Compensation and Benefits Flashcards
Act that determined that older workers may not be discriminated against by performance-based pay systems.
Age Discrimination in Employment Act (ADEA), 1967
Basic compensation an employee receives, usually as a wage or salary.
Base pay
Combining several salary grades or job classifications with narrow pay ranges into one band with a wider spread.
Broad-banding
Pay that employees receive when they are called back for an extra shift in the same workday.
Call-back pay
Type of health-care plan in which the physician is paid on a per capita (per head) basis rather than for actual treatment provided.
Capitated health-care plan
Form of defined benefit plan that defines the promised benefit in terms of a hypothetical account balance and features benefit portability.
Cash balance plan
Allows a publicly traded company to take back previous executive incentive-based compensation in specific circumstances.
Clawback provision
Payment made to salespeople, usually calculated as a percentage of sales.
Commission
Concept that states that jobs requiring comparable skills, effort, responsibility, and working conditions filled primarily by women should have the same job classification and salary as similar jobs filled by men.
Comparable worth
Pay rate divided by the midpoint of the pay range.
Compa-ratio
Reflect the dimensions along which a job is perceived to add value to the organization; used to determine which jobs are worth more than others.
Compensable factors
Act that provides individuals and dependents who may lose medical coverage with opportunity to pay to continue coverage.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Instrument that measures change over time for costs of a group of goods and services
Consumer price index (CPI)
Healthcare options intended to help employers better control costs while allowing employees to make more decisions about their health care.
Consumer-directed health care
Eliminates the duplication of payments when an employee, spouse, or dependents have health coverage under two or more plans.
Coordination of benefits
Specified percentage (typically 20% to 30%) of covered medical expenses that employee pays or fixed dollar amount that covered person pays each time he or she visits a physician or purchases prescription drugs.
Copayment
Act that prohibits federal contractors from receiving kickbacks from employees or subcontractors for wages earned on federal projects.
Copeland “Anti-Kickback Act, 1934
Periodic compensation payment given to eligible employees regardless of their performance or organizational profitability; usually linked to inflation.
Cost-of-living adjustment (COLA)
Trust created exclusively for the purpose of paying the qualified education expenses of a designated beneficiary.
Coverdell Education Savings Account (ESA)
Act that established prevailing wage and benefit requirements for contractors on federally funded construction projects in excess of over $2,000.
Davis-Bacon Act, 1931
Initial amount of covered medical expenses an individual must pay before receiving paid benefits under a health-care plan.
Deductible
Plan that provides income to employees at some future time as compensation for work performed now.
Deferred compensation
Plan that promises employee a retirement benefit amount based on a formula.
Defined benefit plan
Plan in which the employer and sometimes the employee make an annual payment to the employee’s retirement plan account.
Defined contribution plan
Pay that is based on when the employee works (e.g., overtime pay, shift-pay differential) or where the employee works.
Differential pay
Pay that is received by an employee, including based pay, differential pay, and incentive pay.
Direct compensation
Law that calls for fundamental changes in executive compensation disclosure, compensation committee independence, shareholder voting rights, and clawback provisions in publicly traded companies.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Amount advanced on future commissions
Draw
Career development programs that identify meaningful career paths for professional and technical people whose preferences may be outside traditional management roles.
Dual career ladders
Act that adjusts minimum vesting schedules, increasing retirement plan compensation and contribution limits, permits, catch-up contributions by participants age 50 or older in certain retirement plans, and modifies distribution and rollover rules.
Economic Growth and Tax Relief Reconciliation Act (EGTRRA)
Extra pay that employees receive when they are called into work during an emergency (e.g, a power outage)
Emergency-shift pay
Amendment to the Portal-to-Portal Act; clarifies that commuting time is not paid working time.
Employee Commuting Flexibility Act
Act that established uniform minimum standards for employer-sponsored retirement and health and welfare benefit programs.
Employee Retirement Income Security Act (ERISA), 1974
Stock plan structured as a form of ERISA-governed qualified retirement plan.
Employee stock-ownership plan (ESOP)
Workers who are covered b Fair Labor Standard Act regulations as determined by the IRS.
Employees
Act that prohibits wage discrimination by requiring equal pay for equal work.
Equal Pay Act (EPA)
Work having equal skills, equal effort, equal responsibility, and similar working conditions, all performed at the same location.
Equal work
Non-qualified deferred compensation plans that provide benefits to selected management or highly compensated employees beyond Section 415 limitations.
Excess deferral plans
Amount of employer-provided group-term life insurance over $50,000.
Excess group-term life insurance
Plan in which participants must use providers in the network of coverage or no payment will be made.
Exclusive provider organization (EPO)
Employees who are excluded from FLSA minimum wage and overtime requirements.
