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This term is found in labor negotiations and refers to the ability of an organization to afford a wage or benefit cost increase.
Absolute Assignment
This is when a right to a benefit is transferred from one person to another. (An example is the ownership of a life insurance policy or the
right to retirement benefits).
This is when benefit payments from life insurance or long-term benefit plans are increased to cover expenses for a chronically ill individual.
This describes common group benefit plan coverage where insurance pays for a covered individual's permanent disfigurement, loss of a body
part, or permanent loss of use of a body part or function of the body, or death.
An addition to a Life Insurance Policy, it provides these benefits as a supplement to basic death insurance coverage. Typically, this additional
amount is payable only if the insured dies in an accident or loses any two limbs or his/her eyesight in an accident. (Some riders are third
party administered).
An insurance plan that provides benefits in the event of loss of life, limbs, or eyesight as the result of an accident. As costed in ERI's Benefit
Assessor software (and as sold), it is priced as U.S. cents ($.01) per $1,000 of coverage on a monthly basis.
This Board published rules by which United States CPAs conducted their accounting. The Financial Accounting Standards Board (FASB)
replaced it in 1974.
These were the bulletins published in the U.S. before 1960, which stated the generally accepted accounting principles.
Accrual Basis
In accounting, this is the method where expense items and income are recognized as incurred or earned, even if they have not yet been
received or paid. This is also called ACCRUAL METHOD. It is the opposite of CASH BASIS.
Accrual of Benefits
In pension (defined benefit) plans, it is the accumulation and counting of pension credits for years of experience, age, and earnings. In profit
sharing plans (defined contribution), it is the vesting of funds accumulated in personal accounts.
This is the counting of vacation time due. Usually accumulation is by the number of hours or days worked. For example, after two years of
service, an employee would have the right to two weeks of paid vacation.
Accrued Liability
The value of a pension plan's promised benefits calculated by an actuary (actuarial valuation), taking into account a set of investment and
benefit assumptions to a certain date.
The value of a Pension Plan's vested and non-vested promised benefits using a formula (or formulae) typically based upon employees' years
of service.
In the United States, this is the amount by which the accumulated promises of a Pension Plan, as compared to the funds available, do not
meet certain minimum funding standards.
Accumulated Value
In profit sharing plans, this is the amount of money available in an individual account, including earnings.
Accumulation Option
A life insurance term where dividends are left in a policy so that they can earn tax-free interest. Sometimes called Accumulated Interest
Option.
Accumulation Period
Acid Test
A ratio used by financial analysts where the available assets (cash, marketable securities, and account receivables) are divided by the
current liabilities (Current Assets/Current Liabilities). Also called the Quick Ratio.
Acquisition
When one organization purchases another, with the surviving organization being the purchaser. (As opposed to a Merger, where both
organizations might change forms.) Acquisitions may be of two types - purchase of assets or purchase of stock. The latter includes purchase
of all liabilities, including retirement and welfare plans. The former often does not include these liabilities (although union fund retirement
plan obligations are not escaped with an asset only purchase).
Acquisition Expenses
These are costs associated with and caused by one organization purchasing another. Also called Acquisition Costs.
Across-the-Board Increase
A wage or salary increase where either a flat rate (common number of cents/hour) or a common percentage of salary is used. Also called a
General Increase.
Should an employee's health insurance coverage be scheduled to commence and that employee is absent from work for certain specified
reasons, the coverage will not commence until the employee returns to work.
Activities of daily living include getting in and out of bed, dressing, bathing, eating, and generally getting around inside the home.
Actual Hours
The number of hours worked during a pay period, as compared to the scheduled hours.
Actuarial Assumptions
These are assumptions made by actuaries regarding mortality, morbidity, interest, expense and other forecasts. In insurance, they are used
to set insurance reserves. In retirement plans, they are used (along with salary levels and turnover) to determine the annual contribution
deemed necessary to a pension plan.
Actuarial Department
The department, within an insurance company, that determines the reserves needed for liabilities.
Actuarial Equivalent
An alternative form of a benefit equal in value. For example, a Lump Sum payout of a benefit rather than smaller monthly payments.
Actuarial Valuation
In a pension or a benefit plan trust, this is the total amount needed to meet promised benefits. This set of mathematical procedures typically
calculates the value of benefits to be paid, the funds available, the annual contribution required, and the amount of expense that an
organization can take on for accounting and tax purposes.
Actuarially Sound
This is a description of when a Voluntary Employee Beneficiary Association Plan (VEBA) or pension plan has the amounts of funds necessary
to meet liabilities.
Actuary
In life insurance, this is a professional who calculates mortality rates, morbidity rates, lapse rates, premium rates, policy reserves and other
values. In pension work, a professional who applies these and other principles to calculate retirement plan obligations.
In the United States, the Age Discrimination in Employment Act of 1967 protects employment rights of individuals age 40 and over. 1978
amendments raised the minimum mandatory retirement age to 70 years of age for most employees.
A variable life insurance contract where a person can change his or her annual premiums and the amount of coverage provided.
Common to health welfare plans, where an organization employs an outside organization to provide administrative services for self-funded
plans. The ASO Contract or provider provides claim and policy administration, but the purchasing organization retains financial responsibility.
ASO providers are also called THIRD-PARTY ADMINISTRATORS.
Administrator
An organization designated under the legal terms of the contract, plan, or trust to operate and direct a Benefit Plan. This is almost always a
corporation, rather than an individual or the Plan Sponsor.
Admitted Reinsure
In the United States, this is a corporation that is licensed to accept reinsurance in a state or territory. Also called an AUTHORIZED
REINSURER.
Advance Funding
An organization deposits funds in a plan in advance of the time when funds will be distributed.
This is the insurance industry's misnomer for the main company's home office department that provides technical and marketing assistance
to agents in the field.
Adverse Impact
This is where a not obviously discriminatory practice affects a protected group of employees. This term is used in salary administration,
retirement, and benefit discrimination tests, as well as in general human resource practices.
Adverse Selection
Occurs when an employee or groups of employees purchase or select coverage with a greater than likely loss at the expense of an insurance
company (or the organization if it is self-insured). This is also called ANTI-SELECTION.
Affiliated Director
A Board of Directors member who is not a current employee, but who may be either a retired employee or one who does business with the
organization on which he/she serves as a member.
Affinity Provider
An Internet term related to the sharing of links. In some cases, two sites link to each other on a reciprocal basis. The term partner is not
used.
Age Discrimination
In the United States, an employer is prohibited from treating individuals over age 40 differently because of their age.
Age of Majority
The legal term used for when an individual can enter into and be bound by a legal contract.
Agency
Several definitions: 1) A service or business authorized to act on the behalf of others. (For example, an employment agency that refers
employees to organizations for a fee.)(2) A government's administrative section. (3) A legal term describing the relationship between two
parties -- a principal and his or her agent, representing the principal in business transactions with a third party.
Agency Agreement
Agency System
A distribution system whereby insurance companies use their own commissioned agents to sell and deliver insurance policies. The agency
system is the most common system for distributing individual life insurance products and includes the branch office distribution system and
the general agency distribution system. Also called the ordinary agency system. See also branch office distribution system, brokerage
distribution system, and general agency distribution system.
Agent
An individual who sells insurance policies as either a Direct Writer or Independent Agent. Also services insurance policies for clients.
Agent of Record
The agent or broker who is recognized by the insurer as the person to whom commission is to be paid.
Agent's Statement
The portion of the insurance application in which the agent reports anything he or she knows or suspects about the proposed insured that is
not reported by the applicant or proposed insured.
A method of accumulation of money for a pension plan, where an actuary determines the present value of all future payments of benefits
and deducts from this value any funds that may be on hand with trustee or with the insurance company and distributing the balance as a cost
over the future.
The practice of increasing market survey data by an assumed percentage, which is representative of wage movement, to bring the data to a
consistent point in time. Also known as 'advancing' or 'trending' the data.
Aleatory Contract
A contract under which one party provides something of value to another party in exchange for a conditional promise. This promise is that
the other party will perform a stated act if a specified, uncertain event occurs. Insurance contracts are aleatory (dependent on chance)
because the policy owner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs.
Alien Corporation
A company that is incorporated under the laws of another country. Compare to DOMESTIC CORPORATION and FOREIGN CORPORATION.
Alienation of Benefits
The assignment of a plan participant's benefits to an individual other than the participant. In the United States, ERISA generally prohibits
such alienation of benefits, although exceptions to this rule exist and include the use of a participant's vested benefit as collateral for a loan.
The ERISA prohibition on alienation of benefits prevents creditors from attaching an individual's pension benefits.
All-Causes Deductible
In the context of health insurance, this is a deductible that must only be satisfied once during a given period of time. If the period of time is
a calendar year, as it usually is, then this type of deductible is known as a calendar year deductible. Contrast with a PER CAUSE DEDUCTIBLE.
Allocated Funding
A method of funding a pension plan whereby a portion of the total plan funds is allocated to each participant. This type of funding is often
achieved through the purchase of annuities or insurance contracts for each participant. Contrast with unallocated funding.
Allowance Supplemental
Payments such as those for hardship, relocation, or the education of dependent children. It is distinguished from differential, which is a
payment to offset differences in costs between the home and assignment locations.
A pay policy that makes exempt/nonexempt status 'invisible' to workers. Under this policy, all employees are paid on a salaried basis and all
pay is defined in the same terms, such as a monthly or annual salary.
This is an IRS mechanism created to ensure that corporations, trusts, high-income individuals, and estates all pay at least some minimum
amount of tax, regardless of deductions, exemptions or credits. The AMT is triggered when there are large numbers of personal exemptions
on state and local taxes paid, by Incentive Stock Option (ISO) plans, or large numbers of miscellaneous itemized deductions or medical
expenses.
An organization that collects and disseminates data on life insurance markets in the United States.
An organization overseeing the buying and selling of publicly owned shares of stock listed on the exchange.
This law creates non-discrimination protection for people with disabilities, similar to the Title VII of the Civil Rights Act of 1964 extended to
other minorities. Under the law, employers may not refuse to hire a person due to his or her disability.
American-Style Option
A stock option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded
options are American-Style options vs. European-style options, which may only be exercised during a specified period of time just prior to
expiration.
Amortization
1) The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. Such payments must be
sufficient to cover both principal and interest. 2) Writing off an intangible asset investment over the projected life of the assets.
Amortization Basis
The process of paying off an interest-bearing liability through a series of installment payments.
Anniversary Date
Several definitions: 1) The date used by insurance companies for the purpose of determining the experience rating for the completed
accounting period and establishing the premium rates for the next period. (2) The date used in some pay systems to trigger a raise.
Anniversary Year
The 12-month period following an employee's date of hire or date of re-employment (after a one-year break in service), and each
succeeding 12-month period.
Annual Benefits Statements Under The Employee Retirement Income Security Act of 1974 (ERISA)
Employers are required to provide participants in qualified plans specific information about the status of their projected pension income or
account balances.
Annual Bonus
Usually a lump-sum payment (cash, shares, etc.) made once a year in addition to an employee's normal salary or wage for a fiscal or
calendar year. Generally nondiscretionary and not based on predetermined performance criteria or standards.
A plan in which each year, usually at the end of the year, employees become eligible for an additional amount of money or other reward.
Annual Budget
A 12-month operating budget ending on the last day of the calendar year (i.e. December 31 of that year).
Annual Incentive
Usually a lump-sum payment (cash or stock) made in addition to an employee's normal pay for a fiscal or calendar year, based on
performance (individual, business unit and/or company). May also be called an annual bonus.
In Canada, a report containing financial and other information that pension plans must file annually with the appropriate provincial or federal
government.
Enables Employers, in a number of ways, to determine the value of a worker's personal use of a company car.
Life insurance that allows an individual to continue the coverage at the end of the year for a specified number of years. This coverage is also
called YEARLY RENEWABLE TERM INSURANCE (YRT).
In the United States, a detailed report of membership and financial information pertaining to the operation of a pension plan. This report
must be filed annually with the Internal Revenue Service.
Annual Statement
An accounting report that insurers must file each year with the appropriate regulatory agency. This report contains detailed accounting and
statistical data that regulators use to evaluate a life and health insurance company's solvency and its compliance with insurance laws.
Salary increase that is expressed as an annual rate of increase, calculated by dividing the number of months since the last increase (the
dominator) into 12 (the numerator) and multiplying the result by the increase percent.
An annuity is a contract for the payment of specified or objectively determinable periodic payments over a specified period of time or over
the lifetime of the recipient.
A calculation of probability of dying at each age. Used by actuaries to calculate premiums and reserves for annuities in which benefits are
paid only if a designated person is alive. Annuity mortality tables usually project lower rates of mortality than do mortality tables that are
used for life insurance. See also MORTALITY TABLES.
Anti-Selection
Occurs when an employee or group of employees purchase or select coverage’s with a greater than likely loss at the expense of an
insurance company (or the organization if it is self-insured). This is also called Adverse Selection.
Apparent Authority
When a principal (client who hires an agent) suggests to a third party that the agent may act on the principal's behalf. The third party
believes in the authority of the agent, but that authority was not expressly conferred; it is implied.
Applicant
Application
A paper or electronic form that must be completed by an employee who desires a certain benefit. Information provided by the individual
allows the insurance carrier or employing organization the information necessary to enroll (or not enroll) the individual.
An agreement issued along with a conditional premium receipt that provides temporary life insurance coverage as of the date the insurer
approves the proposed insured as a standard risk. See also insurability conditional premium receipt and temporary insurance agreements.
Compare to insurability type temporary insurance agreement.
Arbitration
For collectively bargained single employer plans, the bargaining agreement's grievance and arbitration procedure may double as a claims
procedure.
Area Differential
Several definitions: 1) Allowance paid to compensate expatriate employees for medium-term cultural and hardship factors present in his or
her country of assignment as compared to the base country. (This is also known as a hardship allowance.) (2) Allowance paid to domestic
employees in some geographic areas, which is based on different average pay levels and or cost of living.
These are standard survey formats used across geographic boundaries so that consistent reporting can illustrate the same jobs and their
different pay in various geographic areas.
Arithmetic Mean
Arithmetic Mean (as defined by the U.S. DOL) is the rate of wages to be determined, to the extent feasible, by adding the wages paid to
workers similarly employed in the area of intended employment and dividing the total by the number of such workers. This computation
usually produces a Weighted Average.
Assessment Method
An early method of funding life insurance where members of the plan were charged in advance for the amount of money that the
administrators estimated would be needed to pay each year's death claims. Also called the pre-death assessment method.
Assessor Series
Geographic, Salary, Benefit, Relocation and Executive Compensation software and databases designed to assist the compensation and
benefits analyst and manager with his/her research.
Asset
An asset is anything of value that is owned by an organization or an individual. Examples are cash, computer equipment, and investments.
Assets can be any percentage of real property or of personal property that can be liquidated in order to pay debts. Assets are shown on the
balance sheet of a company's Annual Statement.
The periodic review of the actions of the asset manager(s) who are investing a qualified pension plan's assets. The plan administrators of
such plans have a fiduciary responsibility to conduct this review regularly.
Asset Sale
A transaction whereby the purchaser only acquires title to certain identified assets and or liabilities of the seller, with no obligation for any
non-identified liabilities or assets. (A buyer may, for example, acquire only one line of product from a seller.)
A method of calculating that imitates the way in which the assets of a particular block of policies should grow, depending on certain
assumptions about future interest rates, morbidity, mortality, expenses and so on.
Asset-Liability Matching
The process of investing, purchasing, selling and otherwise adjusting an insurance company's asset holdings so that cash is available when it
is needed to cover the company's liabilities.
Assignee
The party to whom all or certain contractual rights are transferred under an absolute or collateral assignment.
Assignment
Several definitions: 1) The transfer of ownership rights in a life insurance policy or other type of contract from one party to another. (2) The
document that causes the transfer of ownership rights to go into effect. See also ABSOLUATE ASSIGNMENT and COLLATERAL ASSIGNMENT.
Assignment Location
Assignment of Benefits
An authorization directing an insurer to make payment directly to a provider of benefits, such as a physician or dentist, rather than to the
insured.
Assignor
The person or party who transfers certain contractual rights under an absolute or collateral assignment.
Association Organization Insurance
Assumption Reinsurance
A reinsurance agreement by which one company permanently transfers (cedes) full responsibility for a block of policies to another company.
After the cession, the ceding company is no longer a party to the insurance agreement.
Attained Age
The current age of the insured. Also refers to the age of the insured at the time the insured's policy was issued, plus the number of years
elapsed since the policy was issued.
The changing of a life insurance policy from one form of insurance to another (such as from term life insurance to whole life insurance) at a
premium rate that is based on the age the insured person has reached at the time the change takes place.
Attendance Bonus
Attendance Bonuses are provided to employees who have maintained perfect attendance for a period of time, typically a full quarter or year.
These bonuses are usually provided in the form of a flat cash amount, additional paid time off, or gift awards upon completion of the period of
perfect attendance.
A written statement from a physician who has treated, or is currently treating, a proposed insured or an insured for one or more conditions.
The statement provides the insurance company with information relevant to underwriting a risk or settling a claim.
In the United States, this is a corporation that is licensed to accept reinsurance in a state or territory. They are often also called an Admitted
Reinsure.
For a specific life insurance policy, this is the dividend option that applies in the event that the policy owner does not choose an option. See
DIVIDEND OPTIONS.
For a specific life insurance policy, a specified nonforfeiture benefit that automatically becomes effective when a renewal premium is not paid
by the end of the grace period and the policy owner has not elected another nonforfeiture option. See also nonforfeiture options.
A life insurance nonforfeiture option that allows the insurer to pay overdue premiums on a policy by establishing a loan against the policy's
cash value. See also NONFORFEITURE OPTIONS.
A reinsurance agreement in which the reinsurer agrees, for a stipulated type of risk, to accept each risk or a portion of each risk submitted
by the ceding company, up to a certain limit, provided the ceding company insures up to its usual retention limit. In this agreement, the
ceding company assumes full underwriting responsibility for all cases reinsured.
Automatically increasing wages after specified periods of service, until the employee reaches the top of his or her salary range. Automatic
wage progression often is achieved through an automatic step-rate pay system.
Automobile Benefits
An allowance to an employee for the use of his/her own automobile, which may or may not be taxable.
Automobile Insurance
Companies that maintain a fleet of cars for the use of employees who require transportation for business purposes may purchase insurance
for automobiles and drivers of the automobiles.
Average
The average is the result of dividing the sum of two or more quantities by the number of quantities. Example: (a + b + c)/3 = the average.
See also mean.
Normally calculated on a department-wide or company-wide basis. It is determined by summing up the months between increases granted
for the employee groups and dividing by the number of increases and employees.
Hourly pay determined by dividing hours worked per period into the total wages earned for that period.
In the United States, this is the figure on which social security disability, retirement and other benefits are based. The figure is an average of
the monthly earnings on which a worker has paid Social Security tax. The figure is indexed, that is, adjusted to compensate for inflation.
Calculated by dividing the sum of salary increase amounts for all eligible employees by the eligible payroll. Both the numerator and the
denominator include those who were eligible and participated but received no increase.
Hourly pay determined by dividing the hours worked per period into the total straight-time earnings for the period (excluding overtime).
Awards
Awards, prizes and gifts are a traditional way for employers to recognize and reward employees for their contributions to the company. Such
contributions may comprise long years of service, a cost-saving suggestion, a good safety record, or outstanding performance.
Back Pay
The amount of lost earnings accruing between the time a plaintiff terminates employment and a subsequent measuring date. Like Front Pay,
it is not subject to the Civil Rights Act of 1991 $300,000 liability cap. Each can be awarded over and above any compensatory or punitive
damages.
Back-Loaded Policy
A life insurance policy (usually a universal life insurance policy) in which most of the expense charges occur when the policy owner
surrenders the policy or makes cash withdrawals from the policy. Such charges are usually highest in the early policy years and are often
eliminated at the end of a certain number of years. See also front-loaded policy and universal life insurance.
Back-Loading
The practice of providing a higher accrual of pension benefits during a participant's later years of employment. The practice is designed to
encourage and reward long service.
Backup Withholding
Refers to withholding 20% of payments for federal income taxes unless the payee has a correct Social Security number on file with the
employer, or is otherwise not subject to withholding.
Bail Out
An acquisition transaction (usually initiated by the seller) in which the seller is in poor financial condition and another company purchases
the financially troubled company and improves their financial condition.
Balance Sheet
A financial statement of a company or other entity, showing what it owns (assets), what it owes (liabilities), and the owner's investment
(shareholders equity) at a point in time such as the end of the fiscal year.
An accounting term that describes a situation where debits and credits must match. The balance sheet approach is used to set expatriate
compensation. There the goal is to protect or equalize an expatriate's purchasing power while on assignment abroad. Its primary objective is
to ensure equity among expatriates and their home or base country peers.
Band Grading
The grouping of life insurance policies according to death benefit amounts for the purpose of calculating loading or expense charges.
Bankruptcy
A standard bankruptcy liquidates a business or individual. Then, subject to specific exemptions, assets of the bankrupt are collected and paid
to creditors.
Bar Chart
In international compensation, this is the country upon which an expatriate's compensation is based. It is usually the expatriate's home
country or the country in which the employee's headquarters is located.
Base Pay
Base pay is the salary that would be paid for a position on the basis of its level. For expatriate's it is the stated home country salary before
any addition of differentials, allowances or incentives for Foreign Service or required contributions.
Base Payroll
Determined by the sum of annual salaries and or wages (base rates) paid at the opening of business on the first day of the plan year or last
day of prior year, e.g., Dec. 31, before any increase.
The rate of pay set for a unit of work before anything extra is added. This rate does not include things like shift differentials, benefits,
overtime, incentive premiums or any other pay element other than the base rate.
The rate of pay set for a unit of work before anything extra is added. This rate does not include things like shift differentials, benefits,
overtime, incentive premiums or any other pay element other than the base rate.
The death benefit according to the terms of the original, basic contract of a life insurance policy. The basic death benefit does not include the
benefit for any supplementary riders, such as an accidental death benefit (ADB) rider. For policies whose death benefit remains constant, the
basic death benefit is equivalent to the face amount.
Basic Earnings Per Share
The net earnings available to common shareholders of an organization divided by the weighted average of total shares outstanding. No
consideration is given in this calculation for common stock equivalents such as stock options.
A mortality table without a safety margin. Also called a basic experience table. See also mortality table and safety margin.
A medical insurance plan that provides for coverage of almost all hospital and surgical charges and some other medical expenses, up to a
specified amount without a deductible.
Basic Services
Commonly covered items on an insurance policy (e.g. Dental procedures specified in a dental insurance plan such as diagnostic, preventive,
and routine restorative dental services).
Basket Clause
Several definitions: 1) From an investment point of view, this is a provision that allows insurance companies to invest a small percentage of
their assets generally without regard to statutory restrictions. (2) From an accounting point of view, this is a clause that permits life, and
health insurers to hold a specified amount of their assets as nonauthorized assets, which are not restricted in the same way as authorized
assets.
Any performance assessment system that concentrates on the behaviors of those being rated (such as behavioral expectation scales,
behaviorally anchored rating scales, or behavioral observation scales).
This is a compensation-related loan. It is any loan bearing a below-market interest rate made in connection with performance of services
directly or indirectly between an employer and employee.
Benchmark Job
A job that is commonly found and defined, used to make pay comparisons, either within the organization or to comparable jobs outside the
organization. Pay data for these jobs are readily available in published surveys.
Benchmarking
The process by which an organization seeks to identify top performing organizations and analyzes their strategies, policies and practices for
the purpose of learning some or all of them.
Beneficiary
The person designated to receive the benefits resulting from the death of an employee, such as the proceeds of a life or accidental death
insurance policy or benefits from a pension plan. See also Contingent Beneficiary, Irrevocable Beneficiary, Primary Beneficiary, and Revocable
Beneficiary.
Beneficiary Declaration
Specific to Canada, an insurance policy beneficiary designation that is made in a separate written document after the insurance policy has
been issued.
Benefit
For insurance purposes this is the amount of money paid when an insurance claim is approved. Also known as the policy benefit.
Benefit of Survivorship
A term used to describe the fact that annuity payments will be made as long as the designated recipient is alive at the time the payment is
due. This concept is used in the calculation of amounts due under life insurance settlement options.
