CEBS key terms

A pension plan that promises a specified retirement benefit, typically based on salary and years of service. The employer bears the investment risk and must fund the promised amount.

A plan in which contributions go into individual accounts and the retirement benefit equals those contributions plus investment gains or losses. Employees bear the investment risk and make many of the choices.

The process by which an employee earns a nonforfeitable right to employer-provided contributions or benefits. Employee deferrals are always fully vested; employer money may require a stated period of service.

The Employee Retirement Income Security Act of 1974, a federal law setting minimum standards for private-sector pension and welfare plans, covering fiduciary conduct, reporting, disclosure, and claims procedures.

Someone who exercises discretionary authority or control over a plan's management or assets, or who gives investment advice for a fee, and must act prudently and solely in participants' interest.

A plain-language document ERISA requires administrators to give participants, explaining eligibility, benefits, claims procedures, and rights in terms an average participant can understand.

An employee who satisfies an IRS ownership test or whose prior-year compensation exceeded the annual threshold, forming the favored group that nondiscrimination tests measure against everyone else.

IRS-required tests comparing the benefits or contributions received by highly compensated employees against those of other employees, to confirm the plan does not favor the better-paid group.

A federal law requiring most employers with 20 or more employees to offer continued group health coverage, at the individual's expense, for limited periods after events such as termination or divorce.

An arrangement in which an employer pays health claims directly from its own assets instead of buying insured coverage, usually hiring a third-party administrator and buying stop-loss protection against large claims.

Coverage purchased by a self-funded plan that reimburses claims exceeding set thresholds, either for one person (specific stop-loss) or for the whole group (aggregate stop-loss).

A tax-advantaged account for people covered by a qualifying high-deductible health plan. Employer or employee contributions, plus earnings, pay medical expenses and roll over year to year.

An account employees fund through pre-tax salary reductions to pay medical or dependent care expenses, generally subject to use-it-or-lose-it rules softened by a carryover or grace period.

A managed care process that reviews whether care is medically necessary and appropriate, before, during, or after treatment, in order to control cost and support quality.

A vendor that administers prescription drug coverage, negotiating discounts and rebates with manufacturers and pharmacies, processing claims, and applying formularies and utilization controls.

Rules that decide which of two or more health plans pays first when someone is covered twice, so that combined payments never exceed the actual expense incurred.

The combined value of pay, benefits, work-life programs, recognition, and career development that an employer offers, considered as one package for attracting and keeping talent.

Comparing an employer's benefit designs, cost, and participation levels against market surveys or peer groups to judge competitiveness and support plan decisions.

A documented long-range plan that ties benefit programs to organizational goals such as cost control, talent retention, and workforce health, with measurable targets and clear governance.

The overall package of pay, benefits, culture, and growth opportunities an employer offers, expressed as the reason people join the organization and choose to stay.

A formal document asking vendors to bid on services, stating scope, requirements, and evaluation criteria so that competing proposals can be compared on equal terms.

A set of measures such as cost per employee, participation, claims trend, and satisfaction that tracks whether benefit programs deliver their intended strategic and financial results.

The pre-transaction review of a target company's benefit plans, contracts, funding, and compliance, used to spot liabilities, cost, and integration problems before a merger or acquisition.

A defined contribution plan that lets employees defer part of pay on a pre-tax or Roth basis, often with an employer match, subject to annual IRS limits.

A 401(k) design that skips annual ADP and top-heavy testing by making required employer contributions, fully vesting them immediately, and giving participants a required annual notice.

Minimum contribution and faster vesting requirements that apply when key employees hold more than 60 percent of plan account balances on the plan's determination date.

An employer contribution tied by formula to how much an employee defers, such as 50 percent of the first six percent of pay, used to encourage plan participation.

A withdrawal from a 401(k) permitted only for an immediate and heavy financial need defined by IRS safe harbors, limited to the amount needed and typically pausing deferrals.

The annual cap, adjusted for inflation, on the salary deferrals an employee may contribute to a 401(k) or similar plan, tracked separately from overall contribution limits.

A default fund, such as a target-date or balanced fund, that receives contributions from participants who make no investment election and gives fiduciaries protection when Department of Labor rules are met.

A defined benefit plan kept as a hypothetical account for each participant, credited with pay credits and interest credits, while the employer retains the investment risk.

The least amount an employer must contribute to a defined benefit plan for a plan year under funding rules, with excise taxes imposed on shortfalls.

The Pension Benefit Guaranty Corporation, a federal agency that insures covered private-sector defined benefit plans and pays guaranteed benefits when an underfunded plan terminates.

A single payment of a participant's entire benefit, computed using plan and IRS assumptions, taken instead of a series of annuity payments.

The smallest amount that must be withdrawn each year from a tax-deferred retirement account after the required beginning age, with steep tax penalties for missing the deadline.

Estimates of future events such as interest rates, mortality, turnover, retirement age, and pay growth, used to value pension obligations and set contribution amounts.

A written document stating a plan's investment objectives, risk tolerance, asset allocation, and review procedures, guiding fiduciaries in selecting and monitoring investments.