Exempt employees
Traditional term used to describe persons who live in one country and are employed by an organization based in another country.
Expatriates
Rating system that bases insurance rates on claims history.
Experience rating
Written statement provided by an insurance provider indicating what portion of a benefit claim was paid to the health-care provider and what portion of the payment, if any, the individual is responsible for.
Explanation of benefits (EOB)
When and organization’s pay rates are at least equal to market rates.
External equity
Act that provided certain legal protections for spousal beneficiaries of qualified retirement plans.
Retirement Equity Act (REA)
Job comparison method that ranks each job by each selected compensable factor and then identifies dollar values to develop a pay rate.
Factor comparison method
Act that regulates employee status, overtime pay, child labor, minimum wage, record keeping, and other administrative concerns.
Fair Labor Standards Act (FLSA)
Act that provides employees with up to 12 weeks of unpaid leave to care for family members or because of a serious health condition of the employee.
Family and Medical Leave Act (FMLA)
In these type of profit-sharing plans, the employer contributes a percentage of profits to employee accounts in a qualified, tax-deferred retirement plan.
Deferred profit-sharing plans
Private, not-for-profit body that decides how public financial executives should report their firm’s financial information to their shareholders.
Financial Accounting Standard Board (FASB)
Qualified tuition plan that provides families a federal tax-free way to save money for college.
529 plan
Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses.
Health reimbursement account (HRA)
Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as single-rate pay.
Flat-rate pay
Type of Section 125 plan that allows employee to use pretax dollars to pay for out-of-pocket health and dependent-care expenses.
Flexible spending account (FSA)
Plans that allow employee to make tax-free favored pay deferrals toward retirement savings through a payroll deduction plan.
401 (k) plan
Plans that allow employees of certain tax-exempt organizations to contribute pretax dollars toward retirement savings.
403 (b) plan
Plans that allow employee of states, political subdivisions or agencies of states, and certain tax-exempt organizations to defer receipt of wages.
457 plans
Listing of grouped data, from lowest to highest.
Frequency distribution
Shows the number of people or organizations associated with data organized in a frequency distribution.
Frequency table
Type of 125 plan that allows employees to choose from a menu of benefits and allocate pretax dollars to pay for those benefits.
Full cafeteria plan.
Health-care plan in which the employer pays a third-party insurance carrier premiums that cover medical insurance charges, administrative costs, sales commissions, taxes, and profits.
Fully insured health-care plan.
Group incentives where a portion of the gains an organization realizes from group efforts is shared with the group.
Gainsharing plans.
Individual, usually a primary-care physician, who is given control of patient access to specialists and services in a managed care organization.
Gatekeeper
Pay increase given to all employee (or a class of employees such as office or production workers) based on local competitive market requirements; awarded regardless of employee performance.
General pay increase
Act that prohibits discrimination against individuals on the basis of their genetic information in both employment and health insurance.
Genetic Information Act (GINA)
Pay based on where an employee works
Geographic differential pay
System of overlapping short- and long-term incentives to make it less likely that key employee will leave an organization.
Golden handcuffs
System by which qualified retirement plan participants become incrementally vested over a period of years of service.
Graded vesting
Clauses written into executive contracts that provide special payments to key executives who might lose their position or be otherwise disadvantaged if another organization took control through a merger or acquisition.
Parachutes; also known as golden parachutes
Account providing tax-free income growth; contributions are made with after-tax dollars.
Roth IRA
Total earning before taxes; include regular wages plus additional earning such as tips, bonuses and overtime pay.
Gross earning
Situation where an employee’s pay is below the minimum of the range.
Green-circle rates
Pay earned by employees who work in an environment that is considered more risky from a safety or health point of view.
Hazard pay
Act that made changes to ERISA, the Internal Revenue Code, the Public Health Service Act, and COBRA to improve health-care coverage portability and accessibility and provide medical record privacy and security.
Health Insurance Portability and Accountability Act (HIPAA), 1996
Purchases health-care plans for large groups of employers to provide small organizations the economic advantages large organizations have.
Health insurance purchasing cooperative (HIPC)
Tax-sheltered savings account similar to an IRA but created primarily to pay for medical expense
Health savings account (HSA)
Determined by an array of issues such as business ownership and/or salary.
Highly compensated employee (HCE)
Form of base pay that is dependent on the number of hours worked.
Hourly wage
Form of direct compensation where employers pay for performance beyond normal expectations to motivate employees to perform at higher levels.
Incentive pay.
Full-choice health plan that allows covered employees to go to any qualified physician or hospital and submit claims to the insurance company; also known as fee-for-service health-care plan.
Indemnity health-care plan
Workers who are not covered by Fair Labor Standard Act regulations as determined by the IRS.
Independent contractors
Jobs used as reference points when setting up a job classification system and when designing or modifying a pay structure.
