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Benefits Key TermsTCHRA PHR and SPHR Preparation CourseADEA- Age Discrimination Employment Act. Cannot discriminate at age 40 and above. Prohibits terminating benefit coverage for older employees (except top executives) but can reduce life and disability benefits based on age.Cliff vesting- vesting schedule requiring participants to work a number of years before receiving any benefits. Typically 0% vesting until year 3 and then 100% vesting. COBRA- Consolidated Omnibus Budget Reconciliation Act. Provides for health care continuation for employees who have coverage and lose it due to a qualifying event such as termination (voluntary or involuntary), layoff, death, divorce, age attainment of dependents, or military service. Note time frames for each.Consumer directed health care- health care options to assist in controlling costs while allowing employees to make more decisions regarding their health care.Coordination of benefits- eliminate duplicate payments when the employee has coverage under multiple plans.Copayment- Typical percentage of covered medical expenses that employees pays or fixed dollar amount that covered person pays each time they use medical services or gets a prescription.Deductible- initial amount of covered amount of medical expenses person pays before insurance coverage.Deferred compensation- plan providing delayed compensation for work performedDefined benefit plan- plan that promises employee a retirement benefit amount based on a formula. Employer must maintain funding to insure monies available in the future. (Traditional pension plan)Defined contribution plan- Plan in which the employer and often the employee contributes to retirement making an annual payment into the retirement plan. Employee is at risk for investment and performance. Employer obligation is fulfilled after contribution is made (401k, 403b plans)ERISA- Employee Retirement Income Security Act. Act establishing minimum standards for employer sponsored benefit plans including retirement, but also covers health care, dental, disability and life insurance plansESOP- Employee stock ownership plan- stock plan structured as a form of ERISA governed qualified retirement plan.Excess deferral- nonqualified deferred plan providing benefits to select group of executives beyond Section 414 limitationsFMLA- Family Medical Leave Act- federal law provides up to 12 weeks of unpaid leave for employee or IMMEDIATE family member (spouse, child, adopted child, parents) does not include siblings, grandparents, uncle/aunt, etc except under in loco parentis to deal with serious health condition. Guarantees treatment as employee and same/equivalent job back.FASB Financial Accounting Standards Board- private, not for profit Board that governs treatment expenses and financial statements used by accountants for publicly traded organizations.529 plan- Qualified tuition savings plan for families to save on tax free basis (contributions are made post tax but earnings are tax free)Flexible spending account- type of Section 125 plan that allows employees to contribute to health care premiums, non reimbursed health care expenses ($2500 annual maximum and $5000 child care annual maximum) 401(k) plan- Pretax pay deferral allowing employees to contribute to retirement403(b) plan- same as 401k plan but used for tax-exempt organizations457 plan- Plans for public sector employees of state, counties and cities to defer receipt of wages Full cafeteria plan- falls under Section 125 and allows employees to select among benefit plans to choose benefits most meaningfulFully insured health care plan- Employer pays a third party insurance plan to cover medical claims, administrative costs, commissions and full risk. GINA- Genetic Information Nondiscrimination Act. Prohibits employment decisions based on genetic information. Significant issue for employment physical exams, health history and wellness programs.Golden handcuffs- retention vehicle using short and long-term incentive payments of deferred compensation to retain executives.Golden parachute- clause written into executive contract providing payments to key executives who lose their jobs due to merger, acquisition, change of control, etc.Graded vesting- system in a qualified retirement plan in which vesting occurs over a period of years. (20% after three years of service, 20% each year after and 100% upon completion of six years of service)Group term life insurance- life insurance sponsored by employers providing a lump sum benefit to beneficiariesHIPAA- Health Insurance Portability and Accountability Act. Act that made changes to improve health care coverage portable (from one job to the next) and provides medical record privacy and securityHealth insurance purchasing cooperative- group of employers pooling efforts to purchase health care at discountsHMO- Health Maintenance Organization- form of health care in which services are provided for fixed period of time on a prepaid basisHRA- Health Reimbursement Account- EMPLOYER FUNDED ONLY health plan that reimburses employees for health care expensesHSA – Health Savings Account similar to an IRA in which the EMPLOYEE and EMPLOYER may contribute. HSA plans are portable and may be carried after the employee leaves the employerHighly compensated employee- IRS rule regarding amount of contribution that may be made- varies by plan and officer/owner statusIn loco parentis- Latin for “In place of parent”. In some cases, allows expansion of FMLA coverage to include persons who provide day to day responsibilities to care for and financially support a child.Indemnity health care plans-full choice health care in which covered person has freedom to see any health care provider without prior authorization. Also known as a fee for service health care planIndirect compensation- Non cash compensation such as benefitsIRA- tax deferred accounts in which persons may contribute an amount to a yearly maximum. Pre tax basis.International social security agreements (aka Totalization agreements) Social security agreements with foreign government to avoid double payment of social security. Used with expatsInvoluntary deductions- payroll deductions such as wage garnishments, child support and tax levies that employees must payLifetime maximum benefit- Maximum out of pocket dollar amounts during persons lifetime. Under Health Care Reform Act, this is currently not allowed.Long term care insurance- insurance to provide coverage for persons requiring assisted living, nursing homes, in home nursing, etc.Long term disability- Replaces lost income due to injury or illness. Work related injuries and illness are covered under workers compensation but could be also covered under long term disability insurance.Managed care- medical treatment plans coordinated by a provider to insure proper care and cost effective