Parity rule
A rule stating that credit for former service under a pension plan may be lost if a break in service is longer than the participant’s accrued length of service.
See performance-accelerated restricted stock award plan.
Partial disability
The result of an illness or injury that prevents an insured individual from performing one or more of the functions of the regular job.
Partial termination
The situation when benefits under a pension plan are reduced or participation requirements are made less liberal. The benefits earned by participants in the plan, whether vested or not, become fully vested as a result of a partial termination.
Partial vesting
That form of immediate or deferred vesting under which a certain portion of pension benefits accrued for plan participants becomes vested benefits.
Any employee or former employee of an employer, a sole proprietor, or a partner in partnership who is or may become eligible to receive a benefit of any type from an employee benefits plan or whose beneficiaries may be eligible to receive any such benefit.
Participating insurance
An insurance policy under which the company agrees to distribute to policyholders the part of its surplus that its board of directors determines is not needed at the end of the business year. Such a distribution serves to reduce the premium the policyholder has paid.
Participation requirements
Limit eligibility to participate in a plan: for example, the requirement that an individual be employed for at least six months.
Any fiduciary (including any administrator, officer, trustee, or custodian), counsel, or employee of a plan; a person providing services to a plan; the employer; employee organization; officer; director; or 10 percent shareholder. ERISA prohibits certain transactions and requires the reporting of all transactions with parties-in-interest.
Past-service cost
The pension cost that is assigned, under an actuarial cost method, to the years prior to the inception of a plan. This cost is the initial supplemental liability of the plan.
Past-service liability
The actuarial value (single sum) of the past-service benefits as of the effective date a plan is established. See also initial actuarial liability.
See Pension Benefit Guaranty Corporation.
See Pregnancy Discrimination Act.
A sum of money paid regularly to an eligible person or to the designated beneficiary of such a person who has retired from employment because of disability or advanced age.
Pension Benefit Guaranty Corporation (PBGC)
A federal corporation established by ERISA to guarantee vested pensions. Insurance premiums are paid by employers with covered pension programs.
Pension cost
The present value of prospective benefits under a pension plan determined as of a specified valuation date. Also, that portion or portions of such present value assigned to a specified period or periods.
Pension plan
See employee pension benefit plan.
Pension trust fund
A fund consisting of money contributed by the employer, and in some cases the employee, to provide pension benefits. Contributions are paid to a trustee that invests the money, collects the interest and earnings, and disperses the benefits under the terms of the plan and trust agreement.
Performance-accelerated restricted-stock award plan (PARSAP)
A restricted-stock award or grant that vests on an accelerated basis if preset objectives or performance levels are reached.
Performance awards
Performance shares and/or performance units.
Performance shares
Actual shares of stock or stock units provided through an incentive plan to key employees who achieve multiyear performance objectives.
Performance unit
Performance share that has its award value denominated in cash rather than stock price.
Performance unit plan
A stock grant plan in which awards are made on the basis of performance and in units not related to stock price.
Period certain annuity
A modified type of life annuity that guarantees that payments will continue for a specified number of years, even if the annuitant dies sooner.
Permanent life insurance
Any form of life insurance except term. Generally, insurance that accrues cash value, such as whole life or endowment.
Perquisites (perks)
Special noncash compensation items usually reserved for top-level executives. Typical perquisites include financial counseling, cars, and club memberships.
Personal leave
Paid time off, usually amounting to only a few days a year, that employees can use for religious observance, to take care of family members, for personal business, or to meet other needs.
Phantom stock plan
A long-term executive incentive plan with payment in cash representing the value of a number of shares of phantom stock. The plan uses the company’s actual stock price as the value determinant and the valuation date specified in the plan or award, or with payment in stock or cash representing the increase in stock value from the time of grant to the time of payment.
Physician’s expense insurance
Coverage that provides benefits toward the cost of such services as doctor’s fees for nonsurgical care in the hospital, at home, or in a physician’s office as well as X rays or laboratory tests performed outside the hospital. Also called regular medical expense insurance.
See primary insurance amount.
Plan administrator
The person designated by the the terms of a plan as being responsible for managing the day-to-day affairs of the plan. If a designation is not made, the plan administrator is the plan sponsor.