The two types of health care benefit programs are indemnity programs and health maintenance organizations.
A Retirement Plan is an agreement on the part of management to provide a vehicle for the retirement income needs of employees. Such
plans may be qualified or non-qualified for tax purposes.
Benefit Reductions
A cost-containment measure utilized by an organization to reduce its expenses through reduction in benefit coverage (e.g. increase in
medical plan deductibles, increase in employee contributions, reduction in annual limits in dental plans).
Benefit Schedule
Under an organization's insurance plan, this is a table or schedule that specifies the amount of coverage, provided for each class of insured.
Insureds are often classified with reference either to earnings or to rank or position. Also called a schedule of benefits.
Benefit Statements
Each year employees must be given an individual benefit statement that explains accrued benefits to date and vesting status.
Benefits Packages
The total value of all non-cash compensation elements, including but not limited to income protection, health coverage, retirement savings,
vacation and income supplements for employees, provided in whole or in part by employer payments.
Bennett Amendment
An amendment to the Civil Rights Act of 1964 that states that it shall not be unlawful practice to differentiate compensation on the basis of
sex if such differentiation is authorized by the Equal Pay Act.
Bereavement Leave
Bereavement Leave (or Funeral Leave) provides time off for workers following the death of a family member. Policy on such leave defines
the number of days and defines who is considered to be a relative under the policy. Some companies allow employees to take bereavement
leave as unpaid leave, sick leave or annual leave.
A benefit plan that calculates a recipient's retirement benefit based on the period during which the employee earned his or her highest
income.
Beta
A mathematical measure of the volatility of a particular stock, mutual fund, and/or portfolio in comparison with the entire market.
Specifically, it measures the stock, fund or portfolio performance during the last 5 years. A beta of 1.0 indicates that an asset closely followed
the market; a beta greater than 1.0 indicates a greater volatility than the market - a beta of less than 1.0 indicates that the asset was less
volatile than the market.
Bilingual Differential
Bilingual Differential is a cash differential that is paid in addition to base salary for language skills that are required in a job. The differential
also provides a continual reminder to the employee that he or she is compensated for this ability in addition to performance of the job.
Bimodal Distribution
A type of initial premium receipt that makes insurance coverage effective immediately, but only until the insurance company either rejects
the application or approves it and issues a policy.
A mathematical formula that determines a theoretical value for an option on stock subject to trade on an option exchange. May be used by a
company that chooses to apply the FAS123 rule to stock granted to employees.
Birthday Rule
A provision that specifies the manner in which benefits for dependent children are to be coordinated between two insurance plans. According
to the birthday rule, benefits for dependent children will be paid by the plan of the parent whose birthday falls earlier in the year.
Black-Scholes Model
A mathematical model originally derived by economists Myron Scholes, Robert Merton, and Fischer Black to value stock options traded on
public markets. The Black-Scholes Formula provides a way to determine the worth of a CALL OPTION at any given time. To find out how to
use this formula, see DLC Course 22: Black-Scholes Valuations.
Blended Rates
Several definitions, two of which are listed: 1) Organization mortality rates that are based, in part, on a group's own experience and in part
on manual rates. These Blended Rates are used to determine the appropriate organization insurance premium rates for intermediate-size
groups. See also Experience Rating and Manual Rates. (2) A rate offered by a lender, which is somewhere between a previous rate and a new
loan rate.
BLS
A health care plan offered by a regionally-operated health care provider, having any of these insurance products: PPO, fee-for-service, HMO,
or POS. A provider of such plans belongs to the Blue Cross and Blue Shield Association.
A health care plan offered by a regionally-operated health care provider, having any of these insurance products: PPO, fee-for-service, HMO,
or POS. A provider of such plans belongs to the Blue Cross and Blue Shield Association.
Typically refers to a valid job requirement, i.e., a knowledge, skill or an ability level that is required for competent job performance. Origin of
the term BFOQ is found in Title VII of the Civil Rights Act (1964).
Bond
A debt instrument issued for a period of more than one year with the intent of raising capital by borrowing. The Federal government, states,
cities, corporations, and other types of institutions sell bonds. A bond is typically a promise to repay the principal loan along with interest on a
specified date of maturity.
Bonus
Plans that award cash or other items of value, such as stock (or stock options), based on accomplishments achieved. While incentive plans
are 'forward' looking' bonus plans are 'backward looking'.
Plans that award cash or other items of value, such as stock or stock options, based on accomplishments achieved. Incentive plans are
'forward' looking; bonus plans are 'backward' looking.
Bonus Eligible
Refers to groups or classes of employees eligible to participate in a bonus program.
Bonus Guarantee
A payment in addition to base salary that is made regardless of performance, e.g., an incentive award that is guaranteed, usually to a new
hire or to a newly promoted person. It is usually nonrecoverable by the company.
Bonus Progressivity
An employee rewards plan that increases the incentive as the employee performance exceeds predetermined degrees of performance. See
PROGRESSIVITY OF INCENTIVES.
A type of long-term incentive plan, whereby an employee is awarded stock valued at the book value per share. In this kind of plan an
increase in the book value of the stock accrues to the benefit of the employee.
Total shareholders' equity divided by the number of common shares outstanding. Book value is sometimes used in incentive plans in
privately owned companies where the fair market value of shares is not readily known.
An incentive program in which employees purchase shares of their organization at book value. They subsequently can sell the shares back to
the organization at the then book value.
Bottom Line
An individual's or company's profit after taking into consideration all expenses, income and taxes.
Branch Manager
The individual typically in charge of a field office. For insurance companies, this individual uses the Branch Office Distribution System. Also
called a general manager.
A common system for selling individual life insurance. Under this system, the soliciting agents who work out of a branch office are under
contract to the insurance company, not to the branch manager. The agents receive commissions directly from the insurance company. The
branch office manager, supervisors, and clerical personnel in the field office are employees of the insurance company; and these employees
are subject to the same types of controls normally exercised by an employer. See also AGENCY SYSTEM and BRANCH MANAGER.
Breach of Duties
A breach is a violation or infraction, as of a law, a legal obligation, or a promise. When applied to an employee, it is grounds for dismissal.
Break In Service
The length of time between the date on which an employee leaves an organization and the date on which the employee resumes working for
that firm. For pension and employee benefit plan purposes in the United States, a plan participant cannot be deprived of benefits that
accumulate before a break in service, unless the break is longer than (1) five years or (2) the amount of time that the participant has been
employed when the break commences.
An anniversary year during which a plan participant does not complete more than 500 hours of service and earns no pension benefits. If a
non-vested employee incurs five or more consecutive break years, that employee may lose all the time towards vesting under the plan.
Bridge Loan
This is a loan typically secured by your current home, which is usually listed for sale. The bridge loan is used to finance the purchase of the
second home. The homeowner usually has a year within which to sell or rent the first home and to pay off the loan with the proceeds.
Bridging Supplement
A Canadian program that provides a supplemental pension to a pension plan participant who retires before age 65. The bridging supplement
is generally used to integrate private pension plans with public pension plans. If a pension plan participant retires before age 65, the plan
sponsor can provide a bridging supplement until the retiree turns 65 and begins to receive payments from the public pension plans. The
combined benefit payment that the participant receives remains level and is the same as the participant would have received had he or she
waited until the age of 65 before beginning to receive benefits. The sponsor is providing an amount in addition to the basic pension payment.
Known also as a Bridging Benefit.
Broadbanding
A pay structure that consolidates a large number of pay grades and salary ranges into much fewer broad bands with relatively wide salary
ranges. These ranges typically have 100 percent or more differences between minimum and maximum. (e.g. $25,000 to $50,000)
Broker
A person or firm who, for a fee or commission, acts as an intermediary between a buyer and seller. Usually a license is required.
Broker Dealer
Other than a bank, any individual or firm that is in the business of buying and selling securities for itself and others. Called an agent or
broker when buying securities and a principal or dealer when selling them. The SEC requires that broker/dealers not only register with the
SEC but also with the states in which they conduct business.
A distribution system relying on commissioned agents, called brokers, who sell the products of more than one insurance company.
Brokerage Manager
A salaried insurance company employee or an independent agent whose responsibility is to appoint brokers on behalf of the company and to
encourage brokers to sell the products of a particular insurance company.
Brokerage Shop
An agency operated by an independent general agent who is under contract to a number of insurance companies. Also known as a
Brokerage General Agency.
Brother-Sister Arrangement
When a third corporation, group, or person owns two or more corporations this arrangement is typically known as 'brother - sister.'
Budget
An itemized plan of an individual or company's income and expenses expected for a future period of time.
Bulletin Boards
Bulletin Boards are one method of posting information that is of general interest to employees. This may include information that employers
are required to make available to employees such as equal employment policies, safety requirements, and other government regulations.
An insurance product in which the mortality, investment, and expense factors are all used to determine premium rates. Cash values are not
separately identified in the policy. Usually whole life insurance is an example of a bundled insurance product. See and contrast with
UNBUNDLED INSURANCE PRODUCT.
This is the United States Federal Government's major fact-finding agency in the field of labor economics and statistics. Its responsibilities
include finding data on wage, national pay, and industry surveys, such as the National Compensation Survey (NCS) and the Occupational
Employment Survey (OES).
An insurance type for closely held businesses, it is designed to provide funds to enable the remaining partners in a business, or the
remaining stockholders in a closely-held corporation, to purchase the business interest of a deceased or disabled partner or stockholder.
Compare with PARTNERSHIP INSURANCE and STOCK REEPURCHASE INSURANCE.
Business Expenses
Several definitions: 1) This is the cost of operating a business. It is a deductible for federal income tax purposes. 2) Where the employee is
concerned, a business expense is that expense for which the employee is reimbursed and which is not included in his/her pay.
Business Insurance
This type of insurance is intended to serve the insurance coverage needs of a business, as opposed to that of an individual.
An insurance plan that covers both employees and the employer should an accident occur while the employee is traveling on company
business.
An insurance plan that covers both employees and the employer should an accident occur while the employee is traveling on company
business.
Buyer's Guide
In the United States many states require that insurance companies make this publication available to an applicant for life insurance. The
Buyer's Guide enables the applicant to make a better-informed choice among policies.
Buying Power
The inverse of cost of living. COST OF LIVING is the cost of purchasing goods and services, as determined by the demand and supply of
goods, services, and property. For example, if the cost of living is 10% higher in an area, the buying power is approximately 10% less in that
area.
Cafeteria Plan
Also known as a flexible benefit plan, offers each employee several choices as to the types and or amounts of organization benefits. An
employee is given a set amount, and he or she can choose how it is spent.
A guarantee of pay for a minimum number of hours when employees, who are not scheduled to work and who are not on call, are called
back to their work. They receive pay for at least the minimum number of hours established, even if they do not end up working up to those
many hours.
Call In Pay
This is the guaranteed pay for a set minimum amount of time for employees who show up to work at the usual time and for whom there is
no work. The employees receive pay for at least the specified minimum number of hours, even if they did not work at all.
Call Option
A stock option contract that gives you the right to purchase a specified quantity of stock at a specified strike price by a specified expiration
date.
This plan applies to all Canadian provinces (with the exception of Quebec). This plan primarily provides for retirement and long-term
disability income benefits to residents.
Similar to the National Association of Insurance Commissioners in the United States, this Canadian organization of provincial insurance
regulators meet regularly to discuss insurance matters. The Council also develops model insurance legislation, which it encourages
legislatures to adopt.
This is a federally incorporated, nonprofit company established by the Canadian Life and Health Insurance Association (CLHIA) in order to
protect consumers against loss of benefits in the event a life or health insurance company becomes insolvent.
Canadian Method
A Canadian prescribed method for the calculation of modified net premiums and reserves.
Cancelable Policy
An individual health insurance policy that can be terminated at any time by the insurer. See also CONDITIONALLY RENEWABLE POLICY,
GUARANTEED RENEWABLE POLICY, and OPTIONALLY RENEWABLE POLICY.
Cap
The total incentive opportunity a sales representative can earn in a given period. Sometimes a cap is referred to as the maximum, the lid, or
the ceiling.
Capacity
The term used to describe the largest amount of insurance an insurer or a reinsurer is willing or permitted to underwrite. The term may refer
to an insurer's capacity for one individual or to the insurer's capacity for all its business.
Capital Employed
The value of all the assets employed in the course of business (e.g. equity and preference capital, fixed and current assets, and gross
borrowings). Sometimes used as a measure of performance for executive incentive plans. Most commonly used in the calculation of Return on
Capital Employed. See also RETURN ON CAPTIAL EMPLOYED.
Capital Expenditures
Monies spent to acquire or upgrade physical assets such as buildings and machinery.
A tax levied on profits realized from the sale of a capital asset, such as stock and real estate.
Capitation Basis
A health insurance payment method whereby a fixed amount of money is paid per person to cover all services, without regard to the number
or nature of services rendered to each person within a set period of time. It is the provider who bears the financial responsibility to coordinate
patient care within the fees or capitated rate for all patients. See also FEE SCHEDULE BASIS.
Captive Agents
Agents who work exclusively for one insurance company and who may not represent another company. See also EXCLUSIVE AGENTS.
Usually set up and owned by a parent company for the purpose of insuring the parent company's exposures to loss. This type of insurance
company provides insurance coverage at a lower cost than is available by going through the general insurance market. A captive insurance
company may be either a non-admitted, nonresident, or foreign insurer. May also provide reinsurance to a self-insure or a domestic company.
Career Agent
A full-time commissioned salesperson who works out of an insurance company's field office, holds an agent contract with that company, and
sends most or all of his or her business to that company. On occasions, a career agent may broker business with other companies.
Career Average
A method used to calculate payout to a retiree in a defined-benefit pension plan by determining average annual salary. Years where less
than 1,000 hours were worked may not always be included in the calculation.
This describes a formula by which retirement benefits are calculated, based on compensation for the entire amount of time in the plan. See
also DEFINED BENEFIT FORMULA.
A formula which basing retirement benefits on actual credited compensation of an employee during his or her total period of service or
participation.
Career Ladder
This represents a series of outlined levels within a job category, where the nature of the work is comparable (e.g., engineering). The
different levels represent the organization's requirements for increased skill, responsibility, and knowledge as the employee advances.
Carpooling
Carpooling is a program whereby employees are encouraged to share rides to work so as to reduce traffic problems, preserve the
environment, and save money.
Found in most medical expense policies, this provision permits you to apply both eligible in-network and out-of-network expenses incurred
during the last three months of the calendar year to the next year's deductible or out-of-pocket maximum.
Case Management
A cost-containment program designed to identify alternate, less costly methods of treatment for seriously ill patients without sacrificing the
quality of care a patient receives. Also called large claim management or medical case management. See also CATASTROPHIC CLAIM
MANAGEMENT.
An established benefit plan resembling a defined contribution plan. The characteristics are usually annual or monthly account additions made
at a predetermined rate (e.g., a percentage of pay). These contributions grow at a stated rate. Upon retirement or withdrawal, the participant
may receive the full account balance in one lump sum, so long as the benefits are fully vested. The account balance may be used to purchase
an annuity.
Cash basis compensation implies two things. The first is that the person is paid cash and not in kind, such as room and board or
transportation. The second is that the company records labor expenses as they occur or are paid, and not as accrued.
Cash Flow
The amount paid out throughout the entire year, along with all the incidental changes. The timing of salary changes affects the actual
monies paid out, pay period by pay period.
A financial statement that highlights monies actually received and paid out within a certain time frame (typically a year). It represents the
differentials in the cash and cash equivalents account for the period in question.
The fact of paying cash for the price of an option exercise of a number of shares exercised in order to purchase the shares.
A program in which employees have the option of taking cash or placing some of their earnings into an established trust on a pre-tax basis.
Used for industrial insurance. Under this system, the broker directs the home office of the actual amount collected per policy. The home
office then updates the policy records to mirror these collections and prepares new collection records.
A type of the life income option with refund, which specifies that any proceeds remaining when the beneficiary dies is to be paid in a lump
sum to the contingent payee. Compare to the installment refund option.
The amount available in cash when the owner of a policy voluntarily terminates the policy before it matures or becomes payable by death.
In a life insurance policy, this is the amount of money, adjusted for factors like policy loans or late premiums, which would be received by
the policy owner if he/she were to cancel the coverage and surrender the policy to the insurance company. Also known as the net cash value.
Cash Value
In a life insurance policy, this is the amount of money, before adjustments, that are made for factors such as policy loans or late premiums,
that the policy owner will receive if the policy owner allows the policy to lapse or cancels it and surrenders the policy to the insurance
company. Cash values are a feature of most types of permanent life insurance. Compare to CASH SURRENDER VALUE. Also known as INSIDE
BUILD-UP and policy owner's equity.
The exercise of an option by an individual through an outside broker or dealer. The broker, in effect, makes simultaneous purchases and
sales of the underlying option shares and delivering cash or stock to the individual for the options. The individual does not therefore have to
actually come up the purchase price.
A cost-containment program designed to identify alternate, less costly methods of treatment for seriously ill patients without sacrificing the
quality of care a patient receives. Also known as catastrophic claim management, large claim management, or medical case management.
Proof required by statute in Kansas, Missouri, Rhode Island, and Puerto Rico to show that the facts not accurately represented in an
insurance application were material. In other words, that the misrepresentation affected the insurers decision to insure against that particular
loss, to whatever extent.
Ceding Company
The definition of reinsurance is the transfer of part or all of a risk insured against to another insurance company. The transferor of the risk is
known as the 'ceding company' while the transferee (receiver of the risk) is known as the 'assuming company' or the REINSURER.
A code used by the Securities and Exchange Commission's (SEC) computer systems to identify corporations and individual people who have
filed disclosure with the SEC. The CIK can be used to find a specific company or fund on EDGAR.
Central Tendency
In statistics, central tendency is a measure THAT indicates the middle (mean, median or mode) of a data distribution.
The end result when evaluators rate individual performance of subordinates toward the center of a performance scale, implying the
assumption that everyone's performance is about average or that different performance levels are not significant.
Centralization
The extent to which a central group controls the determination of and the practice of administration of salaries, most commonly, across
organizational units. The degree of centralization or decentralization depends on the CULTURE an organization.
Certain Payment
Payment not based on any condition. This is payment that will be made no matter.
Certificate Of Assumption
In terms of assumption reinsurance, this is a certificate sent to each 'transferor of risk' or 'ceding company' to give the policy owner notice
that: (1) the risk had been assumed, and (2) pertinent information about the new insurer, assuming company, or the REINSURER.
Certificate Of Authority
A document that grants an agent power to act for the insurance company. This document comes from the insurer and is given to the agent
as proof of his authority. The document not only grants authority but also outlines the extent of that authority. A certificate of authority may
be used in any situation where one party grants power to another to act on the first party's behalf.
Certificate Of Indebtedness
A certificate issued by an insurer to the beneficiary of a life insurance policy. This certificate details the minimum interest rate, which is
guaranteed, and the frequency with which interest payments will be made.
Certificate Of Insurance
A document given to the insured by the organization insurance plan. This document outlines the type and extent of coverage to which the
organization member is entitled and the beneficiary of that coverage. Very often, the certificate will also contain a rundown of the contract
terms as they affect individual organization members. See also master contract.
Cession
The act of passing risk to another. The act of ceding. See Ceding Company.
Champus
Health coverage provided by the United States government to members of the armed services.
Chance Of Loss
In insurance terms, this is the likelihood that an event (such as death or injury) will happen.
A clause within a contractual document making provisions for conditions that must be satisfied in the case of a change of control. The
change of control does not necessarily have to be a complete change of ownership. It may only be a percentage of the company that changes
hands.
An individual health insurance policy clause that provides that the insurer has the right to make amendments or adjustments to a policy's
premium rate or benefits available when the insured changes work position or careers.
This is a change, which includes a change in the system of accounting of gross income and or deduction, or a change in the way a material
item is treated. See also MATERIAL FACT.
Chauffeur Services
Providing an employee with a chauffeur in addition to a car. For tax purposes, the value of the chauffeur is determined separately from the
value of the car.
Child Support
There are two instances where an employer may become involved with an employee's Child Support: 1) Where there is a court order
requiring the employer to withhold the support payment from the wages of the employee. Under the Child Support Enforcement Amendments
of 1984 these payments take precedence over all other garnishment orders. 2) Under the Qualified Medical Child Support Order [QMCS], the
child must be covered under the employer's health care plan to the extent that the plan covers dependents.
Church Plans
Church employees are generally exempt from the requirements of ERISA, unless they conduct business other than directly related to the
operation of church.
A provision in Title VII of the Civil Rights Act of 1964 that seeks to prohibit discrimination in all areas of employment on the basis of race,
color, religion, national origin or sex.
Claim
This is notification given to an insurance company asking for payment under the term of the insurance policy. May also be referred to as
insurance claim.
This is the department in a life and/or health insurance company responsible for processing claims. This department also has claim
examiners whose duty it is to review claims made, check into their validity and then authorize the payment of benefits to the proper party.
Claim Examiner
An employee who investigates insurance claims for an insurance company. This individual establishes that claims are valid and authorizes
payment for these claims, while denying those that are fraudulent or invalid.
In terms of health insurance calculations, the claim frequency rate is the anticipated percentage of insured that will make claims against the
company and the number of claims they will make during a certain period of time. The claim frequency rate is used to calculate the estimated
average cost of claims, which, in turn are used to establish premium rates.
Claim Investigation
A system of operation whereby pertinent information regarding a claim is gathered for the determination of whether or not payment is to be
made on that claim.
Claim Reserve
A claim department's estimate of the amount of money needed to pay a claim. The estimate is made with the help of information that the
claim department gathers in the course of handling the claim. This information may involve, for example, the extent to which the claim is
covered by the policy, the effect of previously paid claims on the amount of coverage available to pay a current claim, and the effect of any
applicable reinsurance coverage on the claim.
Claimant
The person(s) making a request, under the terms of an insurance contract, for payment of benefits due.
Claims Base
The claim, employees as a whole, actually incurred in the previous two or three-year period under the same benefits plan.
Claims Procedures
Set procedures, meeting regulatory standards, must be in place and outlined succinctly in plan description for every employee benefit plan.
The set procedure must, in no way, discourage or make it unnecessarily difficult for individuals to apply for benefits. The procedure must also
provide participants with a policy for appeals (within a specific time frame).
A way of classifying certain beneficiaries as one or as a group (e.g. children of the insured).
Classification Control
Any procedure set up for the review and assignment of jobs to established classes / grades.
A methodical system of job evaluation, where the focus is on the actual job as opposed to the individual carrying out the job. This evaluation
method, therefore, determines the skills required to perform the job and measures the degree of difficulty of a particular job in comparison
with another job through job analysis.
Clean-Up Fund
This is a one-time life insurance benefit existing for the sole purpose of paying the insured's final expenses and unpaid debt.
Cliff Vesting
When, after a specified number of years of service, all benefits accrued vests without any gradual vesting before the set time.
Closed Contract
An insurance policy in which the condition of the policy and the application constitute the agreement, in its entirety, between the policy
owner and the insurer. Contrast with OPEN CONTRACT.
Closing
The finalization of the sale of property. Used to describe the securing of commitment from a prospective buyer by requesting and obtaining
the prospect's agreement to submit an application for the amount recommended in the sale proposal.
Clubs
Employers may find it useful to pay for an employee's membership in clubs and professional organizations. Reasons for doing so would
include the contacts made by the employee, the knowledge gained, the community perspective, ore growth of the employee.
CMSA
Consolidated Metropolitan Statistical Area (CMSA). See METROPOLITAN STATISTICAL AREA (MSA).
Coefficient of Determination
The ratio of the explained variation to the total variation is called the coefficient of determination. This is a measure of predicitive reliability,
and is defined as the correlation coefficient squared.
Coinsurance
Found in most health insurance policies, this is an express requirement that the insured pay a particular percentage in excess of the
deductible and of all eligible medical expenses.
COLA
The term COLA can be used in two senses. 1) A Cost-of-Living Adjustment in which wage rates are periodically adjusted, usually upward,
based upon changes in the cost of living. These are often found in collective bargaining agreements. In addition, they constitute large
increases in government programs, such as social security. 2) A Cost-of-Living Allowance is a payment to an expatriate employee for
differences in living costs between the host and home country of the employee.
