Time off from work, usually with at least partial continuation of salary and benefits, during which employees can pursue goals related to personal and professional growth or perform community service. The name stems from an old custom of giving teachers every seventh year off, usually with pay.
A projection of the expedited rate of compensation to be earned in future years that incorporates the effect of promotions, merit raises, seniority, productivity, and inflation.
A pension plan under which each employee enters into a separate agreement with the employer to reduce current compensation or forgo a salary increase by a stated dollar amount or specified percentage in return for the employer’s agreement to contribute an equal amount to a trust on the employee’s behalf.
Salary-reduction simplified employee pension plan
(SARSEP) Also known as a salary-reduction SEP.
Salary scale assumption (salary progression)
Relates to the estimated rates at which compensation levels will increase in future periods. This assumption generally includes factors of inflation, the participants’ share of productivity gains, and merit and seniority increases.
See stock appreciation rights.
See salary-reduction simplified employeepension plan.
Savings plan (thrift plan)
A defined contribution plan that allows its participants to make contributions within a given range (usually a percentage of salary) toward the ultimate benefits that will be provided. Employer contributions to the plan are made on a matching basis, that is, 25 percent, 50 percent, or 100 percent of the contribution made by the participant. The plan may also permit an employer, on a discretionary basis, to make additional contributions.
A health care plan that spells out how much can be paid for each type of service provided.
Section 530 Relief
Refers to provision in the Revenue Reconciliation Act of 1978 which permits an employer to treat certain common law employees as independent contractors.
A way of setting aside money to fund nonqualified deferred compensation. In a secular trust, the money contributed by the employer vests immediately, which means that the beneficiary of the trust must pay taxes on employer contributions when they are made. Money in secular trusts is protected from the claims of the employer’s creditors, unlike money in rabbi trusts.
Self-administered trusteed plan
A pension plan under which contributions are paid to a trustee, generally a bank, that invests the funds, accumulates the earnings and interest, and pays benefits to eligible employees under the terms of the agreement. The plan is administered by the employer or by a committee appointed by the employer.
The procedure by which an employer maintains all records regarding the employees covered under a group insurance plan.
Self-funded or self-insured plan
. A benefits plan in which the employer carries all the risk, paying claims but saving the cost of any premiums Modified self-funding occurs when only some benefits or only benefits up to a certain claims level are self-insured and an outside plan insures above that level.
Status determined by the length of service an employee has with a given employer.
See simplified employee pension plan.
An asset account, established by a life insurance company, that is separate from other funds and used primarily for pension plans and variable life products. This arrangement permits wider latitude in the choice of investments, particularly in equities.
See supplemental executive retirement plan.
In the general sense, years of service as an employee for purposes of participation in an employer’s pension plan. There is also credited service, which is the service as an employee that is used for calculating benefits under a pension plan. A different period, called vesting service, is used to determine the extent to which benefits under a plan are vested.
Emblems, accessories, or other acknowledgments given to commemorate employee service anniversaries, particularly achievement of five-, ten- and twenty-five-year milestones.
The several ways, other than immediate payment in cash, in which a policyholder or beneficiary may choose to have life insurance policy benefits paid.
Compensation paid because of the termination of an employee’s employment due to circumstances beyond the employee’s control.
Prorated unemployment insurance for workers whose hours are reduced through a work-sharing plan. Some twelve states have laws permitting this form of compensation.
Short-term disability income insurance
The provision to pay benefits to a covered disabled person as long as that person remains disabled for up to a specified period not exceeding two years.
Short-term disability plan
A benefits plan designed to provide income during absences due to illness or accident in cases in which the employee is expected to return to work within a specified time, commonly ninety days.
Incentives based on short-term results, usually provided in the form of bonus payments.
Paid time off due to illness or injury.
Simplified employee pension (SEP) plan
A retirement program structured to provide IRAs for all participants who meet certain eligibility and other requirements. SEPs were introduced in the Revenue Act of 1978, which established special rules for contributions and eligibility.
Single premium or unit credit funding method
A method of accumulating money for future payment of pensions under which the amount of money required to pay for each particular benefit or each year’s unit of benefit is paid to the insurance company or to the trust fund in one lump sum.
Single purchase annuity contract
A group annuity contract purchased to provide benefits to participants in a terminated or uninsured plan.
A federally administered program, funded by mandatory payroll deductions and employer contributions, that provides income and Medicare health benefits to retired or disabled former workers and their dependents.
