[ Definitions ]

Additional Child Tax Credit (ACTC)

Under Code § 24, a refundable tax credit for individuals who cannot take advantage of the entire Child Tax Credit because their tax liability is too low.

Adoption Assistance Plan

A written plan that meets the requirements of Code § 137 and provides adoption assistance benefits that are excludable from an employee’s income, funded either by the employer or by the employee with salary reduction dollars.

Adoption Tax Credit

Under Code § 23, a tax credit for certain adoption-related expenses.

After-Tax Contributions

Contributions deducted from an employee’s compensation after the compensation has been taxed.

Annual Report

A report required of certain plan information, prepared using the Form 5500 series and required schedules and filed with the federal government.

Archer MSA

An account established by an eligible individual covered by a High Deductible Health Plan that meets the requirements of Code § 220 and enables the account-holder to pay for qualified medical expenses on a tax-favored basis.

Cafeteria Plan

A written plan that meets the requirements of Code § 125 and offers eligible employees a choice between cash and certain nontaxable benefits (such as health insurance), thereby allowing employees to pay for the benefits they choose on a pre-tax basis.

Child Tax Credit (CTC)

Under Code § 24, a non-refundable credit against tax liability that a taxpayer may be able to claim for a qualifying child.

Claims Procedures

Under ERISA, procedures that each Employee Benefit Plan must have that establish how to file a claim for benefits and how to appeal any denial of the claim. Claims procedures must comply with specific requirements under ERISA.

Co-Insurance

A cost-sharing arrangement under a health plan under which a covered person pays a specified percentage of the cost of a specified service, such as 20% of the cost of a doctor’s office visit.

Co-Payment

A cost-sharing arrangement under a health plan under which a covered person pays a specified dollar amount for a specified service, such as $10 for a prescription or $20 for a doctor’s office visit. Also called a co-pay.

COBRA

The federal Consolidated Omnibus Budget Reconciliation Act of 1985, which established, among other things, the continuation coverage rules for Group Health Plans that are found in ERISA, the Code and the PHSA.

Code

The Internal Revenue Code of 1986, as amended.

Code § 125 Plan

See Cafeteria Plan.

Code § 213(d) Expenses

Certain expenses that are for medical care, as further defined in Code § 213(d).

Consumer-Driven Health Care (CDHC)

An arrangement intended to encourage cost-conscious use of health care by giving individuals a financial stake in reducing their health care costs (e.g., by increasing their insurance Deductible and/or providing access to a medical savings/reimbursement account). Defined Contribution (DC) Health Plan is a related term that is sometimes used to describe an employer-provided consumer-driven health care arrangement.

DCAP

See Dependent Care Assistance Program.

Debit/Credit Card

See Electronic Payment Card.

Deductible

An amount that a person must pay towards covered benefits before any benefits are payable from a health plan.

Defined Contribution (DC) Health Plan

An employer-provided Consumer-Driven Health Care arrangement intended to encourage the efficient use of health care by fixing employer contributions at a certain level (the “defined contribution”), rather than promising a specified benefit regardless of cost.

Dependent Care Assistance Program (DCAP)

A written plan that meets the requirements of Code § 129, under which employees are provided with dependent care assistance. Most DCAPs are Flexible Spending Arrangements (FSAs) offered under a Cafeteria Plan.

Dependent Care Tax Credit (DCTC)

Under Code § 21, a non-refundable credit against tax liability that a taxpayer may be able to claim, if the taxpayer has certain employment-related dependent care expenses.

DOL

The U.S. Department of Labor.

DOMA

The federal Defense of Marriage Act, which provides that for purposes of federal law (including federal tax purposes), a spouse includes only a person of the opposite sex who is a husband or wife.

Elective Contributions

See Pre-Tax Contributions.

Electronic Payment Card

A debit card, stored value card, or credit card that allows a Participant to access funds in a Health FSA, Health Savings Account or Health Reimbursement Arrangement to pay the service provider at the point-of-sale (i.e., the time a service or item is provided).

Eligibility Requirements

The age, service, and other requirements specified by a plan document as pre-conditions to an employee’s participation.

Employee Benefit Plan

Under ERISA, a Welfare Plan, a Pension Plan, or a plan that is both a Welfare Plan and a Pension Plan.

ERISA

The federal Employee Retirement Income Security Act of 1974, as amended, which governs the administration, supervision, and management of Pension Plans and Welfare Plans.

Explanation of Benefits (EOB)

A statement from a plan explaining what portion of a claim was paid.

FICA Taxes

Taxes collected for Social Security and Medicare benefits. (FICA refers to the Federal Insurance Contributions Act.)