Collateral Assignment
This is when someone designates a policy’s death benefit OR cash surrender value TO a creditor AS security WHEN applying FOR a loan. IF
the loan does NOT get repaid, the policy proceeds go TO the creditor up TO the outstanding loan’s balance. The policy’s beneficiary receives
the remainder. Life insurance IS acceptable security TO lenders because it IS freely assignable.The lender IS guaranteed the money IF the
borrower dies before repaying the loan.
Collective Bargaining
Agreements between employees and employers outlining acceptable work conditions including working hours, vacation, holidays, and
termination of service guidelines. These employees are typically part of a bargaining unit represented by a union.
Collective Bargaining Agreements
Agreements between employees and employers outlining acceptable work conditions including working hours, vacation, holidays, and
termination of service guidelines. These employees are typically part of a bargaining unit represented by a union.
Collectively bargained plans may have many features not allowed in other forms of qualified plans. A great deal of flexibility is written into
the laws allowing unions and management to design plans that are in keeping with the circumstances of the particular situation.
Combination Clause
In a disability insurance policy establishing when the definition of total disability changes from the inability to perform a certain job to the
inability to perform any job.
Combination Company
A life insurance company that sells both industrial and ordinary insurance policies.
This kind of dental plan contains both the features of the scheduled and nonscheduled plans. Generally, the combination plans cover
preventative and diagnostic procedures on a nonscheduled basis and other services on a scheduled basis.
Describes a pay plan that is in two parts. The first is a base salary and the second is one or any combination of cash incentive elements (e.g.
commission and/or bonus).
Combination Plan
This is a type of pension plan that adopts an approach whereby part of the funding (the employer's contribution) is allocated and used to
acquire life insurance policies with cash values. The other part of the funding is unallocated and is placed in a conversion fund. Consider also
ALLOCATED FUNDING and UNALLOCATED FUNDING.
Commission
Commissions may be defined as payment to employees or representatives, usually in sales, of a set percentage of the selling price of the
product.
Commissioners Method
Established by the United States, this is a system used to calculate modified net premiums and reserves for life insurance.
Several definitions: 1) In terms of medical insurance policies, this is a common clause, which specifies that: should two or more members of
the same family be injured in the same accident, they will only be subject to one deductible. (2) In terms of many voluntary organization
accidental death and dismemberment policies, this is a clause that provides that the amount which becomes payable by an insurance
company is limited to a designated maximum for a situation where more than one employee is killed or hurt in one accident.
This is an insurance provision requiring that the beneficiary survive the insured by a particular length of time for the benefits to pass to
him/her. In a situation where the beneficiary does not survive the insured by the specified amount of time, the benefits will be paid as if the
primary beneficiary predeceased the insured.
A common law employment relationship is deemed to exist in a situation where the person/company for whom services are being rendered
the right to direct/control the person rendering that service. The said control must go beyond the employer having the right to control what
the employee does. It must include the right to instruct the employee how to do it.
Common Shares
Used to describe the units of equity ownership in a corporation or units of ownership in a mutual fund. Usually, these will have voting rights
and sometimes dividends attached to them. The appreciation and the dividends are neither fixed nor guaranteed.
Common Stock
May be a share in a publicly traded or a privately held company. Holders of common shares have voting and dividend rights. See also
COMMON SHARES.
Community Rated
Used to describe an insurance plan in which the risk is shared equally between the members. Also the premium rebate is based on the
overall community's health and that of the individual members. Also allows for an increase in the insured benefits.
Community Rating
Term used to describe the application of the same premium rates for a particular group without the consideration of past loss experience or
their potential for loss.
Commuted Value
In Canada, this is based on a variety of factors (interest rates, assumptions of mortality, pension entitlements and so on). This is a term
used to refer to the current value of all future income payments from a pension plan. This is typically calculated and provided by the pension
administrator upon request.
Commuting
Commuting is travel between the employee's residence and regular place of business and is considered a non-deductible personal expense.
However, transportation expenses between two specific business locations during the workday are considered a deductible expense.
Company Cars
Excluded from Income. In general, when an employer provides a vehicle to an employee for business purposes, the value of the vehicle may
be excluded from the employee's income. However, if the employee uses the vehicle for personal as well as business reasons, only the
portion of the car's value that can be attributed to business use may be excluded.
A means by which the costs of various life insurance policies are compared. The cash values, dividends and yearly premiums are weighted
by the chances they will be paid. Consider also comparison methods.
Comparable Worth
This is a doctrine that states that jobs have an inherent value. As such, men and women who perform jobs of the same inherent value
should be similarly compensated. Before disparate treatment of protected classes became an issue, this term was used for both external
competitive comparisons and for internal equity decisions. Today comparable worth focuses special attention on pay practices that may match
the market or perpetuate past internal practices, but still create or perpetuate discrimination in the treatment of those holding female-
dominated jobs whose content is similar but not equal to that of male-dominated jobs. Comparable worth means that women should be paid
the same as men, excepting allowable differences (i.e. seniority plans, merit plans, production-based pay plans, or different establishments or
locations).
Compa-Ratio
The ratio of an employee's actual salary (the numerator) to the midpoint of the applicable (the denominator) salary range. To calculate an
individual's compa-ratio, divide the actual salary by the midpoint of the assigned salary range.
In quantitative job evaluation plans, this is a term used to describe yardsticks used to measure and identify particular levels of compensable
factor. Typically, there are about seven degrees for each factor.
Compensable Factors
Any factor used to provide a basis for judging job value in a job evaluation scheme. Typically, compensable factors include effort, skill
needed in order to perform a job, and responsibility. These factors are used to establish job worth when creating a job hierarchy in order to
set a wage structure.
Compensation
A methodical approach to assigning a monetary value to employees in return for work performed. Compensation may include any or all of
the following: base pay, overtime pay, commissions, stock option plans, merit pay, profit sharing, bonuses, housing allowance, vacations and
all benefits. This is referred to as remuneration in some foreign countries.
Compensation Committee
A high level committee (board of directors level) that approves pay and incentive award programs where senior management of the
company are concerned.
A requirement of the Securities and Exchange Commission (SEC), this is an annual report to made by the Compensation and Benefits
Committee. The Compensation and Benefits Committee has the responsibility for establishing compensation for a company's executives as
well as for other compensation programs. Members may not be employees of the company, nor may they be involved with the executive
compensation programs. The Committee takes into account information provided by independent compensation consultants.
Compensation Costs
This describes the overall cost to a company, including unforeseen and unrealized cost effects of current compensation decisions concerning
the total compensation program (base pay, incentive programs and benefit plans).
Executive pay in corporations is limited in small measure. The amount of compensation paid to executives that is deductible or reimbursable
to the company is no more than $1 million in compensation paid to an individual chief executive officer or the four other highest compensated
officers of a corporation.
This agreement requires employees who receive compensation that’s disallowed as a deduction to the corporation to return the funds to the
corporation.
This describes the intrinsic guiding factor for the application and administration of a compensation program. Such a policy would, of course
ensure that a compensation program (which would include benefits and pay) would align with the company philosophy.
The intent of an award of compensatory damages is to compensate the plaintiff for loss suffered. To re-instate the plaintiff to the position in
which they were before they suffered the loss. The intent of an award of punitive damages is to both punish the defendant and to act as a
deterrent to others from similar behavior. Employees wrongfully dismissed may seek compensatory and punitive damages.
Competency
In terms of jobs, competency is an underlying behavior, skill, or characteristic of an employee. It is a good indicator of success.
Competitive Compa-Ratio
The term compa-ratio indicates how employees of a company are paid in comparison with the value of their jobs in the market. In other
words, how the market pay ratio compares to the company's midpoint range in salaries of the same category.
Information from salary surveys of competing organizations' pay practices. This data allows compensation managers to set pay that is at,
above, or below market level, depending on their organizations' pay strategies.
Competitive Pay Policy
Usually, this is a game plan that a company has, whereby they use the results of labor market surveys as means of evaluating and
determining how to set pay levels.
Completion Bonus
Usually only applicable to an employee with an expatriate status, this is a bonus / lump sum given after the successful completion of an
assignment. The objective is to provide incentive for the expatriate to continue with the assignment until its completion.
Compound Interest
Also known as the value of money over time, this is interest that is earned not only on the initial capital, but also on interest that has
accrued over time.
This term is employed to describe the growth rate, expressed as a percentage of a salary over a period of time.
This is a term used to describe a medical insurance program providing coverage of most medical expenses within the one policy. There is
usually an annual deductible, which must be met before benefits become payable.
Health insurance coverage with a combination of both a major medical policy and a hospital expense policy.
Compressed Work-Weeks
A term used to describe any alternative workweek schedules (10 hour days or more complex rotation resulting in extended weekends).
Compression
Wage compression occurs when a new hire is paid the same as or more than employees with more seniority. It also occurs when employees
are paid more than their supervisors. Often this occurs when the external labor market conflicts with a company's internal wage structure.
This describes the age and or date at which employees must retire. Since the amendment to the Age Discrimination in Employment Act of
1967 (ADEA), mandatory retirement, which is based only on age, has mostly been prohibited.
In job evaluation, a computer may be used to manipulate statistical data in order to rank jobs.
When it is to their benefit, employers provide computers for employees to use when working at home. Depending on the amount of personal
use by the employee and the family, the benefit may not be considered taxable compensation to the employee.
This is a health insurance policy that gives the insurer the right to refuse to renew the policy for reasons outlined in the policy at the end of
a premium payment period. Compare with CANDELABLE POLICY, GUARANTEED RENEWABLE POLICY, and OPTIONALLY RENEWABLE POLICY.
Confidence Interval
This is a range that’s computed for the observed value that should include the “real” value 90% or 95% of the time. To determine this range
or confidence interval, you must first compute the standard error of the value.
Confirmation Certificate
Issued to a beneficiary of a life insurance policy, this certificate outlines the amount of life insurance proceeds in a retained asset account
and other pertinent information.
Conservation
In the United States, this is a statute that mandates that employers sponsoring organization health plans continue to offer coverage under
the organization plan to employees, their spouses, and dependent children who lost coverage due to the occurrence of a qualifying event (e.g.
reduction in work hours, many types of termination of employment, death, and divorce).
An accounting method used for subsidiaries where the ownership is more than 50%. See COST METHOD.
The first approach used in determining salary increase budgets. In this approach, there is no information on any planned promotions, new
hires, terminations, reclassifications, etc. It is assumed, that the status quo is maintained.
Construct Validity
The extent to which a measurement reflects the specific underlying construct it purports to assess. Construct validity requires gradual
accumulation of evidence from a variety of sources.
Constructive
A tax principle for the determination of timing of tax liability, where there is a deferred payment. The law states that tax is to be imposed at
the time when an individual reaches out to take the benefit.
Constructive Delivery
Legally equivalent to physical delivery of a policy. Constructive delivery occurs: (a) when an insurer parts with control of the policy with the
intention that the insurer will be unconditionally bound by the policy as a completed instrument, or (b) when the policy is physically delivered
to an agent of the applicant.
Constructive Distributions
If a corporation pays a shareholder-employee a salary that’s unreasonably high considering the services actually performed, the IRS may
treat the excessive part of the salary as a constructive distribution of earnings to the employee-shareholder. The employee-stockholder’s
wages are reduced, and the difference is treated as a dividend. This creates increased corporate taxable income and tax liability for the
corporation since the reduced wages increase the corporation’s earnings but the cash to pay the additional tax is gone. There are also
penalties and interest to be paid on the underpayment. To avoid this compound effect, the corporation and shareholder-employee can enter
into a Compensation Reimbursement Agreement.
Consultants
The use of non-employee professionals by companies provides flexibility in the workforce. Consultants can undertake and complete projects
without increasing the workforce of the organization.
CPI measures the change in consumer prices, as determined by the Bureau of Labor Statistics' monthly survey. Many pension and
employment contract changes are tied to changes in consumer prices. This protects employees against inflation and reduced purchasing
power.
Consumer Report
The communication of any information relating to a person's credit-worthiness, capacity and or general reputation by a consumer reporting
agency.
Content Validity
The extent to which a measurement reflects the specific intended domain of content. Stated as a question: Do the ... thoroughly cover all
relevant aspects of the conceptual domain they are intended to measure?
Contestable Period
A pre-established period (usual two years) within which the insurer may contest the validity of a life insurance policy. Contrast with
incontestable clause.
Contingencies
Events that are likely but not certain to happen. Insurance premium rates and insurance companies' willingness to accept risks are based
partly on the degree of likelihood or the probability that certain contingencies will or will not happen.
Contingency Reserve
A fund or reserve set up by an insurance company of its own volition to cover or help to cover any unusual or unexpectedly large claim
amounts.
An option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income, or a
specified fraction, to be paid after his death to another person designated as his contingent annuitant, for that person's lifetime. The
contingent annuitant is usually the husband or the wife. (See JOINT AND SURVIVOR ANNUITIES.)
Contingent Beneficiary
Should the person designated to receive the proceeds of life insurance policy, predecease the person whose life is insured, then the
contingent beneficiary becomes the beneficiary. May also be known as the secondary beneficiary.
Contingent Compensation
Similar to a BONUS, this is a payment or benefit that depends on the behavior and or performance of an employee.
Contingent Payee
This is the person or party who will receive the proceeds of a life insurance policy remaining to be paid under an option of settlement at the
time of the original payee's death. May be contrasted with the CONTINGENT BENEFICIARY, whose rights end when the insured dies. Also
known as the successor payee.
Contingent Payment
A payment that will be made upon the occurrence of a predetermined event. For instance, this is a payment that will only be made at a
certain date, if and only if, the recipient is alive.
Continuance Tables
Tables containing morbidity statistics that indicate the distribution of claims according to the duration of the illness or amount of expense
involved in the claims.
Continuation Coverage
COBRA and other regulations provide for health care continuation of coverage for employees who have terminated or been terminated from
their employer.
An annual education requirement for many professionals to continue to receive certification in their respective field of work. CE credits are
usually governed by various State Boards.
In the United Kingdom, this is activity beyond initial training, aimed at improving skills, knowledge and understanding, whether by online
courses, day seminars, spare-time study, etc. ERI provides CPD credit for UK counselors (attorneys). See our Course Credit Map.
This term is used generally for CPAs. CPE credits are governed by the National Accounting Standards Board (NASBA) located in Nashville,
except for Illinois and Nebraska, which are governed by their respective State Board.
Also known as straight life insurance, this is a species of whole life insurance in which premiums are payable right up until the death of the
insured / throughout the whole life of the policy.
Contract Of Indemnity
Under this kind of contract, the amount of benefit to be paid is strictly based upon the amount of loss suffered financially (determined at the
time of loss). Insurance contracts are typically contracts of indemnity. Their object is to reinstate the beneficiary to their position before their
loss. See VALUED CONTRACT.
Contracts
In common law, employment is viewed and treated as a contract, and as such is subject to all the usual laws of contracts. Consideration
must, therefore pass from one party to another for a contract to be considered to be binding and for the statute of frauds to apply.
Contributed Surplus
Peculiar to Canada, this is the amount in excess of the par value paid by the owners of the stock, minus the number of dividends paid to the
owners of the stock.
Contribution Limit
In a defined contribution pension plan, this is the maximum allowed by law to be added to the participant's account. The annual contribution
is inclusive of employer's contributions.
Contribution To Surplus
In mutual insurance companies, this is the income that results when an insurance company makes more money than is required to pay for
the cost of actually providing insurance.
A benefits program requiring that employees contribute part (or all) of the cost, and the employer covers any remainder.
Any organization insurance plan that calls for the insured to contribute a portion of the cost of the organization insurance coverage. To be
contrasted with NONCONTRIBUTORY ORGANIZATION INSURANCE.
Contributory Plan
Any pension or employee benefit plan in which plan participants can or must make contributions to the plan out of their own pockets.
Control Point
Within a given salary range, this is the point that represents the desired pay for a completely qualified and satisfactory performer (in a
position or organization of jobs at the midpoint of the salary range).
Controlled Groups
Usually refers to a group of corporations. One is known as the 'parent' company and owns a stock interest in at least one (if not more) other
corporations, known as 'subsidiaries'. May also be a 'brother- sister' type association, whereby two or more corporations are owned by the
same person or groups of persons. A controlled group may also consist of a combination of the two types of groups (in which case it is known
as a 'combined controlled group').
Convention Blank
Filed annually to their respective state insurance regulators, this is a financial statement required of all United States insurers.
Conversion Fund
A fund where all the employer's unallocated contributions to a combination plan accrue.
Conversion Privilege
May be defined in two ways: (1) The right, which an individual has, under certain circumstances to change coverage (e.g. change from an
individual term policy to an individual whole life policy). (2) The right of an individual covered by an organization policy to change his or her
coverage under an individual insurance policy. Typically, this kind of conversion may be made when a person leaves the group or the benefits
are downgraded or ended for a certain group of people.
Convertible Debenture
A bond that may be converted, at the option of the owner, into common shares of the issuing company at certain times and at specific
prices.
May, at the owner's option, be converted at specific times into a certain amount of common stock of the issuing company.
Convertible securities combine aspects of both stocks and bonds, thus creating a truly 'best of both worlds' investment. Convertible
securities are a bonds, debenture or preferred stock exchangeable which, at the holder's option, may be exchanged for the common stock of
the issuing company.
Term life insurance which may: 1) be converted into cash value insurance (USA) or may be the conversion of term assurance into an
endowment assurance (UK); 2) converted into a permanent insurance policy at the option of the owner without further evidence of
insurability.
This is a clause included in health insurance policies that states that benefits will not be paid for amounts that are already covered by other
organizational health insurers. The object of a coordination of benefits clause is to ensure that benefits from all eligible sources do not exceed
100% of permissible medical expenses. This also prevents an individual from profiting from duplicative organization health care coverage.
Consider also OVER INSURANCE PROVISION.
Core Benefits
These are the basic standard benefits that are offered to every employee (e.g. life insurance and health care).
Corporate Culture
The shared beliefs, norms and assumptions of an organization, which enable it to adapt to its external environment and to integrate its
employees and units internally.
The purpose of COLI is to enable a corporation to insure the lives of their highly compensated / executive level employees (beyond what
may be available through qualified plans). The company and the executive typically share ownership and the beneficiary interests.
Correlation
Several definitions: 1) In statistical terms, this is the simultaneous increase or decrease of two numerically valued random variables. 2) In
lay man terms, this is a word used to describe some kind of association.
Corridor
In order to qualify as life insurance for income tax purposes, a specific level of pure insurance protection, which is in excess of the
accumulated value, must be maintained. It is this pure insurance coverage that is known as corridor.
Corridor Deductible
Peculiar to the health insurance industry, this is when a major policy has paid up to the entire amount of the benefits to the insured party
and there still exists some remaining expenses. This additional expense must be shouldered by the insured party before any further coverage
becomes available.
A means by which cost of various life insurance policies are compared by calculating the cash values, dividends and premiums yearly and
weighting them by the chances that it will be paid.
Cost Containment
A plan whereby a company / organization attempts to minimize rising costs of health and welfare benefits by putting into effect programs
that focus on cost effectiveness.
Cost Method
An accounting method used by affiliated companies, where the percentage of ownership is not more than 20%. Compare with EQUITY
METHOD.
Cost Of Capital
An economic concept that may be defined in various ways. 1) A discounted rate equating the market value of securities with the current
value of cash flows to the security owners. 2) A discount rate equating market value of securities to the current value of the net operating
income of a company, after tax. 3) May also refer to minimum rate of return, which must be assumed of a possible investment for the market
value of the company not to be affected.
Determined by subtracting ending inventory from goods remaining and available for sale (purchases vs. beginning inventory).
The eligible payroll multiplied by the average increase, adjusted to reflect the percent of the year the increase is in effect.
Cost Of Labor
The process of establishing external pay practices, where information on labor market costs (total compensation amounts) are obtained from
labor market competitors and relied upon when determining target total compensation opportunity.
Cost Of Living
The cost of purchasing goods and services, as determined by the demand and supply of goods, services, and property. Typically, these costs
are determined by a standard packages of goods.
Cost Of Sales
In terms of sales compensation, the cost of sales is a subjective measure of internal costs. It reflects an 'ability to pay' line of thinking for
setting target pay levels.
Cost Shifting
A strategy whereby an organization minimizes the cost of making health coverage available, by transferring a portion of the costs or cost
increases to someone other than the organization itself (usually to the employee).
Several definitions: 1) An across-the-board wage/salary increase or supplemental payment intended to bring pay in line with inflation in
order to maintain real purchasing power. 2) An increase in a pension benefit, disability income benefit, or life income benefit to compensate
also for inflation.
Cost-Of-Living Index
CPI measures the change in consumer prices, as determined by the Bureau of Labor Statistics' monthly survey. Many pension and
employment contract changes are tied to changes in consumer prices to protect against inflation and reduced purchasing power.
Cost-of-Living Levels
The cost of purchasing goods and services, as determined by the demand for and supply of goods, services, and property. Typically, these
costs are determined by a standard packages of goods, such as is used by the Consumer Price Index (CPI).
Coupon Advertisement
Coverage Rules
Coverage rules govern the admission of employees to participation in a retirement or welfare plan. The term "coverage" also refers to the
IRS and rules that are designed to insure that qualified retirement plans benefit a broad cross-section of the employer's lower compensated
employees. The rules for determining whether coverage is adequate in this latter sense are: 1. The Average Benefit Percentage Test: A plan
will pass this test if: (a) it benefits employees under a classification that the does not discriminate in favor of highly compensated employees
(the classification test); and (b) the "average benefit percentage" for lower compensated employees (their plan benefits expressed as a
percentage of their compensation) is at least 70 percent of the average benefits percentage for highly compensated employees. 2. Minimum
Participation Rule: A requirement for qualified retirement plans that a plan benefit at least the lesser of: (a) 50 employees; or (b) 40 percent
or more of all employees of the employer. 3. Ratio Test: This test requires that the plan benefit a classification of employees that does not
allow more than a specified difference between the percentage of an employer's highly compensated employees who are covered and a
similarly computed percentage for lower compensated employees. For this purpose, the maximum allowable difference is a 70 percent ratio.
4. 70 Percent Test: This test requires a plan to benefit 70 percent or more of all of the employer's lower compensated employees. For this
purpose, all eligible employees are considered to benefit under a plan. In a Section 401(k) plan, or a plan to which employees may voluntarily
contribute or may receive employer matching contributions, all employees eligible to contribute will be considered to benefit in that portion of
the plan.
Covered Compensation
The foundation for integrating pension plan with Social Security benefits. The IRS defines it in its regulation as, the average of the 35 years
of Social Security wage bases up to and including the year an employee reaches the age of eligibility (retirement).
Covered Wages
In benefits plans, this represents the amount of employee wages or salaries used to calculate corresponding benefit amounts. For instance,
pension calculations are typically based on salary and generally do not include other kinds of variable compensation (e.g., bonuses).
Credibility Percentage
This is the amount of credit or weight given to a group's actual claims experience, when calculating a projection of future claims or a
dividend. May also be referred to as the credibility factor. Consider also EXPERIENCE RATING and EXPERIENCE REFUND.
A term insurance that decreases by nature. The purpose is to pay the balance due on a loan in a situation where the borrower dies before
the loan is repaid.
Credit Unions
A credit union is a non-profit cooperative owned and operated by the members to provide financial services to its members.
Credits
Several definitions: 1) A term used in accounting to describe a payment made towards an amount owed. 2) May also be a transaction
between two parties whereby one (creditor/lender) provides money, goods or securities in return for a promised future payment by the other
party (debtor/borrower). Transactions such as this normally include the payment of interest to the lender. Contrast with DEBIT.
The process of underwriting, that have a positive effect on an individual's mortality rating. Credits are assigned negative values. Contrast
with DEBIT and NUMERICAL RATING SYSTEM.
Critical Incident
A method of performance documentation in which the rater keeps a written record of on-the-job incidents and or behaviors, which may be
examples of effective or ineffective behavior. The record is subsequently used as a source document to rate the employee. The purpose being
to avoid subjective judgments, which feature in most ranking and rating methods.
Cross-Selling
Several definitions: 1) The process of using an existing customer base for one product as prospective buyers for other products.
Culture
The shared beliefs, norms, and assumptions of an organization that enable it to adapt to its external environment and to integrate its
employees and units internally.