treatmentMedicare- federal government program under Social Security Administration to address medical care after age 65Medicare carve out- type of plan in which benefits are reduced for employee who are eligible for Medicare. Medicare is primary payer and then claim is reprocessedMental Health Parity Act- requires employer plans that cover mental health or chemical dependency coverage to treat claims the same as other medical and surgical plans (same copayments, deductible and other limits)Modified duty program- also known as light duty- allows employee to return to work as quickly as possible. Job tasks are reduced to accommodate restrictions.Money purchase plan- Plans in which employers make payments based on a fixed percentage of eligible employees compensation to a retirement planNon-duplication of benefits- health care plan in which a secondary carrier (see coordination of benefits) to reimburse only up to the level of reimbursement the primary carrier would have paidNon-qualified deferred compensation- Income deferral benefit offered to select group of executives or highly compensated managersOlder Worker Benefit Protection Act- Act that amended ADEA to include all employee benefits, requires employers who terminate employees at age 40 and above with time to consider severance documents and consult with an attorneyOut of pocket maximum- Amount the insured employee can pay for medical costs in a 12 month period before copayments endPaid time off bank- bank of time combining vacation and sick leave that the employee can use for personal time off.Parachutes- see golden parachutesPBGC- Pension Benefit Guaranty Corporation- mandated insurance for DEFINED BENEFIT pension plans sponsored by the federal governmentPension Protection Act- 2005 law that accelerated retirement vesting for defined contributions and allowed employers to automatically enroll employees into DC plans.Perquisites- additional programs or benefits provided to executives or key employees, generally provided in noncashPoint of service organization- Combination of PPO and HMO- direct access to specialistsPreexisting condition- Medical conditions that existed before a health care policy is obtainedPPO- preferred Provider Organization- negotiated rates with a group of providers to offer services at a reduced rate POP- Premium only Plan- a type of Section 125 plan that allows employees to pay for health care expenses with pre-tax dollars.Profit sharing plan- plans that distribute a portion of organizations profits to employees (Note- technically the organization does not need a profit to make a distribution)Qualified plan- meets ERISA and IRS standards to allow employer to make an immediate tax deduction for payment or plan offeringQualified domestic relations orders- court order to allow an alternate payee (former spouse) to receive some or all of retirement benefitsQualifying event- under COBRA, an event such as termination, layoff, marriage, divorce, loss of coverage, etc. allows employee to continue coverage. Also, a qualifying event may allow an employee to add coverage such as birth, spouse loss of job, spouse loss of health care, retirement, etc.Rabbi trust- private letter ruling allowing employer to segregate nonqualified deferred compensation from employer’s general assets.Reasonable and customary- reimbursement standard used by insurance companies to determine how much providers should be paid for services. Based on procedure and geographic areaRoth 401(k)/403(b) plans- plans allowing after tax contributions to existing 401k and 403b plansRoth IRA- contributions made with after tax dollars, investment earnings are tax freeSerious Health Condition- requires employee incapacity for more than three calendar days plus two visits to a health care providerSOX- Sarbanes Oxley Act. Requires administrators of defined contribution plans to establish financial controls, blackout periods to avoid trading of stock during certain periods and whistleblower protection for employeesSIMPLE Plan- a form of employer sponsored IRA in which all employees are treated the same and matching is automatic. No discrimination testing is needed.Section 125 plans- Tax free contribution toward certain medical and dependent care expenses with qualified plans.SEC- Securities and Exchange Commission. Regulates stock grants such as stock options, restricted stock, blackout periods for executive trading of stock, company disclosure of key events or executive compensation programs in publicly traded organizations.SEP Simplified Employee Pension- tax deferred account in which self employed individuals or employees of very small companies can contribute to retirement Severance- supplement compensation or benefits provided to a laid off or terminated employee. May include cash, benefits, outplacement servicesShort term disability- replaces all or some of employees income when unable to work due to illness or injurySocial Security- Federal program providing retirement, disability, death and survivor benefitsStop loss coverage- insurance policy for employers using self insured funding. Caps liability on individual and total group claimsSupplemental unemployment benefits- federal government program that provides states with additional funding during periods of high unemploymentTop hat plan- nonqualified deferred compensation program providing retirement benefits to executives Total rewards- combined compensation of direct and indirect compensation Totalization agreements- security agreements with foreign government to avoid double payment of social security. Used with expatsUnemployment compensation- state program providing income to persons who have lost their jobs through no fault of their ownUSERRA- Uniformed Services Employment and Reemployment Rights Act- Act that protects employment, reemployment and retention rights for persons who voluntarily or involuntarily serve in the armed forces. Provides for additional pension and paid time off vesting which serving in the military.Utilization review- audit of health care use and changes to insure costs are in line and services are necessary.Vesting- process by which a retirement plan in non-forfeitable. May also apply to paid time off benefitsVoluntary deductions- payroll deductions selected by employees for health care, charitable contributions, supplemental benefits etc.Work opportunity tax credit- tax credit provided to employers for hiring difficult to place individuals. Examples may include physically and mentally challenged individuals.Work related disability- physical condition that is caused, aggravated, precipitated or accelerated by work activity or the work environment.Workers compensation- state insurance program designed to protect employees from work related injury or illness. Covers lost income and medical expenses. ................
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