Flexible Benefits Plan

A plan under which the employer contributes an amount that the employee can use to buy various benefits. The employee may also be permitted to purchase additional benefits with salary reduction dollars and/or elect cash in lieu of benefits under a cash-out option.

Flexible Spending Arrangement (FSA)

A reimbursement plan (including a Health FSA) or DCAP that gives employees coverage under which eligible expenses may be reimbursed, subject to certain conditions such as a maximum limit. The most common FSA is one offered through a Cafeteria Plan, with employees paying the entire premium for coverage through pre-tax dollars.

Forfeitures

Unused contributions remaining under a DCAP or Health FSA as of the end of a Plan Year (after any Run-Out Period), which, under the Use-It-or-Lose-It Rule, must be “forfeited.”

Form 5500

The form for the Annual Report required to be filed for various employee benefit plans.

FUTA Taxes

Taxes collected for federal unemployment purposes. (FUTA refers to the Federal Unemployment Tax Act.)

Group Health Plan

Generally, a plan maintained by an employer or an employee organization that provides medical care to employees or their dependents, directly or through insurance, reimbursement, or otherwise. The specific definition differs depending on the federal statute at issue.

Group Term Life Insurance (GTL)

Life insurance provided to a group of employees that meets the requirements set forth in Code § 79.

Health FSA

A Flexible Spending Arrangement under which Participants may obtain reimbursement for medical expenses that cannot be reimbursed through insurance or any other arrangement (e.g., Co-Payments, Deductibles, eyeglasses, orthodontia).

Health Information

Under HIPAA, information that relates to an individual’s physical or mental health or condition, the provision of health care to an individual, or the payment for an individual’s health care, as further defined in 45 CFR § 160.103.

Health Savings Account (HSA)

An account established by an eligible individual covered by a High Deductible Health Plan that meets the requirements of Code § 223 and enables the account-holder to pay for qualified medical expenses on a tax-favored basis.

High Deductible Health Coverage (HDHC)

A general term for coverage under a health plan with a higher than normal deductible. HDHC is often offered by employers in conjunction with an HRA. HDHC may or may not meet the statutory requirements of an HDHP for purposes of HSAs or Archer MSAs.

High Deductible Health Plan (HDHP)

A health plan with a high deductible that meets prescribed requirements and a cap on out-of-pocket expenses that does not exceed a prescribed amount. Code § 223 (for HSAs) and Code § 220 (for Archer MSAs) each have a different definition of the term HDHP.

Highly Compensated Employee (HCE)

Generally, an employee for whom undue favor (i.e., discrimination) is prohibited under provisions of the Code that apply to Cafeteria Plans, self-insured Medical Reimbursement Plans, DCAPs, and certain other benefit plans. The specific definition differs, depending on the type of plan and the nondiscrimination requirement at issue.

HIPAA

The federal Health Insurance Portability and Accountability Act, which is far-reaching legislation designed to improve the portability of health coverage, reduce health care costs by standardizing the processing of health care transactions, increase the security and privacy of health care information, and to make other changes to the health care delivery system.

HRA

See Health Reimbursement Arrangement (HRA).

HSA

See Health Savings Account (HSA).

Internal Revenue Code

See Code.

Key Employee

Certain employees who are officers or owners of the employer (as further defined in Code § 416) and for whom undue favor (i.e., discrimination) is prohibited under provisions of the Code that apply to Cafeteria Plans and certain other benefit plans.

Medical FSA

See Health FSA.

Medical Reimbursement Plan

A self-insured employer-sponsored plan designed to reimburse employees and their families for their medical expenses. A medical reimbursement plan may be a broad-based Self-Insured Plan that provides coverage comparable to that under an insured Indemnity Plan or may be very limited in scope (for instance, it may reimburse only dental expenses up to $1,000 per year). Medical reimbursement plans that are Flexible Spending Arrangements are called Health FSAs.

Medical Savings Account (MSA)

See Archer MSA.

No-Deferred-Compensation Rule

A requirement under the Code, applicable to Cafeteria Plans, that generally prohibits the use of contributions for one Plan Year to purchase a benefit that will be provided in a subsequent Plan Year.

Non-Highly Compensated Employee (Non-HCE)

An employee who is not a Highly Compensated Employee.

Nondiscrimination Rules

Under HIPAA, rules that prohibit a Group Health Plan from discriminating with regard to eligibility, premiums or contributions based on specified health status-related factors, such as medical condition or history, disability or genetic information.

Notice of Privacy Practices

Under HIPAA, a notice describing a Covered Entity s privacy practices for PHI, including the uses and disclosures of PHI that may be made by the Covered Entity, individuals’ rights with respect to their PHI, and the Covered Entity s legal duties with respect to the PHI.