Benchmark jobs
Compensation commonly referred to as benefits.
Indirect compensation
Tax-deferred accounts to which wage earners can contribute an amount up to a yearly maximum.
Individual retirement accounts (IRAs)
Traditional term used to describe employee brought in from another country to work in the headquarters country for a specific period.
Inpatriates
Requires participants to complete a specific number of years of service with an employer before they get any vested benefits, after which they are 100% vested.
Cliff vesting
Occurs when people feel that performance or job differences result in corresponding differences in pay rates.
Internal equity
Umbrella term used to describe anyone on a global posting.
International assignee (IA)
Bilateral social security agreements that coordinate the U.S. Social Security program with the comparable programs of other countries; also known as totalization agreements.
International social security agreements
Payroll deductions such as tax levies and court-ordered child support that an employee must pay
Involuntary deductions
Evaluation method that groups jobs into a predetermined number of grades or classifications, each having a class description to use for job comparisons.
Job classification
Systematic determination of the relative worth of jobs within an organization.
Job evaluation
Evaluation method that establishes a hierarchy of jobs from lowest to highest based on overall importance to the organization.
Job ranking
Maximum dollar amount of covered medical expenses that a health-care plan will pay on behalf of any covered person during that person’s lifetime.
Lifetime maximum benefit
Act that creates a rolling time frame for filing wage discrimination claims and expands plaintiff field beyond employee who was discriminated against.
Lilly Ledbetter Fair Pay Act
Concept that states that employees must be able to influence the attainment of a goal and see a direct result of their efforts in order for incentive pay plans to be effective.
Line of sight
Insurance coverage that provides a daily monetary benefit to people who are chronically ill and who require living assistance wither at hoe or in residential facility.
Long-term care insurance
Replaces a portion of employee’s lost income after short-term disability coverage ends.
Long-term disability (LTD) coverage
One-time payment made to an employee; also called performance bonus.
Lump-sum increase (LSI)
General term for a medical plan that seeks to ensure that the treatments a person receives are medically necessary and provided in a cost-effective manner.
Managed care
Method similar to job evaluation systems that evaluates jobs based upon their market value.
Market-based evaluation
Correlate pay with time spent in a professional field such as teaching or research.
Maturity curves
Middle point above and below which 50% of scores in a set of data lie.
Median
Involves traveling to hospitals and health-care providers that are outside an employer’s local area of network; also called medical travel.
Medical tourism
Social Security Administration program that provides medical care for people over age 65.
Medicare
Health plan where benefits are reduced for employees eligible for Medicare; Medicare becomes the primary provider.
Medicare carve-out
Health plan that covers specific expenses not covered by Medicare.
Medicare supplement
Act that addresses parity between mental heath benefits and medical benefits.
Mental Health Parity Act (MHPA)
Situation where an individual’s performance is the basis for the amount and timing of pay increases; also called performance-based pay.
Merit pay
Minimum hourly amount, determined by Congress, that nonexempt employees can be paid.
Minimum wage
Value that occurs most frequently in a set data.
Mode
Offered to employees who are on leave for injuries under FMLA; job tasks are modified to meet the employee’s restrictions.
Modified-duty programs
Plans in which employers make mandatory payments (a fixed percentage of an eligible employee’s compensation) to a retirement plan.
Money purchase plans
Organizations with operations in multiple countries.
Multinational enterprises (MNEs)
In health plans, requires a secondary carrier to reimburse only up to the level of reimbursement the primary carrier would have paid.
Non-duplication of benefits
Employees covered under FLSA regulations, including minimum wage and overtime pay requirements.
Nonexempt employees
Income deferral benefit offered to a select group of management or highly compensated employees in the organization.
Non-qualified deferred compensation plan
Act that amended ADEA to include all employee benefits; also provided terminated employees with time to consider group termination or retirement programs and consult an attorney.
Older Worker’s Benefit Protection Act (OWBPA)
Pay that employees receive when they can be called in to work but are not working before receiving the call to return to work.
On-call pay
Stated amount out of pocket the insured can pay for medical costs in a 12-month period before copayments end.
Out-of-pocket maximum
Required for nonexempt workers under FLSA at 1.5 times the regular rate of pay for hours over 40 in a workweek.
Overtime pay
Large bank of time comprising all of an employee’s paid time off (i.e., vacation, sick leave, and holidays) that the employee can use as he or she sees fit.
Paid-time-off (PTO) bank
Occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority; also know as salary compression.
Pay compression
Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as flat-rate pay.
Single-rate pay
Used to group jobs that have approximately the same relative internal or external worth and are paid at the same rate or within the same pay range.
Pay grades
Job ranking method in which evaluator compares each job with every other job being evaluated.
