax-free transfer of money or property from the trustee or custodian of one qualified retirement plan or account to another.

 

Disability Benefit
Benefits received from a disability income insurance policy that are payable if the insured becomes totally (and, in some cases, partially) disabled.

 

Disability Income Insurance
A policy that pays the insured a portion of his or her income in the event that a temporary or permanent disability prevents the insured from working in his or her occupation or, in some cases, in any occupation.

 

Diversification
The practice of investing in multiple asset classes and securities with different risk characteristics to reduce the risk of owning any single investment.

 

Dividend
Money an investment fund or company pays to its stockholders, typically from profits. The amount is usually expressed on a per-share basis.

 

Dow Jones Industrial Average (Dow or DJIA)
A widely followed price-weighted index of 30 of the largest, most widely held U.S. stocks.

 



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E

Early Withdrawal
The removal of funds from a fixed-term investment before the maturity date or from a tax-deferred investment or retirement savings account before a fixed time. One example would be a distribution from an Individual Retirement Account (IRA) taken before age 59½, other than for death or disability. Early withdrawals may be subject to a penalty.

 

Early Withdrawal Penalty
A 10% federal income tax penalty levied against withdrawals from a qualified retirement plan (e.g., IRA, 401(k) plan, or profit-sharing plan) that are taken prior to age 59½. Certain situations may qualify as exceptions depending on the type of plan and the situation. Exceptions to the tax penalty include: if an individual is disabled, has higher education expenses, has first-time homebuyer expenses, has unreimbursed medical expenses that exceed 7.5% of adjusted gross income (AGI), is responsible for medical insurance premiums as a result of unemployment, is receiving payments in the form of substantially equal periodic payments, or is a beneficiary of death proceeds.

 

Emerging Market
Generally, economies that are in the process of growth and industrialization, such as in Africa, Asia, Eastern Europe, the Far East, Latin America, and the Middle East which, while relatively undeveloped, may hold significant growth potential in the future. Investing in these economies may provide significant rewards, and significant risks. May also be called developing markets.

 

Emerging Market Fund
A fund that invests primarily in emerging market countries.

 

Employee Benefit Plan
The package of employee benefits offered by an employer beyond the salary or wage scale, such as death benefits, health benefits, disability benefits, dental, vision, retirement, and similar programs.

 

Employer Securities
Securities issued by an employer of employees covered by a retirement plan that may be used as a plan investment option.

 

Equity Fund
A fund that invests primarily in equities.

 

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 fixed income fund (such as a money market fund).

 

Equity/Equities
A security or investment representing ownership in a corporation, unlike a bond, which represents a loan to a borrower. Often used interchangeably with “stock.”

 

Estate Planning
This process plans for the orderly administration and disposition of assets after the owner dies.

 

Estate Tax
Federal and/or state taxes that are levied on the transfer of the assets of a decedent (person who dies). Commonly, estate taxes are paid by the decedent's estate rather than by his or her heirs.

 

Exchange Traded Fund (ETF)
An investment company, such as a mutual fund, whose shares are traded throughout the day on stock exchanges at market-determined prices.

 

Expense Ratio
A measure of what it costs to operate an investment, expressed as a percentage of its assets or in basis points. These are costs the investor pays through a reduction in the investment's rate of return. See Operating Expenses and Total Annual Operating Expenses.

 



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F

Federal Deposit Insurance Corporation (FDIC)
An investment company, such as a mutual fund, whose shares are traded throughout the day on stock exchanges at market-determined prices.

 

Fiduciary
A person who owes a duty of loyalty to another person with respect to his/her property. A fiduciary can refer to an individual, company, or association responsible for holding and managing assets for any other party. One of the most common examples of a fiduciary is a trustee.

 

Financial Industry Regulatory Authority (FINRA)
A self-regulatory organization for brokerage firms doing business in the United States. FINRA operates under the supervision of the SEC. The organization’s objectives are to protect investors and ensure market integrity.

 

Financial Statements
The written record of the financial status of a fund or company, usually published in the annual report. The financial statements generally include a balance sheet, income statement, and other financial statements and disclosures.

 

First-to-Die Life Insurance
A type of life insurance policy that covers two or more insureds and pays a death benefit when the first death occurs.

 

Fixed Annuity
An annuity contract in which the insurance company makes fixed or guaranteed payments to an individual for the term of the contract.

 

Fixed Income Fund
A fund that invests primarily in bonds and other fixed-income securities, often to provide shareholders with current income.