Open Enrollment

An annual period, usually occurring shortly before the beginning of a new Plan Year, during which employees can enroll for benefits and change their elections under the employer’s plans.

Out-of-Pocket Medical Expenses

Co-payments, deductibles, and medical expenses that are not covered by the employer’s major medical plan.

Over-the-Counter (OTC) Drug or Medicine

A drug or medicine that is sold lawfully without a prescription.

Participant

Under ERISA, an employee or former employee who is or may become eligible to receive a benefit from an Employee Benefit Plan or whose Beneficiaries may be eligible to receive any such benefit. This term is sometimes used more generally to mean an employee or former employee receiving benefits under a plan.

Participant Contributions

Amounts (other than union dues) that a Participant or Beneficiary pays to an employer, or amounts that a Participant has withheld from his or her wages by an employer, for contribution to a plan. The term includes wage withholdings, salary reductions, COBRA premiums, and retiree premiums.

PHI

See Protected Health Information.

Plan Assets

Funds or property of a plan, including Participant Contributions.

Plan Document

A written document that sets forth a plan’s terms and conditions.

Plan Sponsor

Under ERISA, the plan sponsor of a single employer plan is the employer that maintains the plan. The plan sponsor may be different when other types of plans are involved (e.g., Multiemployer Plans or MEWAs).

POP

See Premium Payment Plan.

Pre-Tax Contributions

Contributions that are made pursuant to an employee’s written agreement to reduce his or her salary on a pre-tax basis (i.e., before the compensation has been taxed), to pay for certain elected benefits.

Premium Conversion Plan

See Premium Payment Plan.

Premium Payment Plan

The most common form of Cafeteria Plan, which has only one objective: to permit employees to pay for their share of the premiums for certain insurance coverages (e.g., group health coverage) with pre-tax dollars.

Premium-Only Plan (POP)

See Premium Payment Plan.

Protected Health Information (PHI)

Under HIPAA, Individually Identifiable Health Information that is maintained or transmitted in any form or medium by a Covered Entity or its Business Associate, as further defined in 45 CFR § 160.103.

Qualified Benefits

Benefits that may be offered under a Cafeteria Plan. Examples include coverage under an accident or health plan, benefits under a Health FSA or DCAP, and Group Term Life Insurance plan coverage.

Qualified Transportation Fringe Benefit Plan

A plan that meets the requirements of Code § 132(f)(4) and allows an employer to provide certain transportation fringe benefits, including transit passes, vanpooling, and parking, on a tax-free basis.

Qualifying Event

Under COBRA, a Triggering Event that causes a loss of coverage under a Group Health Plan.

Qualifying Individual

An individual whose dependent care expenses may be submitted by an employee for reimbursement under a DCAP or may allow a taxpayer to claim the Dependent Care Tax Credit. The term includes certain children under age 13, as well as certain individuals who are physically or mentally incapable of self-care, as further defined in Code § 21

Run-Out Period

A period of time after the close of a Plan Year (typically 30 to 90 days) during which Participants in a Flexible Spending Arrangement (FSA) may request reimbursement for expenses incurred during that Plan Year.

Salary Reduction Plan

A type of Cafeteria Plan under which employees may choose to receive their full salary in cash, or to have their salary reduced on a pre-tax basis and applied by their employer to purchase some or all of the Qualified Benefits that the plan offers (e.g., health insurance).

Self-Funded Plan

See Self-Insured Plan.

Self-Insured Plan

A plan that does not use insurance to pay benefits. (However, the plan or its sponsor may purchase Stop-Loss Insurance.)

SPD

See Summary Plan Description.

Summary Annual Report (SAR)

Under ERISA, a summary of an Employee Benefit Plan’s Form 5500 filing that must be furnished, subject to certain exceptions, to covered Participants and certain other individuals.

Summary of Material Modifications (SMM)

Under ERISA, a summary of plan or SPD changes that must be distributed to covered Participants and certain other individuals when there is a Material Modification to the plan or a change in the information required to be in the SPD.

Summary Plan Description (SPD)

Under ERISA, a summary of an Employee Benefit Plan s terms that must be furnished, subject to very limited exceptions, to covered Participants and certain other individuals.

Third-Party Administrator (TPA)

An outside entity that handles certain plan administrative responsibilities for the employer or other designated Plan Administrator. Typically, a contract with the TPA determines the amount of control the TPA exercises over the plan.

Use-It-or-Lose-It Rule

Under the Code, a requirement applicable to Cafeteria Plans under which employees cannot be permitted to carry over unused contributions from one Plan Year to another.

Voluntary Plans

Also called employee-pay-all plans, these are insured arrangements that may be exempt from ERISA if there is minimal employer involvement and no employer contributions.