Plan participant
Any employee or former employee of an employer, or any member or former employee of an employee’s organization, who is currently or who may become eligible to receive a benefit of any type from a pension plan or whose beneficiaries may be eligible to receive a part or all of any such benefit.
Plan sponsor
The party or parties that maintain an employee benefits plan. A plan sponsor can be an employer, an employee organization, or the committee, association, joint board of trustees, or a similar group of representatives in a multiemployer plan.
Plan year
Any period of twelve consecutive months chosen by the plan sponsor for purposes of maintaining the plan records. This twelve-month period may be a calendar year, a fiscal year, or a policy year in instances in which an insurance contract is used in funding plan benefits.
Point of Service (POS) Plans
Plans permitting the insured individuals to choose providers outside the plan yet designed to encourage the use of network providers. Also often called open-ended HMOs or PPOS. Some managed care organizations will allow you to purchase a point of service option plan (POs). This plan combines features of both prepaid and fee-for-service insurance. You may use network providers or out of network providers. You probably will pay much less and get better coverage if you use network providers.
The legal document issued by the company to the policyholder that outlines the conditions and terms of the insurance. Also called the policy contract or the contract.
Policy dividend
A refund of part of the premium on a participating life insurance policy reflecting the difference between the premium charged and actual experience.
The person who owns a life insurance policy. This person is usually the insured person but may also be a relative of the insured person, a partnership, or a corporation.
Policy loan
A loan made by a life insurance company from its general funds to a policyholder on the security of the cash value of a policy.
Policy owner
See policyholder.
Policy proceeds
The amount actually paid on a life insurance policy at death or when the policyholder receives payment at surrender or maturity.
Policy reserves
The measure of the funds that a life insurance company holds specifically for fulfillment of its policy obligations. Reserves are required by law to be so calculated that, together with future premium payments and anticipated interest earnings, they will enable the company to pay all future claims.
Pooled contract
A contract in which the premiums an employer pays are determined on the basis of the claims experience of a group of employers.
Pooled trust
A common trust fund, generally sponsored by an employer, that is used for purposes of accumulating the assets of the different plans of that employer and its subsidiaries.
See premium-only plans.
Any provisions for the retention of pension rights when an individual moves from one employer to another.
See preferred provider organizations.
Preadmission certification
A process in which a health care professional evaluates whether an attending physician’s request for a patient’s admission to a hospital is justified by established medical criteria.
A procedure for reviewing and certifying proposed health care treatment before treatment begins.
Preemption of state law
Preemption clauses in federal statutes block the states from enforcing any laws dealing with the same matters. ERISA and the National Labor Relations Act (NLRA) are examples of statutes that preempt state law. By contrast, the Americans With Disabilities Act (ADA) is not preemptive, leaving states free to pass disability discrimination laws that supplement the ADA.
Preexisting condition
A physical and/or mental condition of an insured person that first existed prior to the issuance of the policy or that existed prior to issuance and for which treatment was received. Excluded from coverage under some policies.
Preferred provider organization (PPO)
A network of fee-for-service providers who contract with purchasers and with insurance and other third party payers to provide health care services at competitive rates. Plan participants retain the freedom of choice to join the PPO or not, but there are economic incentives for joining. A PPO is a type of managed care plan that combines aspects of an HMO and fee-for-service system. As a member of a PPO, you pay a set fee if you see providers included on a list provided by the plan. You can see providers outside of the list, but you will be required to pay much higher out-of-pocket costs and you may not be covered for as many services.
Pregnancy Discrimination Act (PDA)
An amendment to Title VII of the Civil Rights Act of 1964 that requires employers to treat disabilities or medical conditions associated with pregnancy and childbirth in the same way as other disabilities or medical conditions. Similar treatment also extends to disability benefits, health insurance benefits, short-term sick leave, and employment policies, including seniority, leave extensions, and reinstatement.
The periodic payment required to keep a policy in force.
Premium conversion plan
An arrangement for using pretax employee earnings to pay employees’ share of benefits premiums. Because it is authorized under Section 125 of the Internal Revenue Code, premium conversion is sometimes classified as a flexible benefits program.
Premium-only plans (POPs)
Plans set up under Section 125 of the Internal Revenue Code to enable employees to pay premiums for another plan on a pretax basis.