Social security option
An option under which an employee may elect that monthly annuity payments before a specified age (age 62 to age 65) be increased and that payments thereafter be decreased to produce a level total annual annuity to the employee when social security is included.
A health care provider who has training and education in a particular area of medicine. For example, cardiologists, orthopedics, or surgeons.
Split-dollar insurance plan
Life insurance policies in which the employer and employee share ownership and benefits. The premium is split between the employer and employee; the death benefit is split between the employer and the beneficiary. These policies are usually offered to executives on a selective basis and may be used to supplement other insurance or to fund future financial obligations.
A pension plan that is funded partly by insurance contracts and partly through funds accumulated in a separate trusted fund.
Insurance issued at normal rates and written on the basis of regular morbidity underwriting assumptions used by an insurance company.
A contract provision in an insurance plan that is generally required by state statutes until superseded by the uniform policy provision.
The classification of a person applying for insurance who fits the physical, occupational, and other standards on which the normal premium rates are based. A person who fits this category is eligible for insurance without extra ratings or special restrictions.
State disability plan
A plan for accident and sickness or disability insurance required by state legislation of those employers doing business in that state.
A pension plan providing different levels of benefits based on various levels of compensation. For example, under a money-purchase plan, a contribution of 10 percent of compensation may be made for compensation up to $9,000 and a contribution of 15 percent of compensation for compensation in excess of $9,000.
Stock appreciation rights (SAR) plan
An executive incentive plan in which an executive is given the right to receive a dollar amount or value equal to the future appreciation of company stock, often in lieu of exercising a stock option.
Stock bonus plan
See employee stock ownership plan.
Stock grant plan
A plan that grants stock to employees at no cost to them. Stock appreciation grants provide payments equal to the appreciated value of the stock. Full-value grants provide the total worth of the stock.
Stock life insurance company
A life insurance company owned by stockholders, who elect a board to direct the company’s management. Stock companies, in general, issue nonparticipating insurance but may also issue participating insurance.
The right to purchase shares of company stock at a fixed price over a stated period after certain time requirements are met.
Stock purchase plan
In its qualified form, a plan that allows employees to buy company stock, with the company contributing a specified amount for each unit of employee contributions or with the stock offered at a fixed below-market price and paid for in full by the employees. In its nonqualified form, a plan that allows executives to purchase stock, with requirements for length of service before purchase and restrictions on when the stock may be sold. The company reserves the right to buy back the stock.
An arrangement in which a holder of a stock option uses stock already owned to swap for a greater number of shares under the option, widely used in executive compensation.
Insurance that is triggered when benefits paid by a self-insured employer under a plan exceed a preset amount.
A provision in a health insurance plan that increases the coinsurance to 100 percent after the participant has paid a certain amount out-of-pocket.
Straight life insurance
Whole life insurance on which premiums are payable for life.
See supplemental unemployment benefits.
Insurance issued with an extra premium or special restrictions to those persons who do not qualify for insurance at standard rates.
Suggestion plan awards
Awards given under a suggestion program to employees who make valuable suggestions. Often the amount of the award is proportional to the savings anticipated from implementation of the suggestion.
Summary annual report
A report that must be given to participants in employee benefits plans summarizing the financial status of the plan.
Summary plan description (SPD)
A detailed report mandated by ERISA that describes a pension plan’s provisions. It must be written in a manner designed to be understood by the average participant and must be provided to participants, beneficiaries, and the Department of Labor.
Benefits that are provided by a pension plan in addition to the plan’s main retirement benefits. They vary according to the terms of the particular pension plan, but they usually include benefits that are paid in the event of termination, death, disability, or early retirement.
The annual cost that is associated with the amortization of a pension plan’s supplemental liability.
Supplemental executive retirement (SERP) plan
A retirement plan for a highly paid employee that provides benefits over and above those provided to the employee by the qualified plan.
The excess of the projected benefits liability over the actuarial present value of the future normal cost accruals and the value of the pension fund assets. The supplemental liability consists of the past-service liability, the unfunded prior service cost, unamortized actuarial gains or losses, and unfunded normal costs that have accrued since the pension plan was adopted.
Supplemental unemployment benefits (SUB)
Benefits payable under the terms of a collective bargaining agreement that supplement statutory unemployment compensation when employees are laid off.
Surgical expense insurance
Health insurance policies that provide benefits toward the physician’s or surgeon’s operating fees. Benefits may consist of scheduled amounts for each surgical procedure.
A list of cash allowances attached to a policy that are payable for various types of surgery, with a maximum based on the severity of the operation.
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