Cafeteria Plan. A plan under which
employees may choose between cash or qualified benefits (see flexible benefit
plan).
Elective Contributions. An
employee's salary reductions used to pay for qualified benefits.
Enrollment Period. The time period
specified in the Plan Document during which employees are given the opportunity
to elect to participate in a flexible benefit plan or Qualified Transportation
Expense Plan.
ERISA. The Employee Retirement
Income Security Act of 1974. This act deals with specific employee rights under
benefit plans.
FICA. Federal Insurance
Contributions Act. Commonly referred to as Social Security Tax.
FSA (Flexible Spending Account).
An account funded with tax-free dollars that can be used to reimburse plan
participants for eligible expenses. There are two types of accounts: medical or
dependent care.
Flexible Benefit Plan. Eligible
employees may choose among two or more benefits consisting of cash and
nontaxable benefits.
FUTA. Federal Unemployment Tax
Act.
HCE (Highly Compensated Employee).
An employee is considered to be a Highly Compensated Employee (HCE) if at
any time during the preceding year the employee meets any one of the
following conditions:
- an officer
(the term officer shall include an employee who has company-wide
decision-making power);
- an employee who earned more than $85,000
in annual compensation at anytime during the preceding plan year, or, if
elected by the employer, who was in the 20% top paid group;
- an employee who owned 5% or more of the
company; or
- an employee who is a spouse or dependent
of an individual described above.
Key Employee. An employee is
considered to be a Key Employee if at any time during the current Plan
Year or any of the four preceding Plan Years the employee met any one of
the following conditions:
- was an
officer of the company who earned more than $67,500 in annual compensation
(the term officer shall include an employee who has company-wide
decision-making power). The number of officers that must be recognized as key
employees is limited to the greater of three officers or 10% of all employees,
but in no case more than 50 employees;
- owned 1/2 percent or more of the company
and received annual compensation from the employer of more than $30,000. This
is limited to the 10 employees with the largest ownership interest in the
company.
- owned 1% or more of the company and
received annual compensation from the employer of more than $150,000; or
- owned 5% or more of the company.
Non-elective Contributions.
Employer's funds provided to the employee for the purchase of benefits. These
are sometimes referred to as a "Benefit Credit."
Plan Administrator. The entity or
individual who has complete control over the operation of a flexible benefit
plan, monitors movement within the plan, and reserves the right to make changes
or terminate the plan. The employer is usually the plan administrator.
Plan Document. A formal written
plan that describes the employer's intention under the law.
Plan Highlights. Part of the Plan
Document which contains specific information regarding eligibility requirements,
the Plan Year dates, eligible benefits, etc.
Plan Year. The period of time
specified in the Plan Document for the actual operation of the Plan.
QTE (Qualified Transportation Expense).
Work-related mass transit or parking expenses as defined under IRC Section
132(f) as eligible expenses.
Summary Plan Description/Plan Summary.
A separate document which summarizes the Plan's eligibility requirements,
benefits and election requirements. This document must be written in an
easy-to-understand style and must be provided for each employee eligible to
participate in the Plan.
"Use It or Lose It Rule"
Any funds that remain in a Medical or Dependent Care Flexible Spending Account
after the grace period following the end of the Plan Year will be forfeited by
the participant.
W-2. Form issued by the employer
to the employee to indicate earnings and withholdings at the end of the tax
year. This form must be issued by January 31 for the previous calendar year.