 

Front-end Load
A sales charge on mutual funds or annuities assessed at the time of purchase to cover selling costs.

 

Fund Family
A group or “complex” of mutual funds, each typically with its own investment objective, and managed and distributed by the same company. A Fund Family also could refer to a group of collective investment funds or a group of separate accounts managed and distributed by the same company.

 

Fund of Funds
A mutual fund, collective investment fund or other pooled investment that invests primarily in other mutual funds, collective investment funds or pooled investments rather than investing directly in individual securities (such as stocks, bonds or money market securities).

 



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G

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.

 

Global Fund
A fund that invests primarily in securities anywhere in the world, including the United States.

 

Government Securities
Any debt obligation issued by a government or its agencies (e.g., Treasury Bills issued by the United States).

 

Grace Period
The period of time after the due date for a payment during which the overdue payment may be made without penalty or lapse in contractual obligations.

 

Grantor
Also known as a settlor. The creator of a trust, who transfers assets or property to a trustee for the benefit of a beneficiary or beneficiaries.

 

Gross/Net Expense Ratio
The “gross” expense ratio of mutual funds and other similar investments (together: “options”) is also known as an option’s total operating expense and represents the actual cost necessary to run the option. If an option’s investment adviser makes the choice to subsidize an option through a reimbursement or waiver to lower option expenses, the resulting figure would be the “net” expense ratio.

 

Group Annuity Contract
An annuity contract entered into between an insurance company and an owner for the benefit of a designated group, such as retirement plan participants.

 

Group Life Insurance
A type of life insurance policy that insures a group of people who are affiliated in some way, such as through employment or membership. Group life insurance is often provided by an employer as an employee benefit.

 

Growth and Income Fund
A fund that has a dual strategy of growth or capital appreciation and current income generation through dividends or interest payments.

 

Growth Fund
A fund that invests primarily in the stocks of companies with above-average risk in return for potentially above-average gains. These companies often pay small or no dividends and their stock prices tend to have the most ups and downs from day to day.

 

Guaranteed Interest Account
An annuity contract entered into between an insurance company and an owner for the benefit of a designated group, such as retirement plan participants.

 

Guaranteed Investment Contract
A contract issued by an insurance company that guarantees a specific rate of return on an investment over a certain time period.

 

Guaranteed Lifetime Withdrawal Benefit or Guaranteed Minimum Withdrawal Benefit
A feature that may be offered under an annuity contract in which the insurance company promises an individual may withdraw a specified amount from an account, even if the account balance is reduced to zero: (1) for the life of the individual, or the joint lives of two individuals (e.g., the individual and spouse); or (2) for a specified period of time.

 



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H

Household Income
The combined income of all household members from all sources, including wages, commissions, bonuses, Social Security and other retirement benefits, as well as unemployment compensation, disability, interest, and dividends.

 



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I

Immediate Annuity
An annuity contract under which periodic income payments begin within 12 months of purchase.

 

Inception Date
The date that a fund began operations.

 

Income Fund
A fund that primarily seeks current income rather than capital appreciation.

 

Income Phase
In an annuity contract, this refers to the period of time during which annuity payments are made to the payee(s).

 

Index
A benchmark against which to evaluate a fund's performance. The most common indexes for stock funds are the Dow Jones Industrial Average and the Standard & Poor's 500 Index.

 

Index Fund
An investment fund that seeks to parallel the performance of a particular stock market or bond market index. Index funds are often referred to as passively managed investments.

 

Individual Annuity Contract
An annuity contract generally entered into between an insurance company and a person or persons.

 

Individual Retirement Account (IRA)
IRA is an acronym for "Individual Retirement Account." The traditional IRA allows an individual to set aside income up to a specified amount each year (based upon current IRS limits), and have the earnings tax-deferred until withdrawal. Depending on adjusted gross income and eligibility for other pension participation, the contributions may be tax-deductible. There are several other types of IRA. The Roth IRA does not permit deduction of any contributions but exempts savings growth and withdrawals from taxation (subject to certain exceptions). The SEP (simplified employment pension) IRA is for self employed individuals and defers tax on contributions.

 

Individual Retirement Account (IRA) Rollover
Individual Retirement Accounts may receive eligible IRA fund transfers from a qualified plan or another IRA. An IRA Rollover permits continued tax-deferred accumulations on transferred funds and avoids the early withdrawal penalty.