Cumulative
Several definitions: 1) An arrangement whereby payment not made when it is due is carried over to the next period. 2) May also refer to a
type of cycle of performance where the performance of the employee currently holding a certain position is accumulated and expressed over
next performance periods.
Cumulative Withholding
Cumulative withholding refers to a method of determining income taxes to be withheld. Wages are added for a particular payroll period to
total wages already paid during the year. The aggregate is then divided by the number of payroll periods, and any excess tax is deducted
from current payment of wages.
The rate at which a certain country's currency exchanges with another. Distinctive changes in currency rates, relative to the base country
currency, cause the fluctuation of relative payroll costs of expatriates.
Current Assets
An item on a company's balance sheet that represents the sum of cash (including cash equivalents, accounts receivable, inventory, prepaid
expenses and other assets), which could potentially be converted to cash within a year. Contrast with NON-CURRENT ASSET. Compare with
CURRENT LIABILITIES and CURRENT RATIO.
A type of whole life insurance where the cash values are based on the insurer's current mortality, investment, and expense experience. An
amassment account is credited with a current interest rate, which changes over time. May also be known as interest-sensitive whole life
insurance.
Current Liabilities
A balance sheet item that represents the sum of all monies owed by a company and due within a year. Also known as payables or current
debt.
Current Ratio
Current assets divided by current liabilities. This is an indication of a company's ability to meet short-term debt obligations. The higher the
ratio, the more liquid the company is. See also RATION and QUICK RATIO.
Current Review
A part of a utilization re-assessment program that monitors an insured's care while the insured is hospitalized and encourages the discharge
of an insured from the hospital as soon as their medical condition no longer warrants continued in-patient care.
Settlement option rates mirroring the interest rates presently earned by the insurer.
Curriculum Vitae
A written summary of your education, work history, and professional qualifications. This may be provided to a potential employer or in a
court of law where you are to give expert witness testimony.
Curtailment
An amendment to a pension plan significantly reducing plan benefits or employer contributions. Types of curtailments include a reduction of
the expected years of service of present employees, and the elimination or reduction of the accrual of certain benefits for some or all of the
future services of a significant count of employees.
Custodial Care
Specialized care that is provided for those who cannot care for themselves. Custodial care is usually for the old, the seriously ill, or severely
injured.
Under FLSA, this means greater than occasional but less than constant. It includes work normally done every workweek, but does not
include isolated or one-time tasks. (Section 541.701)
The department in a life and health insurance company tasked with the provision of assistance to the company's policy owners, agents, and
beneficiaries. Customer service specialists are tasked with answering policy owners' questions, assisting them with the interpretation of
policy, and responding to questions on the policy coverage itself. They are also tasked with making changes requested by the policy owners,
such as change of address, beneficiary designation, and mode of premium payment. The customer service department may also be the
department that sends premium notices to customers; collects premium payments; and calculates and processes policy loans, dividends,
nonforfeiture options and surrenders. Also known as the client service department, the policy administration department, the policy owner
service department or the service and claim department.
Danger Pay
Usually paid in addition to a hardship premium, danger pay is often given to expatriates who are required to live and work in a foreign
country where a civil war, revolution, or some kind of terrorism could threaten the physical well-being of the expatriate.
Daubert Hearing
A pretrial hearing where a judge determines whether or not “scientific evidence” to be presented by an expert witness will be allowed at
trial. Under this test, judges evaluate whether the evidence is both “relevant” and “reliable” in determining if it will be admissible at trial.
Child care facilities that take care of children for multiple hours of a day while their parents are at work.
The money to be paid when the insured under a life insurance policy dies. (It does not include adjustments for monies owed.) The first
$5,000 of this amount is not taxed. This money may also represent the amount payable to the beneficiary of a retirement plan upon the
death of the insured employee.
Death Claim
A request for payment due to death under the terms of a life insurance policy or annuity contract.
Debit
An accounting entry resulting either in an increased amount of assets or a decreased number of liabilities. Also, in terms of insurance and
underwriting, debits represent factors that have a negative effect on an individual's mortality rating.
Liabilities that are often divided into current liabilities (which are due within a year of the date entered on the balance sheet) and non-
current liabilities (which are due more than a year after the date on the balance sheet).
Debtor-Creditor Groups
A group composed of lending institutions--banks, credit unions, savings and loan associations, finance companies, retail merchants, and
credit card companies--and their debtors.
Amounts for payment against a debt due from the employee. An employer who pays an employee's debt must include the amount as income
to the employee for tax purposes.
Deciles
In statistics this represents any of nine points that divide a distribution of ranked scores into equal intervals where each interval contains
one-tenth of the scores.
A type of life insurance where the amount of coverage decreases over the duration of the coverage.
Decrement
The process of gradually becoming less. In insurance terms, the reduction in the number of participants in an employee benefits plan
(usually caused by such factors as retirement, disability, death or termination).
Deductible
The amount of expenses that the insured party must pay before receiving any benefits from the insurance company. It can also refer to an
item or expense that is taken away from an individual's gross income in order to reduce the amount of taxable income (e.g., mortgage
interest, state taxes, charitable contributions, and business expenses that are not reimbursed).
Deductible Limit
The maximum amount of money the insured must pay before the insurance company starts to pay.
Deferral Date
A date occurring a period of time after the first anniversary of a group insurance policy. Deferring payment to this date helps insurance
companies better calculate the new premium based on the first full year’s experience.
Deferral Options
Options where an employee may defer an amount of compensation and thereby delay owing taxes on the deferred amount until the option is
exercised.
Deferred Annuity
An annuity (an investment through an insurance company) that delays income payments until the holder chooses to receive them.
Deferred Benefits
Non-monetary future compensation that an employee may be entitled to, providing that he/she has accumulated enough credited years of
service (for vesting purposes). These usually include pension plans, 401(k) plans and stock option plans.
An arrangement where a portion of an employee’s income is paid out at a later date than when the income was actually earned. Examples
include stock options, retirement plans, and pensions. For most deferred compensation, the primary benefit is the deferral of tax.
Deferred Incentives
Part of an executive compensation package where the reward for consistent performance is a financial incentive payable in the future.
A life annuity that provides the purchaser with regular periodic payments, usually for the rest of their life and where payments are started
no earlier than one year after its purchase.
Also called a premium-delay arrangement, an agreement between an insurer and a group policy holder that lengthens the grace period of
premiums on a permanent basis, usually by 30, 60, or 90 days. This agreement is usually only granted to companies with excellent credit
ratings.
A portion of company profits allocated by an employer to an employee's trust. Contributions on behalf of each employee are expressed as a
percentage of salary. If the profit sharing plan is a qualified plan according to the IRS, employer contributions are tax deductible as a business
expense.
This statute affects exempt organization benefits in many ways. It prevents most taxable benefits from being offered as part of a flexible
benefits plan. In terms of health benefits, it makes it mandatory for employers to treat an employee spouse who is over the age of 65 the
same as an employee spouse under age 65.
This formula is used to determine the benefits due each participant, upon retirement, in a defined benefit plan. The benefit amount is often
related to the years of participation in the plan.
A plan designed to provide participants with a definite benefit at retirement. Taken into consideration when calculating the benefit are years
of service, age and salary.
A formula that is used to establish the amount of the contributions to be made by the employer toward a group benefit plan.
Group benefits plans in which the amount of employer contributions made is defined according to a set formula.
Demotion
The reassignment of an employee to a lower-level position with lesser pay, involving fewer skills and responsibilities. This may occur as a
result of poor performance, company re-organization, or at an employee's request.
Demutualization
A process in which a mutual company, owned by its members, converts to a public stock company (owned by its shareholders).
An organization like an HMO, but that provides only dental care. Participants can use only the designated dental providers that are approved
or employed by the DMO.
Similar to the HMO, this is an organization that provides dental care only.
Dentist-Consultant
A licensed dentist who works for an insurance company, advising them as to the suitability of dental treatment. A licensed dentist must
understand the underwriting objective of the dental plan he/she is advising.
Department Compa-Ratio
The department compa-ratio identifies exactly where an employee falls in their salary range. It is calculated by dividing the employee's
annual pay by the midpoint of the salary range.
A fringe benefit provided by the employer to its employees as sanctioned under the 1981 Economic Recovery Tax Act. This benefit is
nontaxable to the employee under Internal Revenue Code Section 129, and the costs incurred by the employer are considered tax deductible.
Programs where employers collect sources from within the community of available day care options. They present these to employees who
need help finding day care.
A Dependent Care Reimbursement Account allows employees to set aside part of their salary each pay period on a pre-tax basis to
reimburse eligible expenses incurred for the care of their child or other dependent who is physically or mentally incapable of self-care, so that
employees (and spouses) can work or look for work.
The DCSA plan is for employees who must pay for care for dependents in order to work. Money contributed to a DCSA is free from federal
income, Social Security, and Medicare taxes and remains tax-free when it is received.
This is a group life insurance policy that is made available, on an elective basis, to cover dependents of group members. It is usually sold in
small amounts intended to cover final expenses.
Dependent Variable
The output or response that is the result of changes to the independent variable.
Dependents
In business this word is used to describe a person who is reliant upon another (usually, the head of a household) for financial support. A
dependent is usually a child, spouse, parent, or sibling of the employee. In some companies, the definition of a dependent has been extended
to include a significant other and, on occasion, son- or daughter-in-law.
A method of funding a pension plan in which the sponsor of the plan places the insurance company's assets in a general account. When a
participant leaves the company, the insurer retrieves funds from the general account to pay the plan participant an annuity. This contract
typically protects the sponsor of the plan against loss and guarantees minimum returns. May be compared with Immediate Participation
Guarantee (IPG) Contract.
Deposit Term Insurance
Not really involving a deposit, this is a kind of term insurance where the premium for the first year is greater than that payable in
subsequent years.
Deposition / Depositions
In a deposition, opposing lawyers have the opportunity to review material to be presented and to ask preliminary questions regarding a
case. At trial, deposition testimony can be used to cast doubt on a witness's contradictory testimony or to refresh the memory of a suddenly
forgetful witness.
Depreciation
An accounting and tax concept that is used to estimate the loss of value of assets over time.
Derivative Security
Any security (stock options, warrants, convertible securities or other) that may become a share of common stock.
Determination Letter
Provided by the IRS (Internet Revenue Service), this is a letter documenting the full compliance (with its rules) of a pension plan.
Deviated Rate
Rates used by a group insurance company that are different from those suggested by a rating bureau. An insurance company may use
deviated rates because it feels they are more indicative of the company's experience.
A legal entity that provides dental services at a fixed price. Enrollees in these plans must have dental care provided through designated
doctors.
A system of paying health care providers where the treatment of each condition is given an established dollar figure. Only this amount is
paid to the healthcare provider by an insurance company. The patient must pay the rest of the bill.
Diary / Log
A method of gathering detailed information about a job by requiring the job incumbent to keep track of his or her specific activities during a
determined period of time.
Created by the U.S. Department of Labor Employment and Training Administration, the DOT has been used for its thousands of occupational
definitions to match job seekers to jobs. It was last updated in 1991 (4th edition) and has now been replaced by the O*NET which classifies
jobs in job families, making it less useful for determining disability eligibility or job-specific benefits analysis.
Differential
In expatriate compensation, a differential describes an amount of money used to compensate for the discrepancies in costs between the
home and the assignment location.
Diluted EPS is a company's EPS figure as calculated using fully diluted shares outstanding (including the impact of stock option grants and
convertible bonds). This shows a "worst case" scenario, one in which everyone who could have received stock without purchasing it directly
for the full market value did so.
Dilution (Percent)
A decrease in the equity of a share of stock due to additional shares being issued.
Dining Facilities
In order to keep employees on-site for lunch, many employers provide a dining facility to employees.
Direct Observation
A method of job analysis involving personal observation of employees while they perform their duties. This method is usually used when
analyzing production type jobs, which are very repetitive in nature.
Payments made directly to the worker before any deductions for their contribution to social security and pension funds, life and health
insurance premiums, income tax liabilities, etc.
A way in which insurance companies sell policies directly to customers, relying on media advertisements, telephone solicitations, and direct
mail. By adopting this type of marketing, insurance companies bypass insurance agents.
Promotions that solicit an immediate, measurable response from recipients. New customers are acquired through solicitations to respond,
utilizing media such as direct mail, e-mail, online advertisements, web-based shopping, and through telemarketing.
Direct Seller
Under FLSA (Fair Labor Standards Act) Regulations, tasks that are related to exempt duties and that contribute to or facilitate performance
of exempt work. Work that is "directly and closely related" to the performance of exempt work is also considered exempt work.
This liability insurance provides financial protection for company directors and officers in the event they are sued in conjunction with the
performance of their duties as they relate to the company.
Directors Fees
Directors fees are fees received by Directors from a Corporation for services rendered. In a situation where a Director is not an actual
employee of a company, the fees are considered to be self employment income for tax purposes and must be reported to the IRS.
Directors of Corporations
Internal or external persons elected by shareholders, directors of corporations manage or direct the affairs of the corporation. They make
the major business decisions, major policy changes and monitor the activities of the officers.
Disability
An individual's physical or mental inability to perform the major duties of their occupation due to sickness or injury.
Disability Benefits
These benefits are usually paid monthly to an insured who is rendered unable to work prior to his or her normal retirement date. Includes
both long and short-term disability benefits.
Insurance designed to provide the funds needed to purchase a disabled owner or partner’s interest in the business if they become disabled.
Disability Table
Two definitions: (1) A calculation of the probability of becoming disabled at each age. (2) A calculation of the number of people who remain
disabled at each age and the length of the disability.
Under the Americans with Disabilities Act of 1990, Individuals with a disability are defined as persons who have a physical or mental
impairment that substantially limits a major life activity, have a record of impairment, or are regarded as having an impairment. These are
Individuals with a disability who are qualified for a particular job and can perform the essential functions of the job with or without reasonable
accommodation.
Disabled / Disability
A series of payments made to an insured party which are contingent upon that person being both alive and disabled.
Discharge Provision
Part of a small estates statute which allows an insurance company to pay relatively small amounts of policy proceeds to the deceased
insured's estate without involved court proceedings.
Disclaimer Statement
As a legal term, used to describe a denial or repudiation of responsibility for an act or thing, or an attempt to limit liabilities.
Disclosure Requirements
The Employee Retirement Income Security Act (ERISA)requires that employers disclose to employees information about benefit plan
provisions and legal protections provided under ERISA.
Discontinuity Index
A test that is required by the NAIC Model Life Insurance Disclosure Regulation. Its objective is to pinpoint instances in which policy
illustrations have been tampered with, so that they show an unrealistic/untrue progression of premiums, dividends and benefits.
Discount Rate
The interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve
Bank's lending facility.
A stock option granted at a price that is less than the stock's then-current trading price.
An assessment of expected cash flow in the future against a project’s net present value. Cash flows in the future are discounted because
their real value will be eroded by inflation.
The purchase, by an employee, of restricted stock at a price that is below market rate.
Discrete
A type of performance cycle where the performance of an employee is limited to a particular performance time period without any relation or
reference to past or future performance time periods.
Discrete Data
In terms of statistics, this describes variables that assume only particular, distinct values and that are not continuous. For example, salary
levels and performance classifications are discrete variables, whereas height and weight are continuous variables.
A bonus plan that is used to reward outstanding performance, given at the discretion of the management.
Discrimination
Disparate or unequal treatment of employees unrelated to qualifications, skills, or performance (e.g., race, religion, gender, etc.). The Equal
Pay Act of 1963, The Civil Rights Act of 1964, the Age Discrimination and Employment Act of 1967 (ADEA), and the Equal Employment
Opportunity Act of 1972 all forbid this kind of disparate treatment of employees.
Discrimination Laws
Since the 1960's, a series of anti-discrimination laws have been enacted. The major one has been the Civil Rights Act of 1964, as amended
in 1972 and 1991. Title VII of that Act covers employment.
Discrimination Testing
A method used to determine whether benefits within a plan are being provided fairly and equally to a wide range of employees.
Disintermediation
The flow of funds out of one financial instrument, whose interest rates are low, into another financial instrument, whose interest rates are
higher.
Disparate Treatment
The treatment of members of a protected class of people (under Title VII of the Civil Rights Act or the Equal Pay Act), which is inconsistent
with the provisions of the Civil Rights Act or the Equal Pay Act. This would include any company policy or practice that is deemed to be
inconsistent with either of the Acts.
Disqualified Person
A person who in the past five years was in a position to exercise substantial influence over the affairs of a tax-exempt organization (deemed
an insider per section 4958 of the internal revenue code).
The premature sale or disposition of shares of an ISO (when the required holding period is not met). When this occurs, the ISO is taxed at
the regular rate (the employee will recognize ordinary income as well as capital gain).
The ERI Distance Learning Center (DLC) provides compensation and benefit courses. Online education lets you attend class in your home,
your office, or while traveling--24 hours a day, 7 days a week. All you need is a computer with an Internet connection. Each course examines
a topic used daily by HR professionals. The DLC offers downloadable course materials, interactive self-study exercises, instantly graded
exams, and the ability to track credits and print completion certificates. DLC courses are approved for PHR/GPHR/SPHR, CBP/CCP/GRP, CRCC,
CPE, JCA, CLE, and CE credit. To enroll, go to www.eridlc.com and click on the Enroll tab at the top of the page.
Distress Termination
Termination of a defined benefit pension plan, initiated by a company in financial difficulty, occurring when the pension plan is lacking
enough assets to pay present and future benefits and when continuing the plan would likely force the company to shut down.
Distribution Expenses
The expenses incurred while making insurance products available to the public, such as the cost of printing, postage, telecommunication
expenses, sales representative wages, etc.
Distribution System
The method used by insurance companies to get the product to their customers, involving all the necessary marketing activities.
Distributions
Regarding Benefits, a term that describes payments made to a participant or beneficiary, such as the disbursement of profits to
shareholders, interest earned, dividends, or payments from a pension plan.
Distributive Justice
The theory that people involved in an exchange are most happy if the relationship between the outcomes and inputs is the same for all
parties. This theory is attributable to G.C. Homans and forms the basis for the equity theory.
Distributor / Wholesaler
Firms or individuals who buy products in bulk, usually from many different manufacturers, and then re-sell or distribute them among various
retailers.
Divergent Data
Measurements that move apart from the norm. They move ahead of the common point or fail to approach the limit of a distribution.
Divestiture
Also known as "spin off," this refers to the disposition or sale of a subsidiary company or asset.
Payments for earnings of a corporation to its stockholders, typically made on a quarterly basis in the form of cash or stocks.
Dividend Accumulations
Also referred to as dividend credits, the amounts that are the result of an insurance policy owner leaving the policy dividends owed to him or
her on deposit with the insurer.
Dividend Expenses
The calculation representing the amount of money it costs the insurance carrier to maintain the policy for the current year. This calculation
appears on the policyholder's dividend statement.
The amount to be reimbursed to the insured of all or a part of the excess of premiums paid (e.g., premiums not needed by the insurer to
pay claims, establish reserves, and cover expenses).
The interest rate that represents the actual rate of earnings on an insurer’s present investments. Insurance companies use this rate to
calculate policyholder dividends.
Dividend Options
The different alternatives insureds may choose from to receive dividends under a life insurance policy, such as cash payments, paid-up
additional insurance, or increases in the cash value of a policy.
Divisible Surplus
The portion of an insurance company's earnings that is to be disbursed among the owners of the company's policies. See Surplus.
Divorce
The legal end point of a marriage. A divorce of an employee can affect that person's benefits. The ex-spouse has rights to retirement
benefits accrued during the time of the marriage. The ex-spouse also may apply for health benefits under COBRA. If there are children, then
there are payments for child support, which may be enforced through garnishment.
A doctrine applied by the courts where (even though the policy does not expressly lay it out) the reasonable expectations of policyowners
and beneficiaries will be upheld.
DOL
The value of a benefit to an employee for tax purposes which consists of the cost--including all taxes--incurred by the employer in providing
the benefit, but not including any portion the employee might pay for the benefit.
Domestic Corporation
The term a state uses when referring to a corporation that was incorporated in that state.
Domestic Partners
Usually, two unrelated, ummarried adults who share the same household. To qualify for the same or similar benefits as those provided to
married couples, an employee may need to demonstrate that their eligible partner meets certain criteria set by the employer.
DOT
Created by the U.S. Department of Labor Employment and Training Administration, the Dictionary of Occupational Titles (DOT) has been
used for its thousands of occupational definitions to match job seekers to jobs. It was last updated in 1991 (4th edition) and has now been
replaced by the O*NET which classifies jobs in job families, making it less useful for determining disability eligibility or job-specific benefits
analysis.
An accounting method where depreciation is accelerated to double the annual depreciation by the straight-line method, which amortizes or
apportions an equal dollar amount of depreciation in each accounting period.
Double Indemnity
A death benefit policy that, if an insured's death is accidental, pays an additional benefit that is equal to the basic benefit. Also known as
accidental death benefit (ADB).
Double Taxation
When the government taxes the same income more than once. For example, double taxation occurs when a company's profits are taxed,
and then when any portion of these profits are distributed to stockholders, the profits are taxed again.
The single most watched index in the world, the DOW is a price-weighted average of 30 significant stocks traded on the New York Stock
Exchange and the Nasdaq.
Downgrading
The lowering of status, such as the lowering of a job to a lesser job grade, or pay to a lower pay level.
Downsizing
The reduction of a company’s size and complexity, including a reduction in the number of employees, in an effort to increase its efficiency
and profitability.
Draw
A type of health insurance policy that covers all types of medical expenses arising from specific diseases named in the policy (e.g., cancer).
See Limited Coverage Policy.
Drinking Criticism
An underwriting term for evidence that the applicant abuses alcohol or is addicted to alcohol.
Drug Abuse
The use of illegal drugs or the inappropriate use of legal drugs. In the workplace employees who have been convicted of a felony drug
offense must be disciplined by their employers in accordance with the Drug-Free Workplace Act.
The Drug-Free Workplace Act of 1988 requires most federal government contractors and federal grantees to take specific steps to ensure a
drug-free workplace.
Organizations where a management company buys dentists' tangible assets and provides them with administrative support.
Dual Registration
When a registered representative is licensed with more than one broker, he or she is said to have a dual registration.
Dual-Choice Provision
Part of the Health Maintenance Organization Act of 1973 which required employers with more than 25 employees and who met certain other
specifications to offer health insurance through a federally qualified HMO as an alternative to a traditional health insurance plan. This
provision expired in 1995.
A legal requirement before public offerings, the due diligence process establishes the financial and operating stability of a company. The
process involves a diverse group of experts who examine and evaluate data and assess the property being acquired for any conditions that
would affect the price.
Organizations may choose to pay membership dues to chambers of commerce or other business or professional groups that employees join
as a consequence of their employment. Conversely, organizations may be required under a collective bargaining agreement to collect union
dues or assessments from employees' pay, and turn the proceeds over to the union.
A request to a health insurance company by another insurance company to find out whether other coverage exists for a claim.
There are two ways in which early retirement agreements can occur. In some retirement plans early retirement is built in. This is especially
true of defined benefit plans. Many such plans define an early age when the employee may retire at a reduced monthly payment, based upon
age, tenure, and salary. In a defined contribution plan, the employee would be able to draw out his/her account at an early age.
Organizations may choose to initiate an early retirement program in lieu of lay offs. These must be voluntary early retirement agreements.
This is done by adding years to workers' ages and lengths of service. Some firms make the offer more attractive by offering outplacement
assistance. Employees may be more likely to elect early retirement if the employer makes it easier to find new jobs through outplacement
counseling.
ETO is earned each pay cycle, but is available the cycle after it first accrued. As an employee's years of service increase so does the rate of
ETO accrual.
Earnings
Earnings include base pay, premium, overtime and bonuses. They are the total wages and or cash earned within a specific period of time.
Term used to describe the total earnings of an organization divided by the number of outstanding shares. EPS is sometimes used as a basis
for executive incentives. Also see DILUTED EARNINGS PER SHARE.
Earnings Statement
A detailed summary of the income and expenses of a business over a period of time (usually quarterly, semiannually or annually) showing
the net income or loss incurred.
Economic Benefit
This is a species of Residual Income. EVA is determined by subtracting from the income, the sum of cost of capital multiplied by the invested
capital. EVA is often the measure employed in the determination of an organization’s economic profit. It is not uncommon for EVA to be used
as a basis for incentive programs.