Prepaid group practice plan
A plan under which specified health services are rendered by participating physicians to an enrolled group of persons, with a fixed, periodic advance payment made by or on behalf of each person or family. If a health insurance carrier is involved, a contract to pay in advance for the full range of health services to which the insured is entitled under the terms of the health insurance contract. Such a plan is one form of HMO.
Preretirement surviving spouse annuity
An annuity paid to a surviving spouse of a participant who dies before retirement. Qualified pension plans must allow married participants to elect a preretirement surviving spouse annuity.
Present value (actuarial computed value)
The current worth of pension benefits payable or receivable in the future after discounting this amount at an assumed rate of interest and adjusting for the probability of its being paid or received. In making pension plan valuations, actuaries combine arithmetic factors that represent discount (interest) with other arithmetic factors that represent probability (e.g., turnover, mortality, or salary scale) to determine the present value of future benefits. ERISA defines present value with respect to a liability as the value of anticipated payments adjusted to reflect anticipated events. The concept of present value is very similar to that of discounted cash flow, except that present value incorporates the additional factor of probability of payment,
Present value formulas
Formulas used to determine compensation and benefits-funding requirements and designed to adjust dollar values for amounts payable in the future, using projections concerning interest rates and probability of payment.
Preventive Care
Services provided to you in an effort to prevent you from getting sick, or to prevent or minimize the consequences of an illness. This includes services like immunizations, Pap smears, and exercise.
Primary Care Physician (PCP)
(Also known as Gatekeeper) A physician who serves as the patient’s first point of contact with the health care system and coordinates the patient’s medical care.
Primary insurance amount (PIA)
A worker’s basic monthly social security entitlement. The PIA is adjusted for cost-of-living changes, early retirement penalty or delayed retirement credits, and benefits for dependents to determine the amount the worker actually receives.
Principal sum
The amount payable in one sum in the event of accidental death and, in some cases, accidental dismemberment.
Prior-service cost
The pension cost that is assigned, using an actuarial cost method, to the year prior to the date a particular actuarial valuation is made. This prior-service cost includes any remaining past-service cost.
Privately-held company.
Company that has chosen not to issue stock in a public offering in accordance with Security and Exchange Commission and other regulatory agency requirements.
Professional (standards) review organization (PRO orPSRO)
An organization in which practicing physicians assume responsibility for reviewing the propriety and quality of health care services provided under Medicare and Medicaid.
Profit-sharing plan
A defined contribution plan under which a portion of the profits realized by an employer is contributed to the plan either at the discretion of the employer’s board of directors or in accordance with a predetermined formula. These contributions are generally allocated to the participants’ accounts in proportion to the participants’ compensation; participants’ retirement benefits are based on the balances in their accounts at the time of retirement.
Prohibited transaction
Any of certain financial dealings that are prohibited by law between an employee benefits plan and a party-in-interest. Civil and criminal penalties may apply.
Projected benefit cost methods
Actuarial cost methods under which the estimated total benefit payable at retirement is computed and the related costs are allocated to each year of service in a level amount, either as a percentage of salary or in absolute terms.
Projected benefit liability
The estimated amount of money required as of a specified date to fulfill a pension plan’s future obligations to its participants.
Projected unit credit method
An actuarial cost method whereby an employee’s projected benefits are assigned to those years of service giving rise to the benefits. This method is the one that was chosen by the Financial Accounting Standards Board for measuring plan obligations.
Project employee
This term is replacing the term temporary employee to emphasize that there is no guarantee of permanent employment.
Prototype plan
A preapproved pension plan that is marketed by insurers and consultants.
A person, business, or other organization that provides services under a plan. Any health care professional or organization that treats you or provides a health care service to you. Hospitals, nursing homes, physicians, and nurses are common examples.
Provider Network
The health care professionals or organizations your plan contracts with to treat all members of the plan.
Prudent man rule
A standard of conduct for fiduciaries of employee benefits plans, such as plan administrators, requiring fiduciaries to handle the interests of those whose affairs are entrusted to them with the care, skill, prudence, and diligence under the prevailing circumstances that a prudent person, acting in a like capacity and familiar with such matters, would use in handling the conduct of an enterprise of a like character and with similar aims.
PS 58 costs
Costs applied to an employee’s current life insurance coverage provided under an employer’s life insurance plan that are used to determine the participant’s tax liability for such coverage.

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