 

Inflation
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.

 

Insured
An individual who is covered by an insurance policy.

 

Interest Rate Risk
The possibility that a bond’s or bond fund’s market value will decrease due to rising interest rates. When interest rates (and bond yields) go up, bond prices usually go down and vice versa.

 

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’s issuer.

 

International Fund
A fund that invests primarily in the securities of companies located, or with revenues derived from, outside of the United States.

 

Investment Adviser
A person or organization hired by an investment fund or an individual to give professional advice on investments and asset management practices.

 

Investment Company
A corporation or trust that invests pooled shareholder dollars in securities appropriate to the organization’s objective. The most common type of investment company, commonly called a mutual fund, stands ready to buy back its shares at their current net asset value.

 

Investment Objective
A financial goal. Different investment vehicles have different objectives. For example, a fixed-income fund may have outlined in its prospectus an objective of providing current income by investing in fixed-income securities, whereas, a capital growth fund looks to provide long-term capital gains and high potential future income. Individual investors also have personal investment objectives, based on their own time horizon and tolerance for risk.

 

Investment Options
Mutual funds and/or other similar investments designated as possible investment choices for retirement plan participants by a plan’s fiduciary.

 

Investment Return
The gain or loss on an investment over a certain period, expressed as a percentage. Income and capital gains or losses are included in calculating the investment return.

 

Investment Risk
The possibility of losing some or all of the amounts invested or not gaining value in an investment

 

Irrevocable Trust
A trust that cannot be altered, stopped, or canceled after creation without the permission of the probate court. The grantor, who has transferred assets to the trust, gives up all ownership rights to the assets and to the trust (although the grantor can retain certain benefits from the assets, such as income).

 



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J

Joint and Last Survivor Annuity
An annuity that provides periodic payments for the joint lives of two individuals with benefits payable upon the death of one individual to the surviving individual at, for example, 50%, 75% or 100% of the original payment amount depending upon the terms of the contract.

 

Joint Annuitant
The second person named on a joint and survivor annuity contract who will receive annuity payments in the same or reduced amount, upon the annuitant’s death.

 



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K

Key Employee
An employee who possesses valued skills, craft, knowledge, intellectual or organizational abilities. He or she is considered crucial to the ongoing operation of the business or company and difficult to replace.

 

Key Person Insurance
Insurance purchased by a business on a key employee who possesses craft or scientific knowledge, leadership, and valued skills. Hiring a replacement might alter business planning, profit, stability, and management. To address the financial aspects of replacing a key employee, the corporation becomes owner and beneficiary of an insurance policy that reimburses the company for the untimely loss of a key employee, due to death or disability.

 



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L

Lapsed Policy
A policy that is terminated for nonpayment of premiums.

 

Large Cap Fund
A fund that invests primarily in large cap stocks.

 

Large Cap Stocks
Stocks of companies with a large market capitalization. Large caps tend to be well-established companies, so their stocks typically entail less risk than smaller caps, but large-caps also offer less potential for dramatic growth.

 

Large Capitalization (Cap)
A reference to either a large company stock or an investment fund that invests in the stocks of large companies.

 

Level Premium Term Insurance
A term life insurance policy for which premiums remain the same from year to year for a specified period.

 

Life Annuity
An annuity that makes periodic payments only for the life of one individual. Also known as “single life annuity.”

 

Life Insurance
A contract wherein a premium is paid to an insurance company in return for the insurance company's commitment to pay the beneficiary a defined amount upon the death of the insured. There are various types of life insurance available, including term life, whole life, universal and variable life.

 

Lifecycle 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 “target date retirement” or “age-based” funds.

 

Lifestyle Fund
A fund that maintains a predetermined risk level and generally uses words such as “conservative,” “moderate,” or “aggressive” in its name to indicate the fund’s risk level. Used interchangeably with “target risk fund.”

 

Lipper
A leading mutual fund research and tracking firm. Lipper categorizes funds by objective and size, and then ranks fund performance within those categories.

 

Liquidity
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 and/or a lower price to sell it.

 

Living Trust
Also called an inter vivos trust, a living trust is established by a living person and allows that person to control the assets he or she contributes to the trust during life. At death, the trust becomes irrevocable. This type of trust is intended to avoid probate.

 

Load
A sales charge assessed on certain investments to cover selling costs. A front-end load is charged at the time of purchase. A back-end load is charged at the time of sale or redemption.