Edgar Extracts
EDGAR is a database maintained by the Securities Exchange Commission (SEC). All publicly traded companies in the U.S. must register data
into this database. EDGAR can be reached through the Internet. Financial data is available on all publicly traded companies.
A taxpayer can establish an education IRA to pay the qualified higher education expenses of a named child or grandchild, under the age of
18.
Educational Benefits
Companies may include educational benefits in their benefit package in a number of forms. The most common is an educational
reimbursement plan, in which employees are reimbursed for the costs of schooling or training that can be shown to be related to their job or
to their career in the company.
Effective Date
Several definitions: (1) The date on which a health insurance policy and/or retirement plan kicks into effect and the insured party's coverage
actually begins. (2) The date on which an increase in salary or pay rate goes into effect.
The ratio of income tax actually paid divided by gross income, showing the percentage of income actually paid in taxes.
Effort Bargain
The effort bargain is what an employee receives (level of compensation, benefits, etc.) from an employer in exchange for what the
employee: brings to the table (knowledge and experience) AND does (the tasks of the job or the “effort” made) for that employer. The terms
of the bargain are typically outlined in an employment contract.
Programs designed to assist the elderly in day-to-day activities. Usually this refers to the care of an elderly relative (financially, emotionally
or even mentally).
Election Period
This represents the 60 days, after having been notified of one's COBRA eligibility, during which an ex-employee may opt to accept the
continuation of health coverage or decline.
Contributions made to an employee's 401(k) plan, made by an employer on the behalf of the employee. Contributions are made with before
tax monies from a reduction in the employee's pay check.
Elective Surgery
Under a health insurance program, elective surgery is a covered procedure, but one that requires adequate time to schedule any necessary
diagnostic tests and/or initiation of treatment. This type of surgery usually requires the employee to obtain a second opinion as to the
necessity of the surgery and/or review by the insurance company.
Electronic signature
An electronic sound, symbol, or process attached to or logically associated with a contract or record. This is executed by a person whose
intent is to sign a record or contract. An electronic signature may be a number or code inputted on a telephone key pad, or the clicking of an
I Accept box on a webpage. It indicates acceptance of terms.
Eligibility Date
This is the date on which an employee and/or his or her dependents are eligible for benefits.
The foundation for establishing the employees or class of individuals who are qualified to participate in a specific plan (e.g., supplemental
benefit or incentive plan).
Eligibility Period
Typically 31 days (sometimes 3 months) within which a recently employed individual has to elect to participate in an employer’s insurance
plan (which is contributory in nature).
Eligibility Requirements
Requirements that an individual must meet before being able to participate in a company's life insurance plan, health coverage plan or
retirement, benefit.
Eligible Payroll
Established by calculating the total amount of salaries / wages of employees who, though eligible, do not receive a salary increase.
Elimination Period
(1) Duration between the start of employment and date upon which the employee is actually eligible to receive benefits. (2) The time frame
between an individual's disability and the beginning of benefits from the policy. Also known as qualification period (Canada) or WAITING
PERIOD.
Emergency room services are typically covered in most health plans. In managed care plans, the participant may be required to use a
specified emergency room, unless out of area. Emergency room services are covered in Part B of Medicare.
This task force was created by FASB to deal with matters not expressly falling under GAAP. Jurisdiction includes but not limited to matters
concerning stocks granted to employees.
Any employer can establish an employee achievement award program, using whatever criteria wished to determine achievement. However,
under IRS rules, the employer may establish a qualified plan based upon length of service and /or safety.
An Employee Assistance Program (EAP) is an employer-initiated program to assist employees in dealing with problems such as substance
abuse, marital discord, and employment problems.
Employee Benefits
Forms of compensation (excluding cash) available to employees. Benefits include but are in no way limited to the following: health coverage,
vacation, income protection, retirement savings.
Employee Contributions
Payments made by an employee to fund a specific benefit, thereby contributing to or covering the employer's entire cost.
Counseling for the mental and physical health of the employee is not taxable. Neither is retirement counseling. Other kinds of counseling are
taxable. In Quebec, counseling for physical and mental health is defined narrowly as stress management, tobacco, drug and alcohol abuse.
Employee Discounts
Employers may grant discounts to employees for their products or services. These discounts can be qualified as exclusions from gross
income, provided that certain requirements are met.
Employee Participation
Several definitions: (1)The extent to which employees are involved with the implementation and or the administration of benefits and pay.
This may also include the extent to which employees are involved with other company programs. (2) The level of voluntary participation of an
employee in company benefits plan.
A Federal statute that establishes the following: (1) Rights of beneficiaries to pension benefits. (2) Standards that must be followed when
investing pension plan assets. (3) Requirements that must be met before the disclosure of pension provisions and or funding. The Pension
Benefit Guaranty is also established by ERISA.
A category of benefits inclusive of relocation packages, subsidies on company-provided food service, discounts, and more.
A contract between a company and an employee giving the employee the right to purchase a specific number of shares in the company for a
fixed price, during a certain period of time. Employee Stock Option Plans should not be confused with the term EMPLOYEE STOCK
OWNERSHIP PLANS (also ESOPs), which are retirement plans.
Employee Stock Ownership Plan (ESOP)
Typically, this is a benefit plan that requires that an employee meet certain requirements in order to participate and that has a portion of its
investments (if not all) in company stock. An Employee Stock Ownership Plan (ESOP) is a type of defined contribution retirement plan in
which the account of the employee consists of company stock.
Employees
Employees are persons who are compensated for services performed and whose duties are under the control of an employer.
This is the amount taken away from the total amount paid to a pension beneficiary, so as to determine the part of the distribution that is
taxable.
In Canada, this is a profit sharing species, whereby the employer makes a deposit of funds in a trust account, but is able to withdraw the
amount deposited for tax purposes. Employees typically are taxed on contributions made on their behalf during the year in which the
contribution is made and also taxed on interests earned, if any.
Employment Contract
In a way, all employment is an employment contract, but at times it is in the interests of the company to establish a written agreement. This
is usually for a key employee. Such a contract usually includes a written guarantee of receiving certain rewards, regardless of the results
produced on the job beyond a stipulated period. The employment contract may also have other stipulations, such as a no competition clause
(where the new employee agrees not to compete with the business of the present employer for a certain amount of time).
Employment Taxes
In the United States, employers are required to pay a number of taxes on their payroll. These include Social Security, Medicare, and
Unemployment taxes. Employees must also pay toward Social Security and Medicare. In addition, employees have deductions for income
taxes.
Endorsement
Also known as a RIDER, this is an amendment made to an insurance contract, which then becomes part of the agreement by expanding or
by limiting the existing terms.
Endorsement Method
The way the beneficiary to a life insurance policy is changed. Change may be effected in the following ways: (1) The owner of the policy may
return the contract to the insurer. The insurance company then ‘ endorses’ it with the name(s) of any new beneficiary or (2) the policy is not
actually returned to the insurer. Instead, the policy owner requests (over the telephone) that a change be made reflecting, the fact that there
are new beneficiaries. Then the insurer mails an endorsement, reflecting the change, to the policy owner. Compare with recording method.
Endowment Insurance
A kind of life insurance policy providing benefits (1) if death occurs within a pre-determined number of years, or (2) if after a pre-
determined number of years, the insured is still living.
A life insurance policy whereby part of the dividend is used to provide paid-up-additions and the other is used to produce a pre-established
death benefit.
Enrolled Actuary
An actuary of a pension who has met the requirements and who has been enrolled by the Joint Board for the Enrollment of Actuaries (a
federal agency).
Entertainment Expenses
Employees are entitled to reimbursement for business-related entertainment expenses; these payment are not considered wages if
maintained separately. Business must be the purpose of the entertainment or meal such that there is at least discussion of business during
the time. While meals are the most common entertainment items, sporting events, concerts, or other entertainment is allowable.
Entire Contract Provision
This is an insurance clause that states that only the actual policy and the application for it are binding on the parties.
The purpose of the Equal Employment Opportunity Commission (EEOC) is to administer the various discrimination laws of the federal
government. EEOC has the authority to investigate and conciliate charges of discrimination because of race, color, religion, sex, or national
origin by employers, unions, employment agencies, and joint apprenticeship or training committees.
Makes gender based differentials in pay (wage discrimination) illegal, for jobs that are similar in terms of qualification requirements and that
are performed under similar working conditions
This doctrine goes beyond the Equal Pay Act of 1963. It states that women must be paid the same in a female dominated job type as a man
for a job that is substantially of the same value in a male dominated job type. This doctrine is in effect saying that job value / worth can be
measured.
The intention of this doctrine is to protect women from gender based discrimination in pay and the U.S. Equal Pay Act of 1963 embodies it.
Equitable Assignment
A transfer which though it does not meet the requirements needed for a legal assignment, will be enforced because it is the right thing (the
equitable or the fair thing to do).
Equity
Several definitions: 1) In legal terms, equity came about as a means or righting wrongs not recognized / or provided for under the British
Common Law. (2) The word equity is often used to describe ownership in stock or other forms of securities. (3) In terms of accounting, equity
may be used to describe the percentage by which a company's assets exceed the company's liabilities. (4) Also, in terms of accounting,
equity is used to describe investments of business owners in a business.
Equity Allocation
A term used to describe when a part of a retirement plan is funded by common stock investments (investments in equity).
Equity Investment
An investment which grants the investor an ownership title and or voting rights.
Equity Method
An accounting technique used by an investor who owns 20% to 50% of the voting shares / voting common shares. See cost method and
consolidated subsidiary accounting.
Equity Pension
A pension plan providing benefits, partially at least, which varies according to the success of the investment in common stocks (or other
investments). The equity part of the pension benefit is intended to provide benefits that grow as the rate of inflation rises.
Equity Theory
This principle states that job satisfaction or motivation comes from the comparison of an individual's input (investment) and the related
outcome that follows with the input and result / outcome of another individual. If the result of the comparison is equal, then equity is said to
exist.
A life policy or an annuity whereby the value and benefit fluctuate depending on the performance of the equity investments. Owners of this
kind of insurance policy, in effect are accepting and or risking to sharing in the insurer's gains and losses.
Equivalent Annual Percent Increase (EAPI)
An amount presented as part of interest-adjusted method of comparing cost of life policies, to consumers. The equivalent level annual
dividend is meant to represent the part of the interest-adjusted payment and the cost that is, in effect, not guaranteed by the insurer,
because dividends will change in the future as the insurer's experience changes. This amount gives the buyer an idea of the extent that
nonguaranteed amounts affect the interest-adjusted payment and the cost of a policy.
A payment which is equal in amount to a series of other lesser payments and which may be made in place of several other payments.
Equivocal Suicide
A suicide which leaves no doubt as to the deceased's intention to die as a result of a self-inflicted destructive act.
e-Recruiting
Recruiting services provided over the Internet are called eRecruiting and offer the ability for job seekers to log in and post their resumes.
Similarly, organizations may post job openings with these online services, using email and chatboards to further communication. Typically,
the Internet service provider chargers the organization a fee for posting the open position information.
Ergonomics
A methodical application of known information about every aspect (physical, psychological and social attributes) of human beings to the
establishment and use of everything that may affect a person's working condition. This includes working environment, layout, training, the
organization of the work-load and the job itself.
ERI's software data is based upon a plethora of original sources, including hundreds of surveys. Some of these surveys do not specify the
number of enterprises surveyed or the number of incumbent observations reported. Other surveys do enumerate the number of observations,
but their totalities may involve redundant counts. In keeping with our constant insistence on accuracy and statistical precision, ERI declines to
estimate how many total job incumbents are represented by the current consensus updated figures we report by industry, location, relevant
experience, or size dimension from every possible source. Instead, we provide only the reliability statistics for one single identifiable survey
out of the hundreds that we analyze. This source's counts can be proven accurate and precise (even if somewhat conservative, given all the
many additional sources we also reference). For the Salary Assessor software, this source is the Bureau of Labor Statistic's OES; for the
Executive Compensation Assessor software this is the SEC Edgar list of all ~14,000 registered US corporations. For Canada, we receive no
similar reliability statistics from Statistics Canada.
The ERI Distance Learning Center (DLC) provides compensation and benefit courses. Online education lets you attend class in your home,
your office, or while traveling - 24 hours a day, 7 days a week. All you need is a computer with an Internet connection. Each course examines
a topic used daily by HR professionals. The DLC offers downloadable course materials, interactive self-study exercises, instantly graded
exams, and the ability to track credits and print completion certificates. Courses are free, and continuing education credit costs just $19 per
certificate. DLC courses are approved for PHR/SPHR, CBP/CCP/GRP, CPE, JCA, CLE, and CE credit. To enroll, go to www.eridlc.com and click
on Enroll Now! at the top of the page.
ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) was passed to ensure that pensions offered by private-industry employers
met certain standards and were received by employees. ERISA does not require employers to offer pension programs. But ERISA does require
that those who offer pension programs follow certain rules if they want favorable tax treatment for their contributions and employee’s deferral
of income. ERISA’s four basic requirements cover participation, vesting, funding and fiduciary duties. For more information on ERISA, see DLC
Courses 15, 42 and 74.
ERP
ERPs are the most common form of EDUCATIONAL BENEFIT. Under an ERP an employer could fully or partially reimburse an employee for
education or training expenses on a pay-as-you-go basis.
A type of insurance which is designed to cover claims resulting from negligent acts and or mistakes of an insurance agent, including but not
limited to (1) his or negligent acts or omissions or (2) mistakes made by individuals for whom the agent is vicariously liable.
ESOP
A contract between a company and an employee, giving the employee the right to purchase a specific number of shares in the company for
a fixed price, during a certain period of time. Employee Stock Option Plans should not be confused with the term EMPLOYEE STOCK
OWNERSHIP PLANS (also ESOPs), which are retirement plans.
Estates
Both assets and liabilities left by an individual upon his or her death. This includes any monies owed to the employee by the employer
(wages are the most obvious but these could, theoretically include interest stemming from a retirement program and or life insurance policy
which the company provides.
Estoppel
Estoppel is a legal term that creates a bar to alleging or denying a fact because of one's own previous actions or words to the contrary.
European-Style Option
A stock option contract that may be exercised only during a specified period of time just prior to its expiration. This is in contrast to
American-style options, which may be exercised at any time between the purchase date and expiration date.
Evergreen Authorization
A term employed to describe a situation where shares are set aside to be granted in the future under an option which represents a portion of
shares that are outstanding for every year the plan exists. Shares that remain unused from a previous year get carried forward to be used in
a later evergreen plan. Typically, such plans remain in full effect until cancelled by the board of directors.
Evergreen Plan
A plan that has no specific date, upon which grants will no longer be permitted. Typically, a grant such as this remains in effect until
specifically canceled by the board of directors.
Evidence Of Insurability
Excess Benefit Plans are one form of non-qualified deferred compensation arrangements to supplement other retirement benefits for highly
compensated executives. These plans are initiated in order to attract retain and attract motivated executives. They may also be used for early
retirement, takeovers, and firing of top executives.
A transaction in which a DISQUALIFIED PERSON receives an economic benefit from a tax-exempt organization that exceeds the value of the
benefit the disqualified person provided to the organization. In terms of compensation, this means it was unreasonable compensation under
Section 162.
Excess Contributions
Excess Contributions are those contributions that exceed the deductible limits. A contribution to a profit-sharing or stock bonus plan is
limited to 15 percent. The excessive amounts are subject to an excise tax of 10 percent.
Excess Interest
An interest amount, which is above the guaranteed amount, which an insurance company must pay, when interest rates increase, on a
settlement option.
Excess Plan
Several definitions: 1) A plan providing benefits, only in excess of limits imposed on plans that are tax-qualified. (2) Also a plan providing
benefits to company executives who have limited 401(k) plans.
Exchange Program
A program which permits the insured to exchange a policy with another without the requirement of proving insurability.
Exchange Rate
Several definitions: 1) The price that the currency of one country is in relation to the currency of another country.
Excise Taxes
Excise taxes are a wide variety of taxes levied on employers for two main reasons. The first is as a penalty for failing to perform a required
action or purposely or accidentally doing something wrong. The second type of excise tax is like a license to perform something. You pay for
the privilege of having the right to do something. Most of these excise taxes have to do with the administration of benefit programs or taxes.
Exclusion Ratio
A term used to refer to the taxable part of an annuity plan. May also be used to describe the ratio of an employee's cost basis in relation to
the employee's anticipated return.
Exclusion Rider
Also known as impairment rider, this is a supplement to a health policy excluding or limiting insurance for a particular health defect.
Exclusions
These are losses not covered by an insurance policy. In terms of Accidental death policies, exclusions would be causes of death not deemed
to be accidental. In terms of health insurance, this would be losses not insured (those that were pre-existing, surgeries that are cosmetic in
nature or injuries that are self inflicted.
Exclusive Agents
Known also as captive agents, exclusive agents are those who work exclusively for one insurance company and who may not represent
another company.
Under FLSA, the phrase ‘‘exclusive of board, lodging, or other facilities’’ means ‘‘free and clear’’ or independent of any claimed credit for
non-cash items of value that an employer may provide to an employee. (Section 541.606)
Exclusive Territory
This is a territory no other agent may operate and offer insurance products. May be contrasted with nonexclusive territory and overlapping
territory.
Exculpatory Statute
In community-property states, this is a law that permits an insurance company to pay proceeds of a life policy according to the terms of the
agreement without the risk of incurring double liability.
Executive
In relation to businesses, an executive is taken to be anyone who a sizeable amount of responsibility where the management of a company
is concerned.
Executive Benefits
Provided to a limited number of executives, this is a form of non-cash compensation that is over and above the benefit packages given to
the other employees. These may include but are not limited to company car and supplemental insurance.
Executive Officer
Responsible for a significant business/company function. Usually an executive officer is involved in policy-making.
Exempt Employees
Employees who are not subject to (i.e., they are exempt from) FLSA minimum wage and overtime provisions. These employees are typically
paid on salary.
When a share option holder (owner) actually takes possession of the proceeds of the shares or of the shares themselves, he or she is said to
have exercised their share option. In other words, the actual buying of shares under the terms of stock option grant.
Exercise Period
Time frame / the specific days during which stock option may be purchased by the holder of the option.
Exoneration Statutes
A statute the effect of which is to pardon an insurer if a claim of policy proceeds is made when the insurer has already made payment to
another party without knowing of other conflicting claims (e.g., the payment was made in good faith).
Expatriate
Also known as an international assignee or international staff, this is an individual who has been assigned to a country other than his or her
home base for a period of time.
Expatriate Premium
This term is used to describe any number of supplemental payments which is made to an international assignee / expatriate employee in
order to compensate for any hardship, education of dependent children in their mother tongue or other conditions that may be specific to the
location.
Expectancy Theory
This is a theory that states that individuals make choices according to what they anticipate will give them the most payoffs. When applied to
salaries, it follows that employees must hold the belief that the greater the effort that they make, the better their performance will be (the
greater their results) and therefore the higher the salary they will command.
Expense Accounts are ordinarily a feature of perquisites for executives. Since executives create expenses as a part of their jobs, they are
allowed to keep an account, which allows them to be reimbursed periodically for these expenses.
Experience Rating
This rating system makes use of a group's premium and their claim experience to establish premium rates. Depending on the previous
year's claim experience the insured party's premium will go up or down. See blended rates and manual rates.
Experience Refund
Several definitions: 1) The part of an insurance premium, which is given back to, the policyowner who experiences better than predicted
claim experience. May also be known as an experience rating refund and or retroactive rate reduction. See dividend. (2) The part of a
reinsurance premium which is returned to the ceding company in a situation whereby the actual claim experience is better than that which
was predicted.
Experience-Rated Arrangement
This is an insurance policy whereby the premiums are set according to the insured's previous claim experience.
Experimental Underwriting
As the name suggests, this is when an insurance company accepts to cover a risk on an experimental basis (risks which, under normal
circumstances, they would not insure against).
Expiration Date
The date on which an option is nullified, if it is not exercised. The day that the option to exercise ceases.
Express Authority
This is an authority specifically granted upon an agent. Compare with implied authority and or apparent authority.
Peculiar to Canada, this is an Old Age Security (OAS) benefit which is payable had been dependent on and was receiving a 'spouse's
allowance', when their spouse dies. Such a person is entitled to receive this benefit until they either remarry or until they attain the age of 65.
See and compare with spouse's allowance.
A non-forfeiture option providing for cash value of a policy to be applied as a net one time payment to purchase a term insurance at the
same price as the death policy which is being surrendered minus and loans outstanding. The insured party still will have the same coverage
but typically for a shorter time. See non-forfeiture options.
External Equity
The measure of a company's pay scales (pay levels or the going market rate) compared to the rate of other similar companies. External
equity indicates that a company's pay levels are comparable to the market rate.
Defines the wide variety that exists in pay rates that a company faces in the different labor and occupation markets.
Extraordinary Items
Either a gain or a loss stemming from an unusual event, which is non-recurring. An extraordinary item would typically be recorded
separately on a company's financial statement.
A plan commonly used to rate substandard risks. Using this system, each substandard risk is charged a premium a specific percentage
above the standard rate. To be contrasted with the standard premium method.
Extrinsic Rewards
Rewards related to work and which is received for performance that can be measured in monetary terms. Contrast with intrinsic rewards,
which stem from personal satisfaction stemming from a job well done
Face Page
This is the first page of an insurance agreement. This page typically includes the name of the insured party, their age and the name of the
policyowner if it is different from the insured's name. This page also states the amount of the premiums, the agreement number, date on
which the parties entered into an agreement. Lastly, this page normally has the signatures of both the president and the secretary of the
company.
Face Validity
Facility-Of-Payment Clause
A provision of life insurance which allows the insurer to pay part of or all of the proceeds of the policy either to a blood relation or the
insured party or to anyone who has a valid claim. This clause permits the insurer to pay benefits on time when it is not possible to pay
benefits to the beneficiary who is identified in the insurance agreement.
A method of evaluating jobs whereby a series of job rankings are performed in order to establish which particular job incorporates the most
or the least of the factors considered to be compensable.
Factor Table
Used by underwriters to establish the net worth of an applicant by specifying what that the applicant's income should be multiplied by in
order to arrive at the maximum permissible insurance coverage.
Factor Weight
The weight assigned, in job evaluation, to compensable factors indicating their relative importance.
A federal law meant to ensure that consumer-reporting agencies are fair in their reporting (especially where the consumer's right to privacy
is concerned. See consumer-reporting agency.
This is a federal law that governs, amongst other things, child labor law, minimum wage and record-keeping requirements.
The price of stock is typically measured as an average of the low and high market prices of a company's share of stock, on a specific day
and on a recognized stock exchange.
Family Benefit
This is a life policy providing term coverage for spouses and children of the insured's.
Family Deductible
Relieves a family from having to satisfy a deductible for each member of the family. The family deductible sets a single deductible for the
entire family unit.
Typically, this type of specialized individual insurance policy combines decreasing term with the whole life insurance. The former provides
income for a pre-established period for the insured's family and the latter portion is normally paid in a lump sum when the insured party dies.
This type of insurance policy covers the entire family unit under the one policy.
Family Leave
Paid or unpaid time off granted an employee for the purpose of caring for a family member who is seriously ill or who has a serious medical
condition. Also granted when a new baby is born or a child is adopted.
Issued by the Financial Accounting Standards Board (FASB) in 1985, the statement 35 deals with rules with which to measure and report a
defined pension plan's value in accounting reports issued by the benefit pension plan.
Statement 87 governs the ways in which an employer accounts for and reports the costs of pension benefits offered to its employees. It
requires that, for accounting purposes, employers use a cost method known as the projected unit credit method in order to establish the net
periodic cost of pension benefits offered to employees. Statement 87 further requires employers to recognize a liability if the net periodic cost
is higher than employer contributions to the plan and an asset if the net periodic cost is lower.
Statement 88 determines accounting requirements for employers whose defined benefit pension plans have been limited and or terminated,
or who have experience other unusual events, (e.g., settlement of a pension obligation through a lump-sum payment of benefits to a plan
beneficiary.
This Board published rules by which U.S. CPAs conducted their accounting. It replaced the Accounting Principals Board (APB) in 1974.