Paired-comparison method
Set the upper and lower bounds of possible compensation for individuals whose jobs fall in a pay grade.
Pay ranges
Collect information on prevailing market rates and include topics such as incentive plans, overtime pay, and base pay.
Pay surveys
Act that changed the laws that affected defined benefit plans, defined contribution plans, individual retirement accounts, and other issues related to retirement planning.
Pension Protection Act (PPA), 2006
One-time payment made to an employee; also called a lump-sum increase.
Performance bonus
Situation where an individual’s performance is the basis for the amount and timing of pay increases; also called merit pay.
Performance-based pay
Situation in which employee pays a portion of the required monthly premium for health-care coverage.
Premium sharing
“In place of parent”; term used in expansion of FMLA coverage to employees who stand in place of a parent with day-to-day responsibilities to care for and financially support a child or who have a day-to-day responsibility to care for or financially support a person who stood in loco parentis for them.
In loco parentis
Special privileges for executive characteristics, rather than the job, determine pay.
Perquisites
Pay system in which employee characteristics (skills, knowledge), rather than the job, determine pay.
Person-based pay
Consists of hospital and physician practices that merge into vertically integrated structures.
Physician hospital organizations (PHOs)
Most commonly used method of job evaluation; involves using specific factors to evaluate job worth.
Point-factor method
Combination of a PPO and an HMO; provide direct access to specialists.
Point-of-service (POS) organizations
Act that defines what is included as hours worked and is therefore compensable and a factor in calculating overtime.
Portal-to-Portal Act, 1947
Set of benefits provided to employees who are terminated for some reason other than cause.
Severance package
Medical conditions that existed before a health-care policy is taken out.
preexisting conditions
Formed by an insurance company, an employer or a group of employers who negotiate discounted fees with networks of health-care providers; in return, the employers guarantee a certain volume of patients.
Preferred provider organizations (PPOs)
Type of Section 125 plan that allows employees to pay for certain qualified benefits with pretax dollars.
Premium-only plan (POP)
Rulings issued by the IRS to specific taxpayers or organizations that request an interpretation of the law.
Private-letter rulings
Pay based on the quantity of work and outputs that can be accurately measured.
Productivity-based pay
Plans that distribute a portion of an organization’s profits to its employees.
Profit sharing plans
Stated that an ERISA plan fiduciary has legal and financial obligations not to take more risks when investing employee benefit program funds than a reasonably knowledgable, prudent investor would under similar circumstances.
Prudent person rule
Retirement benefit offered to all employees in the organization; provides tax advantages and is protected under Employee Retirement Income Security Act.
Qualified deferred compensation plan
Create or recognize the right of an alternative payee to receive all or a portion of the benefits under a retirement plan.
Qualified domestic relations orders (QDROs)
Under COBRA, an event such as termination for reasons other than gross misconduct, that allows employees to continue their group health-care coverage for a specified period of time.
Qualifying event
Grantor trust designated to segregate non-qualified deferred compensation benefits from an employer’s general accounts.
Rabbi trust
Reimbursement standard used by insurance companies to determine how much providers should be paid for their services.
Reasonable and customary
Describe situations where employees’ pay is above the range maximum.
Red-circle rates
Traditional term referring to employees who have returned home from international assignments.
Repatriates
Pay provided to employees who report for work as scheduled but then find no work is available.
Reporting pay
Act that provided certain legal protections for spousal beneficiaries of qualified retirement plans.
Retirement Equity Act (REA)
Act that added Sections 125 and 401 (k) to the Tax Code.
Revenue Act
Rulings published by the IRS as general guidelines to all taxpayers or organizations.
Revenue rulings
Plans that allow after-tax contributions to existing 401 (k) or 403 (b) plans
Roth 401(k) / 403(b) plans
Account providing tax-free income growth; contributions are made with after-tax dollars.
Roth IRA
Uniform amount of money paid to a worker regardless of how many hours are worked.
Salary
Occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority; also known as pay compression.
Salary compression
Act that requires administrators of defined contribution plans to provide notice of blackout periods; provides whistleblower protection for employees.
Sarbanes-Oxley Act (SOX), 2002
Retirement plan by which employees can contribute each year to a 401(k) plan or IRA.
Savings Incentive Match Plan for Employees (SIMPLE)
Written benefit plans maintained by the employer that allow employees to use pretax dollars to pay for certain benefits.
Section 125 benefit plans
Health-care plans in which the employer takes on the role of the insurance company and assumes some or all the risk.
Self-funded health-care plan
System that allows preference to employees with the longest service.
Seniority
As defined in DOL regulations, a condition that involves employee incapacity for more than three calendar days plus “two visits to a health-care provider.”
Serious health condition
Supplemental pay period to employees who work less-desirable hours, such as as second or third shifts.
Shift pay