 

Long-Term Care Insurance (LTC)
Long term care refers to the many services beyond medical care and nursing care used by people who have disabilities or chronic (long-lasting) illnesses. Long term care insurance is purchased to help pay for these services upon the occurrence of a covered event.

 

Longevity Risk
The risk that you will live longer than expected with the potential result that you run out of money before you die.

 



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M

Management Expense
One of several different categories of fees included in the total operating expenses of mutual funds and other similar investments (together: “options”). The management expense is expressed as a percentage of an option’s total net assets and reflects the fee charged by the option’s investment advisor (and subadviser — if applicable). For mutual funds, management fees are published in fund prospectuses alongside the other total operating expenses charged by the funds.

 

Management Fee
A fee or charge paid to an investment manager for its services.

 

Market Capitalization or Market Cap
The total market value of a company's outstanding securities, excluding current liabilities.

 

Market Risk
The possibility that the value of an investment will fall because of a general decline in the financial markets.

 

Maturity Date
The date on which the principal amount of a loan, bond, or any other debt becomes due and is to be paid in full.

 

Mid Cap Fund
A fund that invests primarily in mid-cap stocks.

 

Mid Cap Stocks
Stocks of companies with a medium market capitalization. Mid caps are often considered to offer more growth potential than larger caps (but less than small caps) and less risk than small caps (but more than large caps).

 

Mid Capitalization (Cap)
A reference to either a medium sized company stock or an investment fund that invests in the stocks of medium-sized companies.

 

Money Market Fund
A mutual fund that invests in short-term, high-grade fixed-income securities, and seeks the highest level of income consistent with preservation of capital (i.e., maintaining a stable share price).

 

Morningstar
A leading mutual fund research and tracking firm. Morningstar categorizes funds by objective and size, and then ranks fund performance within those categories.

 

MSCI EAFE Index
An index known by an acronym for the Europe, Australasia, and Far East markets produced by Morgan Stanley Capital International (MSCI). Markets are represented in the index according to their approximate share of world market capitalization. The index is a widely used benchmark for managers of international stock fund portfolios.

 

MSCI World Index
An index of major world stock markets, including the United States. The index is a widely used benchmark for managers of global stock fund portfolios.

 

Mutual Fund
A mutual fund is formed when an investment company pools money from shareholders and invests it. Investments can include stocks, bonds, gold or government securities.

 

Mutual Insurance Company
An insurance company that has no shareholders, and is often described as being owned by its policyholders. Ownership privileges can include voting for the company's board of directors and/or sharing any dividends the company may declare. Insurance companies that are not mutual companies are often structured as publicly traded stock companies, where the company is owned by its shareholders.

 



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N

NASDAQ
The National Association of Securities Dealers Automated Quotation, also called the “electronic stock market.” The NASDAQ composite index measures the performance of more than 5,000 U.S. and non-U.S. companies traded “over the counter” through NASDAQ.

 

Net Asset Value (NAV)
The net dollar value of a single investment fund share or unit that is calculated by the fund on a daily basis.

 

New York Stock Exchange (NYSE)
The oldest and largest stock exchange in the United States, founded in 1792.

 

No-Load Fund
A mutual fund whose shares are sold without a sales commission and which does not charge a combined 12b-1 fee and service fee of more than 25 basis points or 0.25% per year.

 

Nonqualified Plan
A retirement plan that does not meet the requirements of Section 401(a) of the Internal Revenue Code and, therefore, is not eligible for all of the favorable tax treatment afforded to qualified plans.

 



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O

Operating Expenses
The expenses associated with running or operating an investment fund. Operating expenses may include custody fees, management fees, and transfer agent fees. See Expense Ratio and Total Annual Operating Expenses.

 

Ordinary Life Insurance
Life insurance with a cash value, such as whole life, universal or variable universal life. Ordinary life insurance generally refers to most forms of life insurance other than term. This type of insurance may also be referred to as cash value or permanent life insurance.

 



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P

Paid-Up Additions
Additional whole life insurance coverage that is typically purchased with policy dividends. The insurance is “paid-up” because the coverage requires no further premiums. Paid-up additions have a cash value component in addition to a death benefit. When declared, dividends are paid on paid-up additions.

 

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.

 

Payee(s)
The person or persons designated on an annuity application to receive annuity payments from the contract.

 

Payout Period
A period of time during which income payments are made to the annuitant or another person identified by the annuity contract owner.