Federal Rule of Evidence 702 was enacted by Congress to simplify and widen the admission of expert-witness testimony. It was hoped that
Rule 702 would clear up the inconsistencies by the Frye decision. This rule was intended to support and extend Frye, not replace it. See DLC
Course 11: Daubert Criteria in Expert Witness Testimony.
FUTA, as it is commonly known, imposes tax on employers in order to pay for the unemployment benefits system. The tax represents the
wages paid to employees.
This is a HMO, which fulfills Health Maintenance Organization Act of 1973 requirements. Federally qualified HMOs may receive some grants
and loans from the government and they may be used by employers to meet the provision to provide dual choice.
Fee Basis
Under FLSA, administrative and professional employees may be paid on a fee basis. An employee will be considered to be paid on a ‘‘fee
basis’’ within the meaning of these regulations if the employee is paid an agreed upon sum for a single job regardless of the time required for
its completion. These payments resemble piecework payments with the important distinction that generally a ‘‘fee’’ is paid for the kind of job
that is unique rather than for a series of jobs repeated an indefinite number of times and for which payment on an identical basis is made
over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a given single task are not
considered payments on a fee basis. (Section 541.605)
Fee Schedule
A list, which represents the maximum benefits payable under a company medical contract for specified procedures. See also relative value
schedule. May also be known as schedule.
Compensation plan found in HMOs and PPOs whereby physicians are paid a pre-established amount for specific services that they provide.
See Capitation basis.
Feedback
The outcome or state of a system, which may be utilized in the modification of system's operation. This term is usually used in terms of
compensation and as such, relates to the system whereby information is obtained regarding performance versus compensation.
FICA
The Federal Insurance Contributions Act established the payroll deduction of OASDI and Medicare taxes from employers and employees.
Under Chapter 9 of the Internal Revenue Code of 1939 and Subchapters A and B of Chapter 21 of the Internal Revenue Code of 1954, as such
codes have been and may from time to time be amended.
Fiduciaries
A fiduciary is a person who has a position of trust with respect to any other person. In employee benefit plans, covered by ERISA, there is a
standard of conduct imposed upon such a person.
Field Allowance
Compensation in form of a payment to an expatriate for additional costs and difficulties and working in different locations.
Field Force
Field Office
Field Underwriting
Underwriting of a prospective client that takes place out in the sales field or sales office.
A private entity created by the accounting profession to develop and promulgate financial accounting standards and practices. Its
membership is composed of top-level accounting professionals from business, government and education professions. It derives its authority
from official recognition by the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA)
and from the general support of corporate and investment communities. While the Securities and Exchange Commission (SEC) has the
authority to regulate accounting standards, it nearly always defers to the FASB.
Issued in the United States by the Financial Accounting Standards Board (FASB) in 1985, Statement 87 governs the ways in which an
employer accounts for and reports the costs of pension benefits offered to its employees. The Statement, titled 'Employers' A
Financial Institution
An institution that uses its funds chiefly to purchase financial assets (deposits, loans, securities) as opposed to tangible property.
Financial Intermediary
Often referred to as financial institutions, they act as the middleman between investors and firms raising funds.
Financial Planning
Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the
consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan.
Financial Settlement
Financial Statements
A financial statement (sometimes called an income and expense declaration) is a court paper, which requires a party to specify her monthly
income and expenses.
Insurance that provides payment for the full loss up to the insured amount with no deductibles.
A method of valuing the cost of goods sold that uses the cost of the oldest items in inventory first.
Commission amounts paid for a policy's first year of premium, based on an annual amount.
Fiscal Year
A 12-month period used by an organization as the accounting period. Can begin on any date. Is used as the time frame for financial
reporting, preparation of profit and loss statements, etc.
A type of retirement plan providing benefits only on a fixed amount or at a fixed percentage # such as 1 percent of monthly salary times the
number of years of credited employment or 25 percent of the employee's average pay over the last few years prior to retirement.
Fixed Liabilities
Also known as liabilities. These are often divided into current liabilities, which are due within a year of the date entered on the balance sheet
and non-current liabilities, which are due more than a year after the date on the balance sheet.
Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.
A method of rating a sub-standard life insurance risk when the extra risk is considered to be constant or temporary.
A benefit program under Section 125 of the Internal Revenue Code that offers employees a choice between permissible taxable benefits,
including cash, and nontaxable health and welfare benefits such as life and health insurance, vacation pay, retirement plans and child care.
Although a common core of benefits may be required, the employee can determine how his or her remaining benefit dollars are to be
allocated for each type of benefit from the total amount promised by the employer. Sometimes employee contributions may be made for
additional coverage.
Flexible Benefits
Many flexible benefit programs include flexible spending accounts, which give employees the opportunity to set aside pretax funds for the
reimbursement of eligible tax-favored welfare benefits. FSAs can be funded through salary reduction, employer contributions or a combination
of both. Employees can purchase additional benefits, pay health insurance deductibles and copayments, or pay for child care benefits with the
money in their FSAs.
Flexible Compensation
An approach to expatriate compensation. Allowances can be changed depending upon the needs and desires of the expatriate.
An annuity under which the policyholder or contract holder may vary the amounts or timing of premium payments.
Many flexible benefit programs include flexible spending accounts, which give employees the opportunity to set aside pretax funds for the
reimbursement of eligible tax-favored welfare benefits. FSAs can be funded through salary reduction, employer contributions or a combination
of both. Employees can purchase additional benefits, pay health insurance deductibles and copayments, or pay for child care benefits with the
money in their FSAs.
Flextime
A system of working according to which people work a set number of hours within a fixed period of time, but can vary the time they start or
finish work.
FLSA
The Fair Labor Standards Act is a U.S. federal law that governs, amongst other things, child labor law, minimum wage and record-keeping
requirements.
Foreign Corporation
A corporation, which was incorporated under the laws of a foreign country, here also called alien corporation. Also, a corporation doing
business in a state other than the one in which it is incorporated here also called out-of-state corporation.
Foreign Employees
Foreign Insurer
An insurer is a foreign company in any state other than the one in which it is incorporated.
Foreseeability
A key issue in determining a person's liability. If a defendant could not reasonably have foreseen that someone might be hurt by his or her
actions, then there may be no liability.
Forfeiture
The loss or surrender of money, property, a right or privilege due to failure to perform.
Forfeiture Loss
Loss of money or anything of value due to failure to perform, such as a deposit given to insure performance.
Form 10-K
A company's annual audited report filed with the Securities and Exchange Commission, due within 90 days of the end of the company's fiscal
year.
Form Of Payment
All payments must be by cash, certified check, cashiers or treasurer's check or by a United States postal, bank, express, or telegraph money
order.
Former Employee
An individual who was once an employee of a particular company or organization. Termination may be voluntary or not.
Fractional Premium
In insurance, a proportionate amount of the annual premium, that is, one-twelfth of the annual premium per month for each month
involved. A premium less than the mode premium, usually used when a change in premium date is desired and the premium must be set to
cover the tie period between the original payment date and the new one.
Fraternal benefit societies are open to men, women and children to provide social, educational and community service opportunities. In
addition, fraternal benefit societies offer members life, accident and health insurance and/or annuities.
Fraternal Insurance
Fraudulent Claim
The submission of a claim, which contains false information, is a crime. You may not claim any item, which you did not own or did not ship.
It is also illegal to deliberately falsify purchase prices, dates of purchase, quantities, or similar information.
Fraudulent Misrepresentation
A false statement of fact, made by a person who does not believe the truth of the statement or is recklessly indifferent to whether it is true
or not, to another with the intention that the other person will rely on it.
A period of time where a policy or product can be reviewed and return it if satisfaction has not been met, with a full refund.
Frequency
Several definitions: 1) Number of times an average person or home is exposed to a media vehicle (or group of vehicles), within a given time
period. (2) The position of a television or radio station's broadcast signal within the electromagnetic spectrum.
Frequency Distribution
Table of statistical data arranged to indicate the number of occurrences of each value.
Fringe Benefits
With this type of life insurance certificate, most of the expense charges take the form of deductions from each premium payment and
continue throughout the premium-payment period.
Front Pay
The amount of lost earnings accruing between the time a plaintiff wins a legal judgment and is reinstated to his/her job or takes another
job. Like back pay, front pay essentially is the equivalence of lost earnings. Neither Back Pay or Front Pay is subject to the Civil Rights Act of
1991 $300,000 liability cap. Each can be awarded over and above any compensatory or punitive damages.
Frozen Plans
Plans that have not been terminated but have ceased accruing benefits and are no longer accepting new participants.
Fully Contributory
A general term used with group health insurance plans in which the employee pays a portion of the premium.
Fund
To finance or underwrite.
Funding Agency
A financial institution or individual that provides for the accumulation or administration of the pension contributions that will be used to pay
pension benefits.
A pension plan funding approach under which a separate account is charged with certain liabilities and credited with certain amounts. The
funding standard is satisfied when there is no accumulated funding deficiency, that is, when the balance in the account is zero.
FUTA
The federal government and the various states impose a tax on employers with respect to certain categories of employee service. A few
states also require employees to contribute to the cost of providing unemployment benefits.
FUTA Tax
The Federal Unemployment Tax Act (FUTA) levies an excise tax on employers to pay for the unemployment benefits system. The tax is a
percentage of the wages paid to employees. Contributions to state unemployment funds are generally a credit against the FUTA tax.
Future Service
For pension benefit purposes, the period of time beginning with the current date and ending with the anticipated date of an employee's
retirement.
Future Value
The value at some point in the future of a present amount of money.
Gainsharing / Gain-Sharing
This type of variable pay ties bonuses or salary increases to increased productivity (vs. profit increases). This is performance-based
incentive pay.
Gatekeeper
The primary care provider responsible for managing medical treatment rendered to an enrollee of a health plan. Alternatively, this term has
been used to describe third party monitoring of care to avoid excessive costs by allowing only appropriate and necessary care to be rendered.
GED
Gender Discrimination
Gender is one of the protected groups under the Civil Rights Act. Thus gender, in and of itself, may not be used in a whole range of human
resource decisions regarding employees. In addition, the Equal Pay Act prohibits paying men and women differently for the same or
substantially similar jobs, and Title IX prohibits discrimination by gender in educational institutions.
General Account
A margin account provided to a customer by a brokerage, in Federal Reserve Board terminology. Regulation T requires that all transactions
involving credit given to the customer must be made in a general account.
A means of distribution that uses general insurance agents rather than branch offices to sell life and health insurance.
General Agent
One who is authorized by a principal to represent the principal in a specific range of matters.
A type of self-funding arrangement in which benefit claims from nonqualified plans are paid from current operating revenues. Supporting
assets are commingled with the employer's other assets. Fiduciary standards and reporting and disclosure requirements apply.
Geographic Differential
A numerical value representing the comparison of position pay in a particular geographic location to the national average for the same job.
The percent difference between pay levels for an occupation in two or more geographic areas. Due to the demand for and supply of labor, an
employee may be paid more or less depending on where she works. This makes setting branch-office salaries complicated, as they must be
adjusted for the local labor market pricing (and in some cases the local cost of living). ERI's Geographic Assessor and Salary Assessor
software aid in planning salaries for positions in multiple locations. See www.erieri.com.
GI Rider
Guaranteed Insurability Rider is an insurance policy in which the insurer is required to renew the policy for a specified amount of time
regardless of changes to the health of the insured. The agreement requires that premiums are paid on time and that the insurer makes no
changes except if a premium change is made for an entire class of policyholders.
Golden Handcuffs
Rewards and penalties designed to discourage key employees from leaving a company.
Golden Parachutes
A clause in an executive's employment contract specifying that he/she will receive large benefits in the event that the company is acquired
and the executive's employment is terminated. These benefits can take the form of severance pay, a bonus, stock options, or a combination
thereof.
Goodwill
Reputation for a product or service standard. A company's value over and above the physical property and accounts receivables.
Grace Period
A specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of
the policy continues.
A form of modified life insurance that provides for annual increases in premiums for a constant face amount of insurance during a defined
preliminary period, with the purpose of making initial payments more affordable.
Graded Vesting
A vesting schedule under which an employee is partially vested, typically 25%, after a certain number of years of service, with the vesting
schedule increasing until full vesting is achieved.
Grant Date
The date that a stock option term begins and the option become effective.
An individual rate that is below the minimum of the established pay range for a specific job or pay grade.
Gross Income
Gross Margin
With regard to an adjustable rate mortgage, an amount expressed as percentage points, stated in the note which is added to the current
index value on the rate adjustment date to establish a new note rate.
Gross Premium
Group Annuity
A pension program underwritten and administered by an insurance company. Normally uses the unit benefit method of funding. Plan
participants are covered under one contract the employer pays premiums on their behalf.
Life insurance issued to the creditor on the lives of debtors to pay the amount of the indebtedness in the event of death. Used frequently by
lending and other financial institutions to eliminate problems of collection from a deceased's estate.
Group Deferred Annuity
A funding instrument wherein the insurance company, for a stipulated fee for each participant's benefit, will guarantee the purchase rates of
the future annuity and will administer the plan.
Group Incentive
A material incentive provided to all members of a work group to reward the group's collective performance.
Group Insurance
Any insurance plan under which a number of employees and their dependents are insured under a single master policy, issued to their
employer or to an association, with individual certificates given to each insured individual. The most commonly written lines are health life
and accident.
It is a plan, which establishes a fund providing legal services for an employee or union, association or organization member as a fringe
benefit.
Group life insurance is part of an increasing number of workplace benefit packages. Most group life insurance policies offer term life
coverage, but individual states in the U.S. usually insist that companies allow employees to change their life insurance policies from term to
permanent when employees leave their jobs. The individuals then pay premiums to the insurer. Federal requirements for group life insurance
include: (1) The policy must provide a general death benefit. (2) The policy must cover a "group of employees." (3) The policy must be
carried directly or indirectly by the employer. (4) The amount of insurance must be computed under a formula precluding individual selection.
In Canada, the persons who are insured by a group life insurance contract. Usually called 'insureds' in the United States.
A combination life insurance plan under which each employee's annual contribution is used as a single premium to buy a unit of paid-up
insurance, while the employer's contribution is used to buy group term coverage. On termination of employment, the employee may take
paid-up insurance or receive a refund of contributions or the cash surrender value of the paid-up insurance.
A group insurance plan in which the whole life policy purchased provides death benefits to the employee's survivors in the event of
premature death. Upon retirement, the cash value can be used to provide income to the employee.
An HMO that contracts with a single multispecialty medical group to provide care to the HMO's membership. The group practice may work
exclusively with the HMO, or it may provide services to non-HMO patients as well. The HMO pays the medical group a negotiated, per capita
rate, which the group distributes among its physicians, usually on a salaried basis.
Group Representative
A contractual arrangement registered under Section 146 of the Income Tax Act between an individual and an insurer, trust company or
corporation authorized to accept payments from an individual or his her spouse for the purpose of providing a retirement income for that
individual or his or her spouse by, upon maturation of the plan, purchase of a prescribed form of annuity or transfer of the plan assets to a
registered retirement income fund (RRIF). Subject to prescribed maximums, such contributions made by a resident of Canada having earned
income are deductible for income tax purposes.
A plan qualifying under Code Section 79 to provide employees with employer-paid life insurance coverage at little or no tax cost.
Guarantee
The assumption of responsibility for payment of a debt or performance of some obligation if the liable party fails to perform to expectations.
A provision in a contract with an employer guaranteeing the employee a minimum income or work over a period of one year.
A nontaxable monthly benefit paid to lower-income OAS recipients on the basis of family income.
A rider now offered on most life insurance policies whereby additional insurance may be purchased at specified future times without a
medical examination or other evidence of insurability. Rates are based on attained age at time of purchase.
A deposit arrangement entered into with an insurance company, which guarantees both the principal and interest repayments. It is a type of
annuity contract, not a marketable security. The amount deposited can be a single sum or a stream of monies deposited over a specified and
limited period of time. Similarly, the deposit plus the guaranteed interest paid thereon can be repaid in a single sum or installments. Expenses
related to the contract arrangement can be charged against the guaranteed interest payments or paid separately by the contract holder.
The insurer will issue up to some stipulated amount of insurance for each individual employee without evidence of insurability. The
requirements are usually based on size of group and distribution by ages, and individual insurers decide on amounts.
An insurance policy, which is guaranteed renewable provided premiums are paid. The policy conditions remain unchanged although the
insurers may review premium rates.
Guaranty Association
All 50 states, the District of Columbia, and Puerto Rico require licensed insurers to assume some of an insolvent insurance company's
policyholder liabilities. Guaranty associations are the mechanism by which solvent insurers bail out the policyholders of companies that fails.
The lines of insurance covered by guaranty associations and the maximum amount paid on any claim vary considerably from one state to
another. In most states, two different guaranty associations cover life and health insurance lines and property/casualty lines.
In Canada, a written statement developed by the Canadian Life and Health Insurance Association (CLHIA). The guide describes the types of
life insurance available, so that prospects for life insurance can compare the advantages and disadvantages of each type of policy.
In Canada, Superintendents' Guidelines that regulate several aspects of group health insurance contracts, including the types of groups to
which a group health insurance contract may be issued and the particulars that must be included in the certificate issued to each person
insured by the contract.
In Canada, a set of guidelines issued by the Canadian Council of Insurance Regulators. The guidelines specify, among other things, the types
of groups eligible for group life insurance.
Hardship Allowance
A payment made in recognition of 'different' conditions prevailing at the host location. Locations are assessed for their degree of hardship
and the criteria may include isolation, special health risks, extremes of climate and political instability, for example. The allowance is usually
expressed as percentage of base pay.
Hardship Distributions
A withdrawal of an employee's contributions to a 401(k) plan prior to retirement at age 55 or attainment of age 591/2. A hardship
withdrawal may be made only in cases of financial emergency provided there are no other sources available to meet the need the withdrawal
is taxable as an early distribution and subject to a 10% excise tax.
Hazard
Danger or obstacle, the existence of which is sometimes tied to the reward system.
Work, which exposes the employee to a considerably greater risk than normal, working conditions. Pay is above normal rate tables due to
the risk associated with each position and risks.
Headquarters Country
In health insurance, policy benefits payable as a result of disability from covered sickness or accident. Sickness coverage is rarely written
separately, unless the insured also carries an amount of accident insurance with the same company.
The agency of the Department of Health and Human Services that, among other things, administers the Medicare program and works with
the states to administer their Medicaid programs.
Allows employees to set aside pretax funds for eligible health care benefits such as physical exams, vision care and dental care, including
deductibles and co-payments. See also Flexible Spending Accounts (FSAs).
Health Insurance
Protection that provides payment of benefits for covered sickness or injury. Included under this heading are various types of insurance, such
as accident insurance, disability income insurance, medical expense insurance, and accidental death and dismemberment insurance.
Federal legislation that improves access to health insurance when changing jobs by restricting certain preexisting condition limitations, and
guarantees availability and renew ability of health insurance coverage for all employers regardless of claims experience or business size. The
law also increases the health insurance deduction for the self-employed provides tax incentives for purchase of long-term care insurance, and
establishes medical saving accounts (MSAs), which provide for tax-deductible contributions to accounts to cover medical expenses.
The Health Maintenance Act was established to encourage the development of HMOs. It requires employers subject to minimum wage
standards who employ 25 or more employees, as well as states and their political subdivisions, to include in a health benefit plan offered to
employees the option of membership in a qualified health maintenance organization (HMO) if an HMO had made a request for such inclusion.
A prepaid medical group practice plan that provides a comprehensive predetermined medical care benefit package. The government, medical
schools, hospitals, employers, labor unions, consumer groups, insurance companies, can sponsor the HMO and hospital-medical plans. HMOs
are both insurers and providers of health care.
The term is broadly applied to anyone who receives property from a deceased person's estate. The heir of the ERISA plan is deemed to be
the beneficiary of the employee's retirement plan.
Hierarchy Of Needs
Abraham Maslow's classification of human needs and motives, ascending in a pyramid from the basic level of physiological needs, such as
hunger and thirst, to the highest level of self-actualization.
Either a 5% owner or a person who earned more than $80,000 during the current or preceding year. Repeals rule treating highest paid
officer as an HCE, the top-100 rule, and family aggregation rules in both the HCE definition and the $150,000 compensation cap.
Discrimination in favor of this group is prohibited.
An insurance policy in which the condition of the policy and the application constitute the agreement, in its entirety, between the policy
owner and the insurer. Contrast with open contract.
Hiring Bonus
An extra sum of money provided at time of hire to entice an applicant to accept a job offer or to make up for compensation forfeited at the
previous company.
Hiring Rate
Refers to the wage or salary to which an employee is assigned upon entering the job.
History Statement
A statement indicating that the individual will reimburse the insurance company if the claim is ever challenged and deemed to be fraudulent.
Holidays
Days established by law or custom for which workers receive pay while absent from work. Law establishes statutory holidays. When the
customary day tolls on a weekend a moveable holiday may be substituted for it on another day.
Home Country
Skilled and semi-skilled part-time care received at home. May include nursing care, physical therapy, speech therapy and/or such custodial
services as cooking, cleaning and washing.
Home Leave
Company funded return airfares, which allow an expatriate to return to his home country for holiday/vacation purposes.
This is a feature provided for expatriates that are selling their home for a foreign assignment. It will pay all the costs associated for selling a
home and relocation, except for capital gains.
A form of health insurance that provides a stipulated daily, weekly or monthly indemnity during hospital confinement. The indemnity is
payable on an unallocated basis without regard to the actual expense of hospital confinement.
A health insurance policy that covers daily hospital room and board charges and some miscellaneous hospital expenses.
Hospital Indemnity Insurance
A form of health insurance that provides a stipulated daily, weekly or monthly indemnity during hospital confinement. The indemnity is
payable on an unallocated basis without regard to the actual expense of hospital confinement.
Medical expense health insurance that combines basic hospital coverage and basic surgical coverage into one policy.
Hospitals
A legally constituted institution having organized facilities for the care and treatment of sick and injured persons on a resident or inpatient
basis, including facilities for diagnosis and surgery under the supervision of a staff of one or more licensed physicians and which provides 24-
hour nursing services by a registered nurse on duty or call. It does not mean convalescent, nursing, rest or extended care facilities or a
facility operated exclusively for the treatment of the aged, drug addict or alcoholic, whether or not such facilities are operated as a separate
institution by a hospital.
Host Country
A nation in which representatives or organizations of another state are present because of government invitation and/or international
agreement.
Hour Of Service
For purposes of retirement plans, an hour for which an employee is directly or indirectly paid by the employer for the performance of duties.
An hour of overtime is still counted as only an hour of service, even though the pay for overtime may be higher. Hours during a leave of
absence or a vacation with pay are counted.
Hourly
Hours Of Work
Standard hours worked in a year is 2,080 (52 weeks x 40 hours per week).
Housing Allowance
An amount paid by the company, either to the expatriate or direct to the property landlord, to enable the expatriate to rent or lease housing
in the host country.
Housing Norm
The portion of the base salary typically spent in the home country on housing. The norm may vary depending on family status and salary
level.
HR
HTML
An acronym for Hypertext Markup Language, HTML is the computer language used to create hypertext documents. HTML uses a finite list of
tags that describe the general structure of various kinds of documents linked together on the World Wide Web.
Hurdle Rate
The required return in capital budgeting. For example, if a project has an expected rate of return higher than the hurdle rate, the project
may be accepted.
Hypothetical Tax
The approximate amount of tax, calculated on home country base salary and bonus, where applicable, that the expatriate would have paid if
he/she had remained in the home country.
IBNR (Incurred But Not Reported)
Claims that have been incurred but have not been reported to the insurer as of some specific date. Often a disputed figure since carriers
must estimate this liability for accounting purposes based on their experience with claims lags.
Understanding who the prospect is and the cycle of the sales process.
Illness Perils
A systematic classification method to classify the type and degree of a peril, for a specific industry, to a specific occupation. An insurance
company does the system of classification.
Immediate Annuity
An annuity under which income payments begin one annuity period (e.g., one month or one year) after the annuity is purchased.
A group insurance contract under which the employer's unallocated account is credited with its share of actual investment income for the
year. There is generally no guarantee of principal or a minimum rate of interest. Annuity payments are charged directly against the account
as they are paid.
A special set of definitions exist for determining the competitive rate of pay that should be paid to immigrants who hold temporary work
permits in the United States. These rules are spelled out in General Administrative Letter 2-98.
