CER key terms

The share of covered medical costs a participant pays after the deductible, usually a fixed percentage such as 20%, while the plan pays the remainder. It differs from a copay, which is a flat dollar amount.

The amount a participant must pay for covered services each plan year before the health plan begins paying its share of costs. Deductibles may differ for in-network and out-of-network care.

The cap on a participant's annual cost sharing for essential benefits within a plan year. Once reached, the plan pays 100% of covered in-network services, limiting catastrophic financial exposure.

A fixed dollar amount a participant pays at the point of service for a covered item such as an office visit or prescription. It is typically not subject to the deductible.

The periodic amount charged by an insurer or paid to a self-funded plan to provide coverage. Employers usually share the cost with employees, and the split affects participation and affordability.

A pricing method in which an insurer sets a group's premium largely by reference to that group's own past claims and demographic history, rather than broad community averages. Larger groups are more likely rated this way.

A pricing approach that sets premiums based on the average cost of covered services across a broad geographic population, not on a specific group's claims. It spreads risk across many groups.

An arrangement in which the employer pays covered medical claims directly from its own assets rather than buying a fully insured policy, usually purchasing stop-loss insurance to cap catastrophic exposure.

Coverage bought by a self-funded employer that reimburses claims above a specified threshold. Specific stop-loss covers one participant's large claim; aggregate stop-loss caps total plan claims.

A health benefit arrangement in which the employer pays a fixed premium to an insurance carrier, which bears the financial risk of paying claims and administering the program.

A category of health coverage recognized as satisfying the individual coverage requirement, including employer-sponsored group health plans, individual market policies, Medicare, and Medicaid.

The requirement that non-grandfathered group health plans cover specified preventive services, such as screenings and immunizations, without participant cost sharing when delivered in network.

A group health plan that existed on the date the Affordable Care Act was enacted and has kept its status by avoiding specified changes. It is exempt from certain mandates, including the preventive care cost-sharing rule.

An employer-funded account that reimburses employees for qualified medical expenses. Only the employer contributes, balances may carry over, and the arrangement must be integrated with group health coverage.

A tax-advantaged account available only to participants in a qualifying high-deductible health plan. Contributions by employer and employee are tax-favored, funds vest immediately, and unused balances roll over.

A health plan whose deductible and out-of-pocket limits meet statutory thresholds, making participants eligible to contribute to a health savings account. Preventive services may be covered before the deductible.

A cafeteria plan account funded by employee salary reductions that reimburses qualified expenses. Health care FSAs generally require forfeiture of unused balances, subject to limited carryover or grace period rules.

A written benefit plan under which employees choose among cash and qualified benefits, with salary reductions excluded from gross income. It is governed by nondiscrimination rules favoring rank-and-file employees.

The right of qualified beneficiaries to continue group health coverage after a qualifying event such as termination or divorce, generally for up to 18 or 36 months, at their own expense.

A life event, such as termination of employment, divorce, death, or loss of dependent status, that triggers COBRA continuation rights or a special enrollment opportunity under HIPAA.

The right to enroll in or change group health coverage outside the annual open enrollment window after events such as marriage, birth, adoption, or loss of other coverage.

A qualified retirement plan that promises a specified benefit at retirement, typically based on pay and service, with the employer bearing investment risk and funding the promised amount.

A retirement plan in which the employer contributes a specified amount to each participant's individual account. The participant bears investment risk, and the retirement benefit equals accumulated contributions plus earnings.

A profit-sharing or stock bonus plan feature allowing employees to defer compensation into individual accounts on a pre-tax or Roth basis, often with an employer match.

The portion of salary an employee chooses to contribute to a retirement plan instead of receiving in cash. Annual limits apply, with a higher catch-up limit for participants aged 50 and older.

An employer contribution tied to the employee's own deferrals, commonly a percentage of pay for each dollar deferred up to a limit. Vesting schedules often apply to matching contributions.

The process by which a participant earns a nonforfeitable right to employer contributions. It may be immediate or graded over years of service, subject to statutory maximum schedules.

The nonvested portion of an employer contribution that a participant loses upon termination of employment. Forfeitures may be used to reduce employer contributions or pay plan expenses.

A qualified plan in which more than 60% of account balances or accrued benefits belong to key employees. It triggers minimum contributions or benefits for non-key employees.

For top-heavy rules, an employee who is an officer above a compensation threshold, a more-than-5% owner, or a more-than-1% owner earning above a set amount.

The process of checking whether a plan disproportionately favors highly compensated employees, through tests such as the actual deferral percentage and actual contribution percentage tests.

An employee who owns more than 5% of the employer or whose prior-year compensation exceeded a statutory threshold, used to apply nondiscrimination tests and contribution limits.

The minimum amount a participant must withdraw annually from tax-deferred retirement accounts after reaching the statutory age, with penalties for shortfalls.

A defined benefit plan expressed as a hypothetical account for each participant, credited with pay-based credits and interest. It promises a stated account balance rather than a monthly annuity.

A measure comparing a defined benefit plan's assets to its funding target, used to determine required contributions, benefit restrictions, and whether certain accelerated contributions apply.

The smallest contribution an employer must make to a defined benefit plan for a plan year under funding rules, based on the plan's funding target and any shortfall amortization.

An estimate used by an actuary to project plan costs and liabilities, such as mortality, turnover, retirement age, salary growth, and interest crediting. Assumptions strongly affect funding outcomes.

A person who exercises discretionary authority or control over plan management or assets and must act solely in participants' interest with the care of a prudent expert.

A transaction between a plan and a party in interest, such as a sale or loan, that is barred unless an exemption applies. Violations can trigger excise taxes and fiduciary liability.

The federal law setting minimum standards for private-sector employee benefit plans, covering fiduciary duties, reporting and disclosure, participation, vesting, and funding rules.

A defense available to fiduciaries of participant-directed plans that follow ERISA disclosure and control requirements, shifting investment decisions and their consequences to participants.

The investment selected for participants who do not make an election, such as a target-date fund. Qualified default investment alternatives receive fiduciary relief when specified conditions are met.

A diversified investment that automatically shifts from growth-oriented to conservative assets as a participant's expected retirement date approaches, commonly used as a default option.

An arrangement allowing selected employees to defer compensation beyond qualified plan limits. It is unfunded and subject to creditor risk, with tax timing governed by section 409A.

The tax code section governing nonqualified deferred compensation, requiring written deferral elections, fixed payment timing, and limits on acceleration. Violations trigger immediate taxation and penalties.

A stock option granted to employees that can receive favorable tax treatment if holding and employment requirements are met. It is subject to annual vesting value limits and alternative minimum tax considerations.

A stock option that does not meet incentive stock option requirements. The spread at exercise is generally taxed as ordinary income, and the employer may claim a corresponding deduction.

A promise to deliver shares or cash after vesting conditions are satisfied. Unlike restricted stock, no shares are issued at grant, so the employee generally recognizes income at settlement.

A qualified defined contribution plan invested primarily in employer securities, offering potential tax advantages to the sponsoring company while giving employees an ownership stake.

A severance payment or benefit triggered by a change in control. Excess parachute payments to disqualified individuals can trigger excise taxes and loss of the employer's deduction.