 

Pension
An employer-provided qualified retirement plan. Examples of pension plans include defined benefit plans, profit-sharing plans, bonus plans, employee stock ownership plans (ESOPs), thrift plans, target benefit plans and money purchase plans.

 

Period Certain
A payment feature that may be available in an annuity contract which guarantees periodic payments for no less than a set period of time. For example, in a life annuity, periodic payments would be made for the longer of either: (1) the guaranteed period, to the individual or a beneficiary, or (2) the life of the individual.

 

Permanent Life Insurance
Life insurance that does not expire and combines a death benefit with cash value accumulation that remains for the life of the insured, provided premiums are paid when due. Whole life, universal life and variable life are types of permanent life insurance.

 

Plan Administrative Services
Services provided to the plan (typically for a fee) by the plan’s provider, advisor and or third-party administrator (as applicable). These services include, but are not limited to, compliance testing, ERISA advisory services, enrollment meetings, and/or investment advisory services.

 

Plan Administrator
As designated in insurance or retirement documents, plan administrators of employee benefit programs are responsible for compliance with government regulations and procedures, including disclosure and reporting to participating employees.

 

Plan Participant
A company employee or union member (as applicable) that is enrolled in a retirement plan.

 

Plan Sponsor
Refers to an employer who establishes and maintains a qualified employee benefit pension or welfare benefit plan. Although ultimately responsible for plan administration, plan sponsors often use outside consultants, corporations, government agencies, or labor organizations to administer the plan in compliance with applicable federal and state laws (such as ERISA or tax).

 

Policy
A legal written document that states the terms of an insurance contract.

 

Policy Dividend
A payment under a participating individual policy that reflects the policyowner’s annual share of divisible surplus. Divisible surplus is the amount of earnings and surplus paid out after a company sets aside funds to cover contractual obligations (reserves), operating expenses, contingencies (such as worsening mortality or economic conditions), and general business purposes. Each year, the board of directors votes on the amount of divisible surplus and how it will be allocated. Policy dividends are subject to change and are not guaranteed.

 

Policy Loan
A loan made by an insurance company, secured by the cash surrender value of a life insurance policy.

 

Policy Rider
A provision that may be added to an insurance policy, usually at an additional cost, to increase or limit the benefits the policy otherwise provides.

 

Policyholder
The person or entity owning an insurance policy. The policyholder is usually the insured but may also be a spouse, business partner, partnership, trust or corporation, as long as that party has insurable interest in the life of the insured.

 

Portability
Refers to the ability of an employee to keep insurance or benefits originally provided or sponsored by an employer after employment ceases. With a mobile workforce in which employees move from one employer to another, portability of employee benefits, especially insurance and retirement plans, is important.

 

Portfolio
The combined security holdings of an individual investor or mutual fund. A portfolio can consist of any combination of stocks, bonds, derivatives, and such. A typical objective of holding investments in a portfolio is to reduce risk through diversification.

 

Portfolio Manager
The individual, team or firm who makes the investment decisions for an investment fund, including the selection of the individual investments.

 

Portfolio Turnover Rate
A measure of how frequently investments are bought and sold within an investment fund during a year. The portfolio turnover rate is usually expressed as a percentage of the total value of an investment fund.

 

Premium
In terms of insurance, a premium is a specified amount of payment required periodically by the insurer to provide coverage under a specific policy. The amount and frequency of the premium payment will depend on the type of policy owned.

 

Premium Loan
A loan made against the cash value of an insurance policy to pay the premium due. Interest is charged on this loan and if the insured dies while the loan and/or interest are unpaid, the death benefit will be reduced.

 

Primary Beneficiary
The named beneficiary who receives the proceeds of an insurance policy or annuity contract when the insured or annuitant dies. There can be multiple primary beneficiaries.

 

Principal
The original dollar amount of an investment. Principal may also be used to refer to the face value or original amount of a bond.

 

Professionally Managed Account
A diversified portfolio of investments assembled and managed by a registered investment advisor on behalf of an investor/plan participant. Professionally managed accounts typically impose fees based on the total amount of assets under management.

 

Prospectus
A disclosure document that must be provided (according to Securities and Exchange Commission (SEC) regulations) by the issuer to potential purchasers of a securities issue. The prospectus provides information such as fees, expenses, risks and other details designed to help a potential purchaser make an informed decision.

 

Purchase Payment
The amount of money applied to an annuity contract.