Impairment
Impairment Rider
A rider attached to a health insurance contract that waives the insurance company's liability for all future claims on a pre-existing condition.
Implied Authority
Authority that, while not specifically granted to the agent in the agency agreement, the agent can assume he or she has through common
sense. Authority that is apparently necessary for an agent's ability to carry out day-to-day or routine responsibilities.
Improshare
Cost-saving group incentive plan in which a standard cost of production is established and the employees share in the cash savings of
production costs under that amount. Improshare stands for improved productivity through sharing.
Incentive
Additional pay (above and beyond the base salary or wage) awarded to an employee, such as stock options or a contingent bonus plan, that
is 'forward looking'.
Incentive Compensation
Rewarding the performance of an individual in an institution with added compensation, typically in the form of bonuses or percentage
increments above the base salary.
Incentive Pay
Additional pay, a higher wage, or a bonus paid to promote the productivity of an employee.
Incident Of Ownership
Rights that will result in the inclusion of life insurance policy proceeds in the policyholder's estate for federal estate tax purposes.
A disability income policy, which specifies that an insured be disabled if he or she suffers an income loss caused by a disability, therefore
qualifying him or her for benefits under the policy.
A residual or partial disability benefit that is to be paid upon satisfaction of the company's elimination period, and the employee experiences
another loss of earnings due to a previous partial or total disability.
Income Statement
A detailed summary of the income and expenses of a business over a period of time (usually quarterly, semiannually or annually) showing
the net income or loss incurred.
Incontestable Clause
A clause that provides that the insurer may not contest the validity of the contract after it has been in force for a period of years.
Term life insurance coverage that increases in face value each year (or certain period) from the date of policy issue to the date of expiration.
Incumbent
Indemnification
The compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity
Independent Contractors
As distinguished from an employee by the IRS, the worker, not the employer, largely determines a person who works for another whose
labor and how it is performed. Independent contractors pay their own taxes the employer does not, for example, pay Social Security or
unemployment taxes for the worker.
This test considers the return on investment indicated by the increase in the value of a corporation’s stock along with dividends paid during
the time period in question. It looks at the company’s performance throughout the year to determine if the compensation to key employees is
reasonable. Basically, an “independent” investor should be happy with the return on his/her investment and not object to the compensation
paid to key employees. The rate of return must be high enough to warrant their pay.
An insurance solicitor, licensed by the state, who places business with a variety of insurance companies and who represents the buyers of
insurance rather than the companies even though he or she is paid commissions by the companies.
Independent Physicians Association (IPA)
A type of managed care organization composed of a group of independent physicians who have formed an association as a separate legal
entity for contracting purposes. IPA physician providers retain their individual practices, work in separate offices, continue to see their non-
managed care patients and have the option to contract directly with managed care plans.
A Broker is any person who, on behalf of the insured, for compensation as an independent contractor, for commission, or fee, and not being
an agent of the insurer, solicits, negotiates, or procures insurance or reinsurance or the renewal or continuance thereof, or in any manner
aids therein, for insureds or prospective insureds other than him.
Independent Variable
A variable in a functional relation whose value determines the value or values of other variables, as x in the relation y = 3x2.
A type of nonparticipating whole life insurance that allows premium rate modifications throughout the life of the policy and guarantees that
the premium rate will never exceed a stated maximum rate.
Indexation
Modifying contracts so that their dollar terms adjust to the inflation rate as measured in an index, such as the consumer price index.
Indexed Options
An option based on the market value of a particular group of stocks. Unlike stock options, index options--when exercised--are settled in
cash.
Indexing
A statistical model expressed in terms of percentages of a base year or years that serves as a reference in judging investment performance.
The index most often used for stock market performance is the Standard & Poor's 500 Index, which measures the average performance of
500 widely held common stocks. Other frequently used indexes are the Dow Jones Industrial Average, the NASDAQ and the Russell 2000,
used for smaller company stocks, the Toronto Stock Exchange 300 Composite Index (TSE 300), used in Canada, and the Morgan Stanley
Capital International Europe, Australia, Far East Index (EAFE), which is used as a benchmark for foreign company stocks.
Indirect Labor
A defined contribution plan or profit-sharing plan that provides an individual account for each participant, allows participants to choose, from
a broad range of investment options, how their accounts will be invested, and whose benefits are based solely on the amount contributed to
the participant's account, including income, expenses, gains and losses. Defined contribution retirement plans such, as 401(k) plans are
examples of individual account plans.
A type of pension plan, frequently used for small groups, administered by trustees who are authorized to purchase individual level premium
policies or annuity contracts for each member of the plan. The polices usually provide both life insurance and retirement benefits.
Individual Insurance
An individual life or health insurance policy purchased on an individual basis (as distinct from group and blanket insurance.) Sometimes
called personal insurance.
Individuals, whether they are covered by a pension or not, are now permitted to save money on a tax-deferred basis in a qualified IRA plan.
Although money can be withdrawn, a 10% penalty has been placed on those assets withdrawn prior to the individual turning 59 1/2, in
addition to the normal taxes, which must be paid upon withdrawal. An individual can set up his own plan with a bank, insurance company,
brokerage house or mutual fund. A company can also deduct an agreed-upon amount from employees' paychecks and send it along to a
designated agent, or set up its own plan where managers are selected to manage the assets.
Individuals, whether they are covered by a pension or not, are now permitted to save money on a tax-deferred basis in a qualified IRA plan.
Although money can be withdrawn, a 10% penalty has been placed on those assets withdrawn prior to the individual turning 59 1/2, in
addition to the normal taxes, which must be paid upon withdrawal. An individual can set up his own plan with a bank, insurance company,
brokerage house or mutual fund. A company can also deduct an agreed-upon amount from employees' paychecks and send it along to a
designated agent, or set up its own plan where managers are selected to manage the assets.
Industrial Insurance
Life insurance issued in small amounts, usually less than $1,000, with premiums payable on a weekly or monthly basis.
Surveys conducted and collected by a variety of sources to provide wage information for a wide variety of industries.
Inferential Statistics
That branch of statistics dealing with procedures used to make inferences about a population from information contained in a sample.
Inflation
A phase of the business cycle characterized by abnormally high prices, a decrease in the purchasing power of money, and spiraling costs and
wage rates. Inflation may occur when purchasing power is in excess of goods and services for sale, and/or buyers stampede to convert
money into commodities or when production costs and prices advance to consecutively higher levels.
Initial Deductible
Several definitions: 1) Amount of expenses which the insured party must pay before receiving any benefits from the insurance company. (2)
An item or expense which is taken away from an individual's gross income in order to reduce the amount of taxable income (e.g. mortgage
interest, state taxes, business expenses which are not reimbursed and charitable contributions). See also calendar year deductible, corridor
deductible, family deductible, integrated deductible and per cause deductible.
Initial Premium
In life and health insurance, the first premium, generally payable with the application or upon delivery of the policy. In group insurance,
especially health, an amount paid at the inception of an insurance contract that permits adjustments to be made based upon future
experience.
Initial Reserve
In life insurance, the reserve amount determined at the beginning of the policy year. It equals the preceding year's terminal reserve, plus
the annual net premium.
Inside Build Up
In terms of life insurance policy, this is the amount of money, before adjustments are made for factors such as policy loans or late
premiums, that the policy owner will receive if the policy owner allows the policy to lapse or cancels it and surrenders the policy to the
insurance company. Cash values are a feature of most types of permanent life insurance. Compare to cash surrender value. Also known as
inside build-up and policy owner's equity.
Inside Director
Insider
A stockholder who owns 10% or more of a company, a member of the board of directors or an elected officer of a corporation, or anyone
else who possesses information that is not publicly known about the company, but which is important in valuing its stock. Securities and
Exchange Commission (SEC) regulations place restrictions on stock purchases and sales by insiders.
Insiders
Section 16 of the SEC regulations identifies 'insiders' as those precluded from profiting, unfairly from the sale and or purchase of company
stock.
Insolvency Clause
In reinsurance, a clause that holds the reinsurer liable for its share of loss assumed under the treaty, even though the primary insurer is
insolvent.
Inspection Receipt
In life and health insurance, a receipt obtained from an applicant when a policy (upon which the first premium has not been paid) is left with
him or her for further inspection. It states that the insurance is not in effect and that the policy has been delivered for inspection only.
Installation
Installment Certificate
A certificate given to the beneficiary of an insurance policy stating the benefit payment information.
An insurance option that states if any proceeds from a policy remain after the beneficiary's death, they will be paid to the contingent payee
in a series of installments.
An insurance company offer that provides for insuring an applicant if he/she were to die before their application and premium reached the
Home office.
Insurability Provision
An insurance provision stating that the policy will not become effective unless the insured is still considered insurable at the time of delivery.
Insurability Statement
A statement ascertaining if there have been changes in insurability between the time of application and policy issue.
An agreement that provides temporary insurance for a short period of time, such as during the period in which regular insurance is being
written.
Insurable Interest
A person's or party's interest--financial or emotional--in the continuing life of an individual, a person or party must have an insurable
interest in the life of a proposed insured in order to purchase an insurance policy on the proposed insured's life.
Insurance
A means of providing or purchasing protection against some of the economic consequences of loss. Risk of loss is transferred to a third party
in exchange for a 'consideration' or premium. This exchange creates an insurance contract.
Insurance Act
This Act, except as provided, applies to every insurer that carries on any business of insurance in British Columbia and to every contract of
insurance made or deemed made in British Columbia.
Insurance Agent
Insurance Coverage
Generally refers to the amount of protection available and the kind of loss which would be paid for under an insurance contract with an
insurer.
Insurance Network
An HMO model that contracts with multiple physician groups to provide services to HMO members, may involve large single and
multispecialty groups.
Formerly known as Early Warning System or Early Warning Tests, financial ratio and performance criteria designed by the National
Association of Insurance Commissioners to identify insurance companies, which may need close surveillance by state insurance departments.
Insured Plan
A pension plan in which the benefits are at least partially insured by an insurance company. Such plans provide a death benefit to
beneficiaries if the employee dies before retirement.
Insurer
A group insurance plan in which the insurer handles all administrative work.
Integrated Deductible
A major medical plan that has a dental plan as part of their features.
Intercept
The x-intercept, or y-intercept, or z-intercept, etc., a point where a curve crosses the x-axis, or crosses the y-axis, or crosses the z-axis,
etc. EX. A linear equation when graphed has at most one x-intercept.
In life insurance, a method of comparing costs of similar policies by using an index that takes into account the time value of money due at
different times through interest adjustments to the annual premiums, dividends and cash value increases at an assumed interest rate.
Interest Option
In life insurance, a settlement option under which all or part of the proceeds of a policy are left with the insurance company for a definite
period at a guaranteed minimum rate of interest. The principal remains with the company for a specified period of time. Interest may be paid
(usually subject to certain minimums) annually, semiannually, quarterly or monthly # or, in some cases, may be added to the proceeds.
Interest Rate
That percentage of a principal sum earned from investment or charged upon a loan.
Intermediate Sanctions
Under Section 4958 of the IRS code, the agency may impose penalty taxes on “disqualified persons” and organization managers” when an
“applicable tax-exempt organization” engages in an “excess benefit transaction” with the disqualified person[s]. Definitions of the above are
as follow.
Applicable tax-exempt organization are those exempt under Section 501(c)(3) or (4). A disqualified person is one who in the past five years
was in a position to exercise substantial influence over the affairs of the exempt organization. An organization manager is any officer,
director, trustee, or person having similar powers or responsibilities in the exempt organization. An excess benefit transaction is one in which
the disqualified person received an economic benefit from the exempt organization that exceeds the value of the benefit the disqualified
person provided to the organization. In terms of compensation, this means there was unreasonable compensation under Section 162.
The penalty taxes consist of: 1) Correction by repayment of the overpayment. 2) An excise tax of 25% on the correction. 3) An additional tax
of 200% of the correction if payment is not made in 90 days.
Internal Equity
The federal agency responsible for administering and enforcing the Treasury Department's revenue laws, through the assessment and
collection of taxes, determination of pension plan qualification, and related activities. See also 1099, 401(k) plan, amended return, audit,
backup withholding, deficiency, determination letter, imputed interest, itemized deduction, over-55 home sale exemption, revenue ruling,
standard mileage rate, wash sale rule.
Internet
Short for Internet work. A network of networks, a group of networks interconnected via routers. Contrast with The Internet (with a capital
I), the world's largest Internet.
Interpleader
The procedure when two parties are involved in a lawsuit over the right to collect a debt from a third party, who admits the money is owed
but does not know which person to pay. The debtor deposits the funds with the court ('interpleads'), asks the court to dismiss him/her/it from
the lawsuit and lets the claimants fight over it in court.
Interquartile Range
Statistics. The range including the central 50% of the observations in a data set.
Intrinsic Motivation
An incentive that originates from the behavior itself rather than from an external reward or reinforcement. Thus, intrinsically motivated
behavior.
Intrinsic Rewards
Distinguishes from work that primarily depends on intelligence, diligence, and accuracy.
A special type of credit report, which contains more detail than a routine credit report. For example, it includes information regarding a
consumer's character, general reputation, and personal characteristics.
Investment Companies
A company or trust managed by investment professionals that invests its capital in other companies for purposes of diversification, the two
principal types of which are the closed-end and open-end or mutual fund. Closed-end funds have a fixed capitalization, and are usually listed
and traded on the New York Stock Exchange like any other security, and may sell at a premium or discount to net asset value. Open-end
funds whose shares are not listed stand ready to sell new shares continuously to investors and to redeem them when called upon to do so.
Investment Managers
Long-term, risk-return targets developed principally from careful consideration of plan sponsor factors, investment factors and a forecast of
the future. Critical in the adoption of investment objectives is the asset allocation decision.
A form of life insurance (also called Universal Life II or flexible life) offering a guaranteed death benefit that combines the flexible premium
features of universal life with the investment component of variable life.
Any dividend calculation method that recognizes differences in earned interest rates depending upon the year in which the investment is
made.
The termination of a pension plan by a party other than the plan sponsor, generally a governmental organization.
Irrevocable Beneficiary
An unalterable beneficiary. The owner gives up the right to change the beneficiary designation without the beneficiary's consent.
Issuing Bank
A bank that opens a straight or a negotiable letter of credit. This bank assumes the obligation to pay the beneficiary or a correspondent
bank if the documents presented are in accordance with the terms of the letters of Edit.
Job
Job Analysis
A detailed study of the requirements necessary to complete a job, taking into consideration chiefly the order of operation, material and
machinery needed, and the necessary qualifications of workers.
ERI’s compensation and benefits accreditaton program. A JCA credential is granted only to those compensation specialists who have proven
their mastery of analytical and quantitative skills by taking 50 ERI courses within a 12-month period and answering all exam questions with
100% accuracy. This will successfully illustrate mastery of over two dozen different types of mathematical skills and calculations and a
thousand compensation and benefit concepts.
Job Descriptions
Physical evidence, such as a written contract, which explains the responsibilities, rights, and duties of each party.
Job Duty
Job Enlargement
Job Enrichment
The education, experience, and performance requirements for entry into a job. ERI software only reports salaries of properly qualified and
duly licensed practitioners in all occupations. This ERI salary data shows ranges for the very least qualified to the very most qualified job-
holders.
Job Evaluation
A systematic analysis of jobs, as opposed to workers, and their function and relative worth in a production process or enterprise.
Job Family
Job Grade
Job Responsibility
Job Satisfaction
The contentment you feel when you have done something right.
Job Sharing
Two people, typically in career-oriented professional positions, performing the tasks of one full-time position in order to enjoy more flexibility
in their personal schedules, typically for child or dependent care. Salary and benefits are prorated.
Job Specifications
A detailed, exact statement of particulars, especially a statement prescribing materials, dimensions, and quality of work.
Job Title
Provides a continued payment to your spouse in the event you die prior to your spouse's death after you retire.
Is offered to cover the cost of repaying loan obligations in the event of your death.
Joint Venture
An association formed for a specific purpose and duration between two or more parties to own and/or develop real estate. A joint venture
may take a variety of legal forms including partnership, tenancy in common or corporation.
A life insurance contract that covers two or more lives and provides for the payment of the proceeds at the death of the first insured, at
which time the policy automatically terminates, with no remaining coverage for the survivors.
Junk Bonds
Bonds that are initially issued as low-quality securities, often in conjunction with takeovers, leveraged buyouts and restructurings. They offer
high interest and high risk. These securities generally lack the characteristics of a desirable investment. The rights of the bondholder are
subordinated to senior debt holders. Assurance of interest and principal payments in the future is limited. Repayment often depends on asset
sales rather than on the ongoing profitability of the business.
Junk Science
An insurance policy that is issued on the life of a child but is owned and paid for by an adult.
Keogh Act
The Self-Employed Individuals Tax Retirement Act of 1962 (also called HR-10 or the Keogh Act), and its subsequent amendments, made it
possible for owner-employees of unincorporated businesses and other self-employed persons to be covered under qualified retirement plans.
Keogh Plan
A qualified tax-deductible pension or profit-sharing retirement plan for self-employed individuals and their employees, with contribution units
based on net earnings. Disability, health, and/or life insurance policies designed to protect the company for the loss of the services of
essential employees, with premiums paid and benefits received by the company, key man insurance. A type of corporate-owned life insurance
purchased by a company to protect itself from financial loss.
Key Employee
A salaried employee who is among the highest paid 10 percent of all the employees employed by the employer.
Kilobyte(Kb)
One thousand bytes (103) or 1024 (210) bytes. A unit of measurement used for computer file sizes.
Knowledge Based Pay
Pay-for-knowledge rewards employees for increasing the depth and breadth of knowledge and skill and the utilization of those skills. Pay-
for-knowledge is often an extension of work redesign efforts.
Knowledge Management
Knowledge management is the name of a concept in which an enterprise consciously and comprehensively gathers, organizes, shares, and
analyzes its knowledge in terms of resources, documents, and people skills.
A distributed system from Knowledge Systems, Inc. for managing knowledge in organizations.
New hires and merit promotions are made on the basis of how applicants measure up to a set of factors, often called 'Knowledge, Skills, and
Abilities' (KSAs) or 'Knowledge, Skills, Abilities and Other Characteristics (KSAOs).'
Labor Grade
Labor Market
The market in which workers compete for jobs and employers compete for workers.
Used in inventory accounting terminology to reflect the fact that sales are made against the latest inventory purchases, which tends to
minimize inventory profits and losses. Contrast with First In, First Out (FIFO).
The practice of setting salary structures at the beginning of the year, to what the competition would reach at the middle of the year. This is
based on competitive information and market research.
The practice of setting salary structures at the beginning of the year- for the entire year. This is based on competitive information and
market research.
Training delivery software on a hosted or rental basis through a specialized ASP offering learning management.
Leased Employees
A three-party relationship whereby the user business purchases services of a worker, on a more or less full-time basis, from a business that
pays the worker's salary. Any interrelationship between these parties can lead to an affiliated service group relationship, which is treated
separately.
Actual y- values. A line fitted to the points that minimize the sum of the squared deviations of the points. This occurs in regression analysis.
Level Annual Premium Funding Method
The cost of providing a pension where the contributions for any employee remain constant until normal retirement age.
Level Cutters
Phrases or words used to distinguish the variety of levels in a particular employment arena. (i.e. accounting, senior vs. junior accountant)
Level Of Work
Important information about the content of a job. It will include skill effort, responsibility and working conditions. (9)
Leverage In Financing
A qualified stock bonus plan or a qualified stock bonus and money purchase plan. Like a stock bonus plan, the contributions need not be
dependent on profits, and benefits are distributable in the stock of the employer corporation. Typically, the ESOP is used as a financing
vehicle for the employer corporation. The plan borrows money from the employer or uses the employer's credit, and purchases employer
stock. The borrowed money is paid to the employer for its stock. The loan is repaid with annual employer contributions. See also Stock Bonus
Plan.
An option in which the underlying is the common stock of a corporation. The Company matches a multiple of the stock options at the
employee's purchase price.
Liabilities
A financial obligation, or the cash outlay that must be made at a specific time to satisfy the contractual terms of such an obligation.
Liability Insurance
A type of insurance that provides a benefit payable on behalf of a covered party who is held legally responsible (liable) for harming others or
their property.
Licensed Broker
An insurance solicitor, licensed by the state, who places business with a variety of insurance companies and who represents the buyers of
insurance rather than the companies even though he or she is paid commissions by the companies.
Lien
The right to take and hold or to sell a debtor's property as security or payment for a debt..
Life Annuity
An annuity payable during one's life. If the insured dies before the designated period of time, the payments will continue to a contingent
payee.
A defined benefit plan that expresses benefits as a lump-sum benefit rather than as an annuity. There are no account balances for the plan
participants. In addition, this plan recognizes final average salary in the benefit calculation. Under the life cycle plan, a participant earns
credits for each year of service. Age is not directly a factor, except as it pertains to how much service an individual could accrue. The total of
these credits is considered a percentage, which is multiplied by the annual final average salary of the participant to determine what lump sum
will be paid at retirement. Also known as retirement bonus plan and lump-sum plan.
Life Income Option
A life insurance settlement option that guarantees the beneficiary a payout of equal payments as long as the beneficiary lives.
A life insurance settlement option that guarantees the beneficiary designated equal payments for a specified period of time. Then the
beneficiary will continue to pay out the life insurance as long as the beneficiary lives. If the beneficiary dies during the specified period of
time, payment will be continued during the rest of the specified time to another recipient designated by the original beneficiary.
A life insurance settlement option that guarantees a total amount due to the beneficiary. If the beneficiary dies prior to the total pay out
amount, the remaining amount will be given to a contingent payee.
An annuity payable during one's life. If the insured dies before the designated period of time, the payments will continue to a contingent
payee.
Life Insurance
The act or system of insuring against death, a contract by which the insurer undertakes, in consideration of the payment of a premium
(usually at stated periods), to pay a stipulated sum in the event of the death of the insured or of a third person in whose life the insured has
an interest.
Life Insured
Life Underwriter
Life-Only Annuity
Lifetime Maximum
The maximum amount of eligible medical expenses that the medical policy will pay for. This is during the lifetime of the insured.
A medical policy that covers only a specific illness, or designated disease. Also called a Dread Disease policy.
A life insurance policy that does not require payment during the entire lifetime of the insured.
Linear Regression
The relation between variables when the regression equation is linear, e.g., y = ax + b
Linear Relationship
A situation in which the relationship between an x-variable and a y-variable can best be described by a straight line.
Linear Scales
Lines on which equal distances between increments represent equal intervals between increments.
Link
A link generally refers to any highlighted words or phrases in a hypertext document that allow you to jump to another section of the same
document or to another document on the World Wide Web.
Liquidity
Listserv
The heart of an electronic mailing list, Listserv software automatically subscribes and unsubscribes list members and sends copies of every
e-mail message to every list subscriber.
A provision in a life insurance policy that allows the insured to receive part or all of the benefit prior to death. This is in the case of terminal
illness.
Living Wage
An acronym for Local Area Network, LAN refers to a local network that connects computers located on the same floor or in the same building
or nearby buildings.
Local National
Employees hired by a local subsidiary or branch in the country of operation. Usually nationals of that country but may be citizens of any
country.
Localization
Also known as Retail Outlet Distribution System. A system of selling insurance products in high traffic consumer locations. I.e. department
stores, grocery stores, and banks.
Premium payments are received at a post office box. The insurer allows the bank to have access to the post office box. The bank opens all
the mail, and deposits the premium. The bank sends receipts of all transactions to the insurer.
Log In / Log On
Log Off
Logarithm
One of a class of auxiliary numbers, devised by John Napier, of Merchiston, Scotland (1550-1617), to abridge arithmetical calculations, by
the use of addition and subtraction in place of multiplication and division.
Logarithmic Model
A calculation under which the x-variable is transformed into logarithms. The equation is y = a + blogx. It is used to describe certain
nonlinear relationships, where y increases at an ever-decreasing rate as x increases.
Logarithmic Scales
Scale on which actual distances from the origin are proportional to the logarithms of the corresponding scale numbers.
A reinstatement application. This application is used if the policy has lapsed for a specific reason, and the policyholder would like to reinstate
the policy.
