HR and Benefits Glossary

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1563 Attribution
Attribution rules used to determine if a Controlled Group of businesses exist. Under the attribution rules of section 1563, an individual is treated as owning any interest owned through options to acquire stock, corporations, partnerships, estates, and trusts as well as interests owned by the individual’s spouse, children, grandchildren, grandparents, or parents. Exception for spouses exists if there is no direct ownership or participation in the other spouse’s business. Stock is only attributed from grandparents, a parent, an adult child, or grandchildren (over age 21) if the individual owns more than 50% of the business.
204(h) Notice
Advance notice of a plan amendment that would cause a reduction in the rate of future benefit accruals that must be given to all affected Participants generally at least 45 days before an amendment’s effective date. Under Code section 4980F, an excise tax is imposed on employers who do not comply with this notice requirement; egregious failures can render amendment invalid.
267(c) Attribution
Attribution rules used in the Prohibited Transaction rules. Under the attribution rules of section 267, an individual is treated as owning any interest that is owned through corporations, partnerships, estates, and trusts as well as interests owned by the individual’s spouse, brothers and sisters, ancestors, and lineal descendants. For purposes of identifying a disqualified person for the Prohibited Transaction rules, the reference to brothers and sisters is dropped but spouses of lineal descendants are added.
318 Attribution
Attribution rules used to determine affiliated service groups and to identify HCEs and Key Employees (1% and 5% owners). Under the attribution rules of section 318, an individual is treated as owning any interest that is owned through options to acquire stock, corporations, partnerships, estates, and trusts as well as interests owned by the individual’s spouse, children, grandchildren, or parents. The age of the child is irrelevant, no exception exists for married couples, and no attribution applies from grandparent to grandchild.
401(k) Plan
A plan feature that may be added to a qualified plan that offers eligible employees a choice between cash and deferral (a.k.a., “CODA”). Typically, these deferrals are offered in the form of salary deferral contributions on a pretax basis. Post-tax 401(k) contributions may be offered as “Roth” contributions. Some 401(k) plans also allow traditional thrift plan after-tax contributions. Employers may offer the 401(k) feature as part of a Defined Contribution Profit Sharing or Stock Bonus Plan. Contributions may or may not be matched. Earnings accrue on a tax-deferred basis.
403(b) Plan
Plan that permits tax-sheltered Annuity or custodial account arrangements to be set up for employees of public schools and section 501(c)(3) tax-exempt organizations, such as hospitals, churches, private schools, cultural institutions and charities.
409A (Section)
Section that governs the tax treatment of nonqualified deferred compensation arrangements. Section 409A governs the timing of initial and subsequent deferral elections, when and how distribution elections may be made and changed, what distribution events are permitted, and when payments may be accelerated. Failure to satisfy section 409A results in taxation of the deferred amounts and may result in an excise tax of 20% and interest on the deferred amount from the date of deferral, which is payable by the Participant.
60-day Rollover
A rollover in which the Participant receives the distribution in kind first and then elects to roll the distribution over to a qualified rollover institution within 60 days.
American Academy of Actuaries.
ACA (Defined Contribution)
Accidental Death and Dismemberment (AD&D) Insurance
A type of life insurance that pays a stated benefit in the event of a Participant’s accidental death or dismemberment (loss of use of body part). Dismemberment is paid based upon a schedule of what body part(s) was dismembered.
Accountable Care Organization (ACO)
An organization in which hospitals, physicians, and other health care providers provide coordinated care, including chronic disease management, to improve quality and lower the cost of care. The organization's payment is tied to achieving health care quality goals and outcomes that result in cost savings.
Accounting Standards Codification (ASC)
Accounting standards issued by the FASB to address the presentation of information in financial statements. Standards previously issued as Statement of Financial Accounting Standards, such as SFAS 35, 87, 88, 106, 132R and 158, and in AICPA Statements of Position, have been incorporated in the Codification. Standards relevant to employee benefit plans include:

  • ASC 715 Compensation – Retirement Benefits
  • ASC 960 Plan Accounting – Defined Benefit Pension Plans
  • ASC 962 Plan Accounting – Defined Contribution Pension Plans
  • ASC 965 Plan Accounting – Health and Welfare Benefit Plans
Accrued Benefit
In a Defined Contribution Plan, the value of the actual contributions made to the individual account to date including gains and losses. In a Defined Benefit Plan, the monthly benefit payable at Normal Retirement Age based on the plan formula.
Accumulated Benefit Obligation (ABO)
The present value of Accumulated Plan Benefits using accounting assumptions chosen by the plan sponsor as of the Measurement Date.
Accumulated Other Comprehensive Income (AOCI)
The component of equity in the statement of financial position separate from retained earnings and additional paid-in capital that results from the transfer of other comprehensive income (i.e., revenues, expenses, gains and losses recognized in comprehensive income but excluded from net income).
Accumulated Plan Benefits
Anticipated future pension payments to all current plan Participants and their Beneficiaries excluding benefits expected to be earned in the future.
Accumulated Postretirement Benefit Obligation (APBO)
The present value of expected future benefits (Expected Postretirement Benefit Obligation, or EPBO) attributed to employee service rendered through the Measurement Date. On and after an employee’s Full Eligibility Date, the APBO and EPBO for an employee are the same.
Active Participant
For purposes of Form 5500: any individual currently employed by the plan sponsor who is covered by the plan and earning or keeping credited service under the plan. For IRA eligibility status: Apart from certain exceptions, a Participant in a Defined Contribution Plan who receives an allocation of a contribution or a Participant in a defined benefit plan who meets the eligibility rules to be covered even if not receiving an accrual. An individual who is an active Participant is subject to reduced IRA contribution limits.
Activities of Daily Living (ADL)
Certain basic activities, such as bathing, dressing, toileting, transferring. An inability to perform a certain number of ADLs is considered in determining eligibility for Long-Term Care benefits under typical LTC insurance policies or public benefit programs such as Medicaid, along with other benefit criteria.
Actual Contribution Percentage (ACP) test
Test must be performed annually to demonstrate the matching contributions and/or after-tax contributions (non-Roth) to a qualified plan do not discriminate in favor of highly compensated employees. In the event that the test is not satisfied, corrections must be processed no later than the last day of the plan year following the year of the test.
Actual Deferral Percentage (ADP) test
Test that must be performed annually to demonstrate the elective deferrals (pretax and Roth) to a Qualified Retirement Plan do not discriminate in favor of Highly Compensated Employees. In the event that the test is not satisfied, corrections must be processed no later than the last day of the Plan Year following the year of the test.
Actuarial Accrued Liability
That portion, as determined by a particular actuarial cost method, of the actuarial present value of pension plan benefits or OPEB and expenses which is not provided for by future Normal Costs.
Actuarial Assumptions
Rates used to determine plan equivalent values, plan liabilities, and funding requirements for a Defined Benefit Plan or OPEB. These include mortality rates, investment return, employee turnover rates, disability rates, retirement rates, salary scale, and health care cost trend, etc.
Actuarial Equivalent
Two or more different forms of a benefit such as single life Annuity or Joint and Survivor Annuity that have an equal value based on a set of actuarial assumptions defined in a pension plan.
Actuarial Present Value of Total Projected Benefits
Total projected benefits include all benefits estimated to be payable to plan members (retirees and Beneficiaries, terminated employees entitled to benefits but not yet receiving them, and current active members) as a result of their service through the valuation date and their expected future service. The Actuarial Present Value of Total Projected Benefits as of the valuation date is the present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment.
Actuarial Value of Assets (AVA)
The fair market value of the assets (FMV) as of the valuation date or an average value. For PPA funding, the averaging period may not exceed two years and the averaged value must be constrained to a 90% to 110% corridor around FMV. The Actuarial Value of Assets includes discounted accrued contributions for the prior plan year.
Adjustable Benefits
Multiemployer Plan benefits such as early retirement subsidies that are not yet in pay status under a plan in Critical Status that are subject to reduction under the plan’s rehabilitation plan.
Adjusted Funding Target Attainment Percentage (AFTAP)
A measure of the plan’s funded status, generally computed by determining the ratio of assets to the plan’s liabilities. Assets are adjusted for certain funding credit balances and Annuity purchases. Liabilities are determined without the at-risk rules and are adjusted for the same Annuity purchases. This percentage is used in determining benefit restrictions such as limits on the plan’s ability to make lump sum payments or increase accruals.
Adjusted Plan Assets
The actuarial value of assets reduced by any Funding Balance and, for AFTAP, increased by certain Annuity purchases.
Adverse Benefit Determination
With respect to a claim for benefits, a denial, reduction or termination of, or failure to provide or make payment (in whole or in part) for, a benefit, including any such action based on a determination of a Participant’s or Beneficiary’s eligibility to participate in a plan. Also includes a rescission of coverage.
Adverse Selection/Antiselection
The adverse impact on a plan or insurer when a Participant chooses coverage or benefit options that have a higher value to the Participant and greater cost to the employer or insurer based on the Participant’s knowledge of their risks. For example, the selection of a lump sum distribution from a pension plan by a Participant who has been advised of a cancer diagnosis. For health coverage, the purchase of insurance by individuals in poorer health creating sicker risk pools and raising the cost of providing coverage.
Affiliated Service Group (ASG)
A group of businesses, whether partnerships, sole-proprietors, or corporations, that must be treated as a single business entity for purposes of compliance reporting and testing for a qualified plan. Status as an ASG is based on ownership percentages and the nature of the business relationship and/or services provided between the entities.
After-tax Contributions
An employee’s payment for retirement or other benefit coverage made after taxes have been deducted from the individual's wages or other taxable income. For retirement plans, voluntary after-tax contributions must be tested in the ACP test regardless of safe harbor status. While Roth Contributions are made on an after-tax basis, they are treated as elective deferrals for compliance purposes.
Age Discrimination in Employment Act (ADEA)
1967 law enacted to prohibit employment discrimination against persons 40 years of age or older. ADEA was amended by the Older Workers Benefit Protection Act.
Agent Multiple-Employer Plan (Agent Plan)
An aggregation of single-employer plans, with pooled administrative and investment functions. Separate accounts are maintained for each employer so that the Employer’s Contributions provide benefits only for the employees of that employer. A separate actuarial valuation is performed for each individual employer’s plan to determine the employer’s periodic contribution rate and other information for the individual plan, based on the benefit formula selected by the employer and the individual plan’s proportionate share of the pooled assets. The results of the individual valuations are aggregated at the administrative level.
American Institute of Certified Public Accountants
Alternate Payee
A spouse, former spouse, child, or dependent of a Participant recognized by a Qualified Domestic Relations Order as having a right to receive all or part of benefits in a qualified plan.
Alternate Recipient
A child of a Participant in a Group Health Plan who is recognized under a QMCSO as having a right to enrollment in the Group Health Plan.
Alternative Limit
One of the tests that, if satisfied, will demonstrate that the ADP or ACP for a Defined Contribution Plan is satisfied. For the alternative limit to be satisfied, the ADP or ACP for the HCEs may not exceed the lesser of two times or two percentage points over the average ADP or ACP, respectively for the NHCEs.
Americans with Disabilities Act of 1990 (ADA)
A federal law that prohibits discrimination against individuals with disabilities and requires, among other things, that they be provided with equal opportunity in employment. The ADA is enforced by the Equal Employment Opportunity Commission and federal courts.

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