 



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Q

QDIA (Qualified Default Investment Alternative)
An investment option (or series of investment options in the case of target date or “lifecycle” investments) that is diversified among different investment types to help limit losses and offer the potential for investment appreciation. The QDIA serves as the plan’s default investment. To qualify as a QDIA under U.S. Department of Labor regulations, a QDIA must be a “balanced” fund/investment option (see definition), a target date series of funds/investment options (see definition), or a professionally managed account (see definition).

 

Qualified Retirement Plan
A retirement plan that complies with the requirements of Internal Revenue Code section 401(a) and, as a result, receives favorable tax treatment of contributions and earnings.

 



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R

Rate of Return
The gain or loss on an investment over a period of time. The rate of return is typically reported on an annual basis and expressed as a percentage.

 

Real Rate of Return
The rate of return on an investment adjusted for inflation.

 

Rebalance
The process of moving money from one type of investment to another to maintain a desired asset allocation.

 

Redemption
To sell fund shares back to the fund. Redemption can also be used to mean the repayment of a bond on or before the agreed upon pay-off date.

 

Redemption Fee
A fee, generally charged by a mutual fund, to discourage certain trading practices by investors, such as short-term or excessive trading. If a redemption fee is charged it is done when the investment is redeemed or sold.

 

Required Minimum Distribution (RMD)
The legally required minimum annual distribution that must be taken from a qualified retirement account or from an IRA. RMDs are calculated by dividing the year-end account balance by the applicable distribution period or life expectancy, and generally must begin by April 1 of the year following that when an individual reaches age 70½. Failure to take the RMD results in an excise tax equal to 50% of the distribution that should have been taken.

 

Return
The gain or loss on an investment. A positive return indicates a gain, and a negative return indicates a loss.

 

Risk
The potential for investors to lose some or all the amounts invested or to fail to achieve their investment objectives.

 

Risk Tolerance
An investor's ability and willingness to lose some or all of an investment in exchange for greater potential returns.

 

Rollover
A tax-free transfer of funds from one qualified retirement plan to another.

 

Roth IRA
A type of Individual Retirement Account (IRA) in which contributions are nondeductible. However, account funds grow tax free, and withdrawals are tax free, provided certain conditions are met.

 

Roth IRA Conversion
This refers to the process of converting a traditional IRA into a Roth IRA. Roth conversions have specific income eligibility requirements and income tax consequences.

 

Round Trip Restriction
A policy that limits the number of times an investor can exchange into and out of a fund within a given time frame. This is intended to discourage frequent trading that increases the costs to all the fund’s investors.

 

Russell Indexes
A group of indexes that are widely used to benchmark investment performance. The most common Russell index is the Russell 2000 Index, an index of U.S. small-cap stocks, which measures the performance of the 2,000 smallest U.S. companies in the Russell 3000 Index.

 



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S

Sales Charge
A charge for buying an investment.

 

Section 529 Plans
State-sponsored higher education savings plans that offer tax benefits while allowing for higher contributions than with other savings alternatives such as Coverdell ESAs (formerly known as Education IRAs) and custodial accounts. Although details of these plans vary by state, they generally come in two forms: 1) Prepaid tuition programs that allow participants to "lock in" tuition rates at eligible state colleges or universities with a lump sum investment or monthly installment payments; and 2) Savings programs that allow for investment in the stock and bond markets. You may not need to reside in a state to participate in its plan.

 

Sector Fund
A fund that invests in a particular or specialized segment of the marketplace, such as stocks of companies in the software, healthcare, or real estate industries.

 

Securities and Exchange Commission (SEC)
Government agency created by Congress in 1934 to regulate the securities industry and to help protect investors. The SEC is responsible for ensuring that the securities markets operate fairly and honestly.

 

Separate Account
An insurance company account that is segregated or separate from the insurance company’s general assets. Also refers to a fund managed by an investment adviser for a single plan.

 

Share
A representation of ownership in a company or investment fund.

 

Share Class
Some investment funds and companies offer more than one type or group of shares, each of which is considered a class (e.g., “Class A,” “Advisor” or “Institutional” shares). For most investment funds each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives.

 

Shareholder
An owner of shares in an investment fund or corporation.

 

Shareholder-Type Fees
Any fee charged against your investment for purchase and sale, other than the total annual operating expenses.