Long-Term Bonus
Long-Term Care
A product designed to provide coverage for necessary diagnostic, preventative, therapeutic, rehabilitative, maintenance, or personal care
services provided in a setting other than an acute care unit of a hospital, such as a nursing home or even one's own home. Also known as LTC
insurance.
Long-Term Compensation
Long-term compensation is generally any cash compensation paid for work/services from prior to last year per a multi-year contract or other
extended pay agreement. Typical examples of long-term compensation include the current year’s cash payouts for the third installment of a
five-year incentive plan or current cash paid pursuant to a deferred compensation agreement in which an employee might receive 10% of last
year’s bonus this year (and each of the next nine years).
Long-Term Debt
Also known as liabilities. These are often divided into current liabilities, which are due within a year of the date entered on the balance sheet
and non-current liabilities, which are due more than a year after the date on the balance sheet.
Policy pays an income benefit when the insured is unable to work due to illness or injury (even if injured on vacation). Benefits are paid
weekly or monthly and determined at a percentage of the insured's past earnings, normally 60 to 70%.
Long-Term Disability insurance (LTD) is a common offering in an employee benefit program. The purpose of this insurance is to offer
employees protection from the effects of an illness or injury that results in a long term absence from employment. LTD is ordinarily group
insurance which provides compensation to employees because of their loss of income. This coverage is characterized by benefit periods of
either two years, five years, or to age 65. Typically, group LTD insurance policies will pay an employee 50 to 60 percent of pre-tax salary,
subject to a monthly cap. Most LTD policies become effective after a waiting period that can range from six months to one year. Most often,
LTD begins at the time that the employee's sick leave and short-term disability benefits have been exhausted. Some LTD programs include
rehabilitation services and wellness programs as a means of managing disability insurance costs and aiding the employee in returning to work
as soon as possible.
An incentive plan typically limited to executives. It requires a level of performance for a predetermined amount of time, for the maximum
benefit to the employee.
Insurance plans that provide financial protection in the event of retirement, disability, and financial security for family needs.
Loss Of Limbs
An insurance policy that covers the incident of accidental loss of limbs. See also Accidental Death &Dismemberment (AD&D) insurance.
Loss Ratio
Lost Wages
Lost wages is generally an element of damages recoverable from the defendant under state law. Lost wages is not the same as loss or
reduction of future earnings. The plaintiff has the burden of proving to the court or juries the damages, which he or she has suffered as a
direct result of defendant's wrongdoing. Generally, testimony of a medical expert may be needed to prove the reason and type of disability
preventing the plaintiff from earning his or her regular wages. Proof of the wages actually lost is also part of the evidence needed to
substantiate a claim for lost wages. It is important to determine if your case allows recovery for lost wages and what evidence is needed to
prove your damages. For more information on lost wages, contact a qualified attorney.
A payment of the entire amount to the employee from a qualified retirement plan within one tax year. (4)
Merit pay in the form of one lump sum cash payment. This is separate from the base pay.
The payment of a one lump sum cash payment, based upon merit.
Lump Summing
A method of determining expatriate employee compensation. In this approach, a lump sum is provided to an expatriate to spend as he or
she wishes. It can be broken into lump sums for pre-departure, at the post, and repatriation.
Lurking
Visiting an online discussion and reading other people's comments without contributing. Lurking is a good way for a beginner to get familiar
with a newsgroup or forum.
Luxury Automobiles
A luxury automobile is defined by the IRS as one with a fair market value of more than a certain amount.
A type of supplementary insurance, in addition to basic medical insurance, to provide for the costs of a major illness or injury.
Major Services
Relates to dental insurance for services that are the most costly.
Managed Care
A method by which insurance carriers attempt to manage healthcare costs by utilizing a pre-selected panel of physicians.
A healthcare approach that delivers medical services while controlling cost and quality.
An independent contractor that appoints personal general agents on behalf of an account, and who might represent numerous accounts.
Mandatary
Mandated Benefits
Non-cash benefits that are required by state law to be covered by an insurance carrier.
Mandator
An individual who hires another to carry out the command or wishes of a mandate.
Mandatory Continuing Legal Education (also known as MCLE) are annual educational requirements for legal professionals. MCLE credits are
governed by various related State Boards. Approximately 1/2 of all U.S. states have these annual requirements. The www.eridlc.com website
refers to legal continuing education credit as CLE.
Annual educational requirements for legal professionals. MCLE credits are governed by various related State Boards.
A liability account that is supposed to incorporate realized and unrealized capitol gains and losses resulting from investments.
Manual Rates
Margin
An error factor, usually a percentage of premium, margin is used by underwriters to set risk.
Market Adjustment
The adjustment that is necessary for an individual or an organization to bring the individual or organization to approximate market values.
An organizations budget to increase salaries that is estimated by their knowledge of the competition.
Market Basket
Market Capitalization
The result of multiplying the number of outstanding shares by the price per share.
Market Compa-Ratio
The comparison of internal pay to competitive pay of a company or individual.
Market Cycle
Market Index
An index that is used to calculate an individual or groups market pay by dividing the current pay of an individual by the market pay.
Market Rates
An organization's determination of rates for wages that are typical for a specific occupation.
Master Contract
A legally binding agreement between and insurance company and the policy holder, usually an organization.
Master Plan
A defined benefit or defined contribution plan, such as pension or other employee benefit plan, that has been developed by a sponsoring
organization and that provides a single trust account in which all adopting employers must invest their plan contributions. The sponsoring
organization must have the plan approved by the Internal Revenue Service.
Matching Contributions
Contributions that are made to an employee's 401K plan by their employer. The intent is to match the employee contribution to a pre-set
dollar or percentage maximum.
Material Fact
In the insurance industry a fact that is considered applicable to an underwriter when considering rating or issuing a policy.
Material Misrepresentation
In the insurance industry any incorrect, misleading or false statement(s) by the applicant that would cause the insurer to accept this
individual as a risk, when under truthful circumstances the insurer may have accepted the risk under other provisions, or may have declined
the policy.
Materiality
In accounting, this idea represents that that relevant information concerning monetary transactions and/or condition of the organization it to
be reported and explained separately.
Matters of Significance
Matured Endowment
In insurance, a type of life insurance that is payable if the insured is still alive on the date the policy has matured.
Maturity Curve
A maturity curve measures salaries based on years of directly related experience since the first educational degree/formal training
requirements for job entry was earned.
Maximum Benefit
In the U.S., the highest lifetime or annual benefit amount that can be paid by a qualified defined benefit plan to a plan participant legally.
(Canada) The highest amount an insured may receive under an insurance plan.
A limitation that is found within policies that refer to all hospital stays and all surgeries that are completed within a period of sickness or a
surgery.
In the IRS determination of reasonable compensation for owner-managers, one of the main considerations is that of comparable wages.
Maximum reasonable compensation would be the highest amount of compensation, both wages and bonus, which would be allowable to be
used as a business expense for services rendered in comparable circumstances. Based on IRS cases, ERI developed the definition in terms of
the standard error of the distribution of compensation for comparable executives. This measure is approximately plus/minus 2.01 standard
error. Very similar to the standard deviation, the standard error represents the range of pay in which one might find 90% of the population in
a skewed distribution.
In ERI survey software data, maximum years is twice the normal career job incumbency period. This is two times the average number of
years people hold this job (per Census and other survey reports). Beyond this point of maximum years you can expect to find very few people
still performing the same job. This maximum years figure is the top number of years that accurately and reliably predicts pay differentials.
The pay of those few who hold this job beyond the maximum year is not related to their total years of experience; i.e., if 5 years is the
average, pay differentials are not reported beyond 10; the pay of those at 11, 12, 13 years, etc., remains best predicted by the 10-year level
and has a spurious relationship with the years in excess of 10. Pay thereafter is related to some factor beyond years of total experience over
the maximum.
The McCarran Ferguson Act allows employers to not include certain time and activities of employees, prior to and/or after work, as "work
time." These activities are ones that are not required in order to accomplish the job. The most common of these is the time taken to commute
to work. Examples of types of activities other than commuting that are non-compensable are: waiting to check in at the beginning of a
workday or waiting in line for a paycheck at the conclusion of a shift.
Mean
A mean is the result of dividing the sum of two or more quantities by the number of quantities. See AVERAGE.
Median
One type of norm measure found by arranging the values in order and then selecting the one in the middle. Therefore, half of the numbers
are less than the median, and half are higher than the median.
A special quantitative analysis technique is useful when analyzing a group of data in a frequency distribution.
Medicaid
An insurance plan funded by the government that provides medical coverage to individuals under age 65 who are low wage earners, and/or
meet other criteria.
Medical Application
An application for medical insurance which also include a medical exam for which the results are reported the insurance company.
An organization that provides fraud protection from those that would try to hide or omit information when applying for various insurance
coverage.
Medical Report
A report on a potential insured's health based on physical examination and questions by a physician for the purpose of a medical application.
A savings account that can be used to pay for medical expenses that are not covered by insurance. The employee contributions to the plan
are tax-deductible.
Medicare
A medical plan that is available to those over age 65 and those with specific disabilities via the U.S. government through the Social Security
Administration. There are two plans available through Medicare. Part A, provides for inpatient hospital services and post-hospital care. Part B,
pays for medically necessary doctors' services, outpatient hospital services and a number of other medical services and supplies not covered
under Medicare Part A.
An option to replace the traditional Medicare plans A and B with an HMO plan that is approved by Medicare.
These rules determine when an employer, group medical insurance plan, would cover medical claims first. Amounts not covered by the
employer's plan can then be submitted to Medicare.
Medicare Supplement
An insurance option available to Medicare eligible individuals to cover expenses that are not covered by Medicare.
Mental Health
In medical insurance these benefits are related to emotional problems and sometime substance abuse issues.
Insurance plans that provide mental health benefits are not allowed to impose lifetime or annual dollar limits for mental health benefits that
are less than those imposed on medical or surgical benefits. Substance abuse treatment is not included in these guidelines.
Merger
The combining of two or more entities into one, therefore all administration is under one corporation.
Merit Bonus
Merit Increase
Merit Matrix
A process by which an individuals salary increase is determined by using performance and pay within the salary range.
Merit Pool
Merit Progression
A process by which an employee progresses through a wage range due to performance or other measurable criteria.
Merit Rating
A process of evaluating the performance of an employee. This is usually is used to determine work assignments, promotions and salary
increases.
A geographic area consisting of a large population nucleus together with adjacent communities having a high degree of economic and social
integration with the nucleus. Where metropolitan areas are combined to form Consolidated Metropolitan Areas (CMSA's), the component
metropolitan areas are designated Primary Metropolitan Statistical Areas (PMSA's). Metropolitan areas that are not combined to form CMSA's
are designated Metropolitan Statistical Areas (MSA's). More information on metropolitan areas is available from the U.S. Census Bureau
website: www.census.gov/population/www/estimates/metroarea.html.
Midpoint
A salary payment agreement between an employee and employer when the employee is involved in such temporary duties as the National
Guard or Reserve. The arrangement may include the employer paying full regular salary or the difference between that when involved in
active status and regular duty.
Minimum Age
The federal law states the minimum age for employment is 17, however a minor under the age of 17 may also work if the conditions of the
occupation meet certain criteria and are not dangerous.
A requirement in planning pensions that an employee must be a certain age prior to being permitted to participation in the employer's
pension plan.
Annual educational requirements for legal professionals. MCLE credits are governed by various related State Boards.
An agreement where an insured can apply the first year cash value to the initial premium amount.
A policy owner will request the premium be paid out of the policy's cash value, and the insurance company is only to bill the policy owner if
the cash value is not enough.
When an employee reaches the age of 70.5 a minimum distribution is required. The amount is determined by the amount in the employee's
account and the employee's life expectancy.
A rule that requires all plans to have at least 50 employees or 40 % of the total employees enrolled.
A health insurance plan that is partly self -insured by the employer, however is fully administered by the insurance carrier. The employer
pays all claims up to an agreed amount, and the carrier pays the rest.
Minimum Wage
Minor
Laws regarding work hours, work conditions and occupations for certain ages under 18 years of age.
Misrepresentation
To be dishonest and provide false information to sell insurance plans. To be dishonest and provide false information when applying for
insurance.
Usually related to life insurance if at the time of the insured's death it is determined that the insured did not state the correct age on the
application, and resulted in incorrect premium being charged for the amount of insurance that the insured received.
Mix
Mode
Model Bill
Legislation created by NAIC that can be used exactly as is or as a guideline by states or provinces to create their own laws.
In a 1976 a regulation that was implemented by the NAIC that states insurance companies are to provide information detailing what life
insurance plan may best suit their needs, an understanding of the plan provisions, and the ability to conduct an analysis of various plans.
Life insurance guidelines set by NAIC regarding advertising for annuity contracts and life insurance.
A NAIC law that contains prohibition against any form of insurance advertisements that are misleading, untrue or deceptive.
A version of a whole life insurance policy where the insured pays less premium than usual for an agreed upon amount of time. After that
period of time the premium payments increase to an agreed upon amount that is higher than usual for the life of the policy.
A kind of defined contribution plan that utilizes a formula to determine the employer's contribution to the employees account. The formula
and contribution are not related to profitability.
Ordinary life insurance that is paid for in monthly premium payments, typically paid directly to the agent.
Moral Hazard
The risk that a potential insured might purposefully try to hide or falsify information that would affect the underwriter's decision to accept
the risk of insuring this individual.
Morbidity
Morbidity Rate
The chance that an individual at a certain age will become ill or disabled. In health insurance a persons premium is somewhat based on the
morbidity rating for their specific age group.
Morbidity Table
A chart that indicates the prevalence of illness among various age groups.
Mortality Charge
The cost that is charged for the insurance protection element of a universal life insurance policy. The cost takes into account various such as
the amount at risk, the insured's current age and the insured's risk factor at the time the policy is purchased.
Mortality Curve
Mortality Experience
Several definitions: 1) The rate that participants in a pension plan have died. 2) The effect of actual deaths while on the plan that then has a
financial effect for the plan.
Mortality Rate
The frequency that death occurs among a specific group of people. The premium paid for a life insurance policy is partly established by the
mortality rate by that person's age.
Mortality Table
Actuarial tables used in the insurance industry to predict the life expectancy and the death rates for various types of people.
A decreasing term insurance plan that insures the life of a person that takes out a mortgage. The policy proceeds will estimate the rest of
the mortgage in the event of death.
These expenses are paid for up front or reimbursed to an employee by the employer when the company needs to have that employee's skills
utilized in another location.
MSA
Metropolitan Statistical Areas are U.S. geographic area consisting of a large population nucleus together with adjacent communities having a
high degree of economic and social integration with the nucleus. Where metropolitan areas are combined to form Consolidated Metropolitan
Areas (CMSA's), the component metropolitan areas are designated Primary Metropolitan Statistical Areas (PMSA's). Metropolitan areas that
are not combined to form CMSA's are designated Metropolitan Statistical Areas (MSA's). More information on metropolitan areas is available
from the U.S. Census Bureau website: www.census.gov/population/www/estimates/metroarea.html.
Multi-Company Representation
A life and health insurance agent is permitted to represent more than one insurance company.
Multi-Employer Plan
A employee benefit plan or pension plan that that has more than one employer.
Multinational Pooling
An employee benefit plan that is maintained by two or more employer groups to provide health and welfare benefits to the employees.
Group benefit plans that cover medical, dental and pension plans, typically for smaller employers, that have joined together under one
master policy.
Full-time agents that sell life and health, and property and casualty insurance to groups of financially related or managed companies.
Mutualization
The process that occurs while a stock insurance company changes to a mutual company.
A bill written by the National Association of Insurance Commissioners that set guidelines for data provided to or by insurance agents,
institutions and support organizations.
NAICS
The North American Industry Classification System was developed by the United States, Canada, and Mexico to provide comparable
statistics of industrial production across the three countries and replace SIC. NAICS also provides for increased comparability
Named Individuals
Based on SEC requirements, these persons have their compensation listed in the company proxy statement.
The primary responsibility is to protect the interests of consumers that are covered or considering buying insurance. The NAIC helps state
regulators in that respect.
A voluntary selfregulated securities organization responsible for the operation and regulation, including fair and ethical practice, of the
NASDAQ stock market and overthecounter markets.
National Association Of Securities Dealers Automated Quotation System (NASDAQ)
An organization that helps in stock trading, via a computerized system, for listed and over the counter stocks.
Companies that provide individualized employee benefit and risk management advice to their clients.
An independent group that reviews quality of care and other procedures of managed care organizations to render an accreditation. NCQA
developed the Health Plan Employer Data and Information Set (HEDIS), which is used as part of the accreditation process.
A survey of salaries, wages, and benefits produced by the U.S. Bureau of Labor Statistics. Includes local, regional, and nationwide data. The
NCS is designed to replace the Employment Cost Index (ECI), the Occupational Compensation Survey Program (OCSP), and Employee
Benefits Survey (EBS).
A federal law giving employees the right to self-organize unions, bargain collectively through representatives of their own choosing.
A board of members who administer the Wagner and the Taft-Hartley Acts. The board determines bargaining agents, bargaining units and
adjudicates unfair labor practice charges.
The Canadian labor market classification system for jobs. Includes coding for duties, skills, interests, aptitudes, education requirements, and
work settings.
A voluntary association of life and health guaranty associations that resolve issues and problems for policyholders in the event of a life and
health insurance company insolvency.
This U.S. government agency is responsible for the SIC (Standard Industrial Classification) manual.
Nature Of Work
Information about a specific occupation that describes the duties and responsibilities.
NCS
The National Compensation Survey is the U.S. government's survey of salaries, wages, and benefits produced by the U.S. Bureau of Labor
Statistics. Includes local, regional, and nationwide data. The NCS is designed to replace the Employment Cost Index (ECI), the Occupational
Compensation Survey Program (OCSP), and Employee Benefits Survey (EBS).
NEC
Needs Analysis
Discovering facts about a potential client to assist in determining their insurance needs.
Negative Differential
When the cost of goods and housing are more expensive in an employees home country than those of the assigned temporary location.
Negotiated Trusteeship
When collective bargaining results in an agreement between a union and an employer to provide the organization insurance.
The difference between the death benefit of a life insurance policy and the policy's reserve at the end of the year.
Net Assets
Net Cost
An individuals or company's profit after taking into consideration all other expenses and income and taxes.
Net Loss
An individuals or company's loss after taking into consideration all other expenses and income and taxes.
Net Premium
The current worth of an investment's future net cash flows minus the initial investment.
Net Sales
Net Worth
In the U.S., the NYSE is the oldest and the largest stock exchange. It is located on Wall Street in New York City.
NMHPA
Newborns' and Mothers' Health Protection Act of 1996 (NMHPA) is part of the Mental Health Parity Act and states that group health plans
cannot restrict the length of any hospital stay that relates to childbirth for the newborn or mother to less than 48 hours for a normal vaginal
delivery or 96 hours for a Caesarean delivery.
No Correlation
The National Occupational Classification System is the Canadian labor market classification system for jobs. Includes coding for duties, skills,
interests, aptitudes, education requirements, and work settings.
No-Evidence Limit
In group insurance, the maximum dollar amount that an insurance company will insure an individual for without requiring evidence of
insurability. May also be referred to as guaranteed issue.
No-Load Fund
A mutual fund in which no commissions are paid if the purchaser buys direct from the fund.
Nominal Measurements
The assets that are restricted from being added to a life insurance company's balance sheet.
A condition of an employment contract that states a specific time period that the employee cannot compete with the employer if the
employee is terminated.
An asset that is not easily changed to cash or not anticipated to become cash within a year.
A stock-option that is part of a compensation package that does not meet the IRS guidelines for a qualified stock option. The employee is
taxed at the beginning if the value of the stock is known, or at the end when the employee exercises the option if the value of the option in
unknown. These options are typically offered to executives.
A health insurance policy for an individual that states the premium cannot be increased and the benefits cannot be terminated.
Noncash Incentives
Incentives that are not a direct cash payment, such as comp time, a membership to a club and a reserved parking space.
A term used when discussing employee benefit plans under which the employer pays, or contributes, the entire cost of the premium for
benefits for the employees.
A term used when discussing employee benefit plans under which the employer pays, or contributes, the entire cost of the premium for
benefits for the employees.
Nondiscrimination Rules
An Internal Revenue code that states employee benefit plans are not to provide significantly greater benefits to higher paid employees and
owners than to lower paid employees.
Non-Duplication Of Benefits
A kind of coordination-of-benefits provision under which the insured's secondary insurance plan pays the difference, if any, between the
amount paid by the primary plan and the amount that would have been payable by the secondary plan had that plan been primary.
Nonelective Contributions
Any employer contribution, that is not a matching contribution, for which the employee may choose to have the contribution paid to the
employee in cash in lieu of being contributed to the plan and, the contributions are not forfeitable when made and cannot be withdrawn prior
to reaching certain conditions.
Nonexclusive Territory
Employees who are subject to the minimum wage and overtime pay provisions of the Fair Labor Standards Act.
Nonfinancial Rewards
Nonforfeiture Factors
Values that are similar to annual premiums that insurers may use to calculate policies cash values.
Nonforfeiture Values
The benefits that a life insurer guarantees to the policy holder if the policy holder discontinues premium payments.
Nonforfieture Options
Different options that a policy holder has if a life insurance policy lapses to apply the cash value of that policy.
Nonimmigrant Visas
Under specific circumstances, a visa will allow a non U.S. citizen to work in the United States.
Nonmedical Application
An application for insurance that does not require the applicant to submit to a medical examination.
Nonmonetary Awards
Nonparticipating Policy
An annuity or life insurance policy that the policy holder does not receive dividends.
Nonqualified Annuity
An annuity that has been funded with money that was previously taxed in the same year that the funds are to be deposited.
Typically used for senior executives and highly compensated employees, this retirement income plan does not meet the guidelines for a
qualified plan, therefore they do not meet the criteria to be eligible for the tax advantages of a qualified plan.
A foreign plan that is no longer qualified due to termination or reversal of a section 404A election.
A pension plan that does not meet IRS requirements, or receive the positive tax benefits, due to the increased benefits compared to what is
allowable of a qualified plan.
A stock-option that is part of a compensation package that does not meet the IRS guidelines for a qualified stock option. The employee is
taxed at the beginning if the value of the stock is known, or at the end when the employee exercises the option if the value of the option in
unknown. These options are typically offered to executives.
A method of evaluating job worth and creating a hierarchy without the use of quantitative methods.
Nonrandom Sampling
Nonresident License
The license gives the agent of another state authorization to the sell insurance in the licensing state.
A disability benefit that pays for the period of disability after the elimination period.
The dentist is paid based on actual charges, if the charges are usual, customary and reasonable.
People who are a standard risk and that have not smoked for a particular time period prior to the application.
Nonsymmetric Distribution
Graphed points that are not the exact image of each other, usually with cluster of more points on one side of the graph.
Normal Cost
The amount necessary to fund for retirement benefits for one plan year for an individual or a whole pension plan.
Normal Distribution
The age, as established by a plan, when retirement normally occurs, and the participant(s) in the plan can receive their full pension benefits.
North American Industry Classification System (NAICS)
Developed by the United States, Canada, and Mexico to provide comparable statistics of industrial production across the three countries and
replace SIC. NAICS also provides for increased comparability with the International Standard Industrial Classification.
NTIS
The National Technical Information Service is the U.S. government agency responsible for the SIC (Standard Industrial Classification)
manual.
A system of categorizing risk where medical and nonmedical factors are given a numeric number based upon the expected impact on
mortality.
401(K) Plans
United States Internal Revenue Code Section 401(k) refers to Cash or Deferred Arrangements. These are retirement plans typically
described as a defined contribution plan used within private for profit firms.
403(B) Plans
U.S. Internal Revenue Code Section 403(b) refers to Tax Sheltered Annuity Plans for nonprofit and public firms.
An employee who owns more than five percent of corporate stock or of capital or profits interest in an unincorporated company. This
definition is used in non-discrimination testing of U.S. group benefit and retirement plans.
501(C)(9) Plans
A U.S. Internal Revenue Code Section that refers to self-insured funds (also called Voluntary Employee Benefit Plans). This is a trust that
many self-insured organizations establish to fund their organization's insurance plans. Contributions to a 501(c)(9) trust are deductible for
federal income tax purposes, as are all investment gains made on funds in the trust