 

SIMPLE (Savings Incentive Match Plans for Employees) Plan
A SIMPLE Plan is a retirement plan, which can be set up as a 401(k) or IRA, that allows employee pre-tax contributions and mandatory employer matching contributions. All contributions are immediately vested in a SIMPLE plan.

 

Simplified Employee Pension Plan (SEP)
A tax-deferred retirement plan allowing both an employer and an employee to contribute to the employee's Individual Retirement Arrangement (IRA) on a discretionary basis, subject to special rules on eligibility and contributions.

 

Small Cap Fund
A fund that invests primarily in small-cap stocks.

 

Small Cap Stocks
Stocks of companies with a smaller market capitalization. Small caps are often considered to offer more growth potential than large caps and mid caps but with more risk.

 

Small Capitalization (Cap)
A reference to either a small company stock or an investment fund that invests in the stocks of small companies.

 

Split-Dollar Arrangement
A contractual arrangement between two parties, commonly an employer and employee, in which they share the obligations and benefits of a life insurance policy. The shared arrangement may govern the payment of premiums, death proceeds, cash values, dividends, or ownership. Special tax treatment applies to split-dollar plans depending on their form and when they were established.

 

Stable Value Fund
An investment fund that seeks to preserve principal, provide consistent returns and liquidity. Stable value funds include collective investment funds sponsored by banks or trust companies or contracts issued by insurance companies.

 

Standard & Poor's 500 Stock Index (S&P 500)
An index comprised of 500 widely held common stocks considered to be representative of the U.S. stock market in general. The S&P 500 is often used as a benchmark for equity fund performance.

 

Stock
A security that represents an ownership interest in a corporation.

 

Stock Dividend
For a stock company, a dividend is a payment to shareholders out of the company's current or retained earnings. This dividend is usually paid quarterly and generally given as cash (cash dividend); however, it can also take the form of stock (stock dividend) or other property. The board of directors of a company votes to distribute dividends to shareholders.

 

Stock Fund
A fund that invests primarily in stocks.

 

Stock Symbol
An abbreviation using letters and numbers assigned to securities to identify them. Also see Ticker Symbol.

 

Subsidiary
A corporation owned by another corporation. A subsidiary corporation possesses all the legal elements of a corporation, but typically has only one shareholder, which is the “upper-tier” corporation.

 

Summary Prospectus
A short-form prospectus that mutual funds generally may use with investors if they make the long-form prospectus and additional information available online or on paper upon request.

 

Survivorship Life Insurance
Also called second-to-die or last-to-die insurance. Survivorship life insurance covers the lives of two or more individuals, and pays a death benefit after the last death of the insureds. It is often used by married couples to help fund estate tax liability that occurs upon the last death.

 



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T

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.”

 

Target Risk Fund
A fund that maintains a predetermined asset mix and generally uses words such as “conservative,” “moderate,” or “aggressive” in its name to indicate the fund’s risk level. Often used interchangeably with “lifestyle fund.”

 

Tax Deferred
The postponement of taxes on accumulated earnings until receipt.

 

Tax-Sheltered Annuity
Also called a 403(b), a tax-sheltered annuity is a retirement plan under Section 403(b) of the Internal Revenue Code that allows employees of government and nonprofit organizations to make pre-tax contributions up to a pre-defined annual limit and have the benefit of tax-deferral until amounts are withdrawn.

 

Term Insurance
Life insurance that has no cash value and that expires at the end of a specific period. Premiums can rise each year, or can be level through a guaranteed period.

 

Ticker Symbol
An abbreviation using letters and numbers assigned to securities and indexes to identify them. Also see Stock Symbol.

 

Time Horizon
The amount of time that an investor expects to hold an investment before taking money out.

 

Total Annual Operating Expenses
A measure of what it costs to operate an investment, expressed as a percentage of its assets, as a dollar amount, or in basis points. These are costs the investor pays through a reduction in the investment's rate of return. See Expense Ratio and Operating Expenses.

 

Traditional Individual Retirement Account (IRA)
A tax-deferred retirement savings vehicle that allows individuals to contribute a limited amount per year. Depending on their income and participation in employer-sponsored retirement plans, individuals may be able to deduct part or all of their contributions. Withdrawals are subject to ordinary income tax. Mandatory withdrawals, generally referred to as required minimum distributions (RMDs), must begin shortly after age 70½. Withdrawals made before the age of 59½ may be subject to a 10% federal income tax penalty.

 

Trust
A fiduciary relationship, wherein a grantor transfers assets or property to a trustee for the benefit of a beneficiary or beneficiaries. The trustee, who may or may not be the grantor, manages the trust property. Duties often include holding title to property, distributing assets, and overseeing investments and payments. A living trust is a trust created during the grantor's lifetime; whereas, a testamentary trust is a trust created by a will.

 

Trustee
An individual or party responsible for managing a trust on behalf of a beneficiary or beneficiaries. Duties often include holding title to property, distributing assets, and overseeing investments and payments.

 



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U

U.S. Treasury Securities
Debt securities issued by the United States government and secured by its full faith and credit. Treasury securities are the debt financing instruments of the United States Federal government, and they are often referred to simply as Treasuries.

 

Underwriting
For insurance, underwriting is the process by which an insurance company determines whether, and on what basis, it can assume the risk of a specific life, disability or long term care insurance policy.

 

Unit
A representation of ownership in an investment that does not issue shares. Most collective investment funds are divided into units instead of shares. See Share.

 

Unit Class
Investment funds that are divided into units (e.g., collective investment funds) instead of shares may offer more than one type or group of units, each of which is considered a class (e.g., “Class A”). For most investment funds, each class has different fees and expenses but all of the classes invest in the same pool of securities and share the same investment objectives.

 

Unit Value
1.The dollar value of each unit on a given date.

2. Comparable to a mutual fund’s share price, the unit value is the per unit price of an investment option (such as a separate investment account or collective trust) that issues units rather than shares.

 

Unitholder
An owner of units in an investment. See Shareholder.

 

Universal Life Insurance
Life insurance that allows the holder to vary the amount and timing of premiums and to change the death benefit, based on the policyholder's changing needs and circumstances. It is generally considered more flexible than traditional whole life insurance and includes a "cash value" feature. In some cases, it is subject to additional underwriting.

 



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V

Value Fund
A fund that invests primarily in stocks that are believed to be priced below what they are really worth.

 

Variable Annuity
An annuity contract under which the insurance company promises to make payments beginning immediately or at some future date. The value of the annuity and amount of the benefits paid by the insurance company will vary depending on the performance of the investment options.

 

Variable Life Insurance
Life insurance with a face amount and cash value that fluctuate according to the performance of the underlying separate account investment options.

 

Variable Product Investment Choices
Professionally managed underlying investments available under a variable insurance policy or variable annuity contract to which premiums, purchase payments, and account values can be allocated.

 

Variable Return Investment
Investments for which the return is not fixed. This term includes stock and bond funds as well as investments that seek to preserve principal but do not guarantee a particular return, e.g., money market funds and stable value funds.

 

Variable Universal Life Insurance
Life insurance that combines features of both variable life insurance and universal life insurance. A policyholder may invest premiums, after certain deductions, modify the death benefit, as well as vary the coverage amount (in some cases, subject to additional underwriting), and/or the premium payments. Because investment options include securities, the Securities and Exchange Commission (SEC) requires a variable universal life insurance policy to be sold by prospectus, which discloses policy operations, risks, expenses, and fees.

 

Volatility
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.

 

Voluntary Employee Contribution
An employee may be permitted to make voluntary contributions to a retirement plan, usually unmatched by the employer, in excess of mandatory contributions to his or her plan account. Voluntary employee contributions may be deposited on a pre-tax or post-tax basis.

 



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Whole Life Insurance
Life insurance that provides guaranteed coverage for the insured's entire life, provided the policyholder pays the premiums when due. Premiums generally remain level for the life of the policy. In addition, there is also a guaranteed cash value component. When declared, dividends are paid on whole life insurance policies.

 

Wholly Owned Subsidiary
A company whose stock is completely owned by another company.

 



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1

12b-1 Fee
A fee assessed on certain mutual funds or share classes permitted under an SEC rule to help cover the costs associated with marketing and selling the fund. 12b-1 fees may also be used to cover shareholder servicing expenses.

 



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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), 1295 State Street, Springfield, MA 01111-0001 and its subsidiaries C.M. Life Insurance Company and MML Bay State Life Insurance Company, 100 Bright Meadow Boulevard, Enfield, CT 06082.


Principal Underwriters: MML Strategic Distributors, LLC and MML Investors Services, LLC, Members FINRA (www.finra.org) and SiPC (www.sipc.org). MML Strategic Distributors, LLC and MML Investors Services, LLC are subsidiaries of Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield, MA 01111-0001.


CRN201412-161589
 


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