There are many terms used in the human resources area whose definitions we may not fully know or we may be mistaken in our understanding of the term. I have compiled here a list of many common ones that you may find helpful. I can also refer you to a publication of ‘International Foundation of Employee Benefit Plans” called A Glossary of Terms.
Accommodation
Modifications or changes made by an employer to assist an individual with a disability in the performance of a job.
Accrual of Benefits
In the case of a defined benefit pension plan, the process of accumulating pension credits for years of credited service, expressed in the form of an annual benefit to begin payment at normal retirement age. In the case of a defined contribution plan, the process of accumulating funds in the individual employee’s pension account.
Acquired Rights (International Benefits)
The obligation on the part of the employer to continue to provide employee benefits or continue other practices that have been in effect for a period of time even if no promise has been made in writing or orally. This may be required by law or by local custom.
Ad Hoc Postretirement Adjustment
Establishes a schedule of one-time increases in retirement allowances. Contrast with Automatic Postretirement Adjustment.
Administrative Services Only (ASO)
An arrangement in which a plan hires a third party to deliver administrative services to the plan such as claims processing and billing; the plan bears the risk for claims. Common in self-funded health care plans.
Antidiscrimination Rules
A general requirement that a benefit be provided to lower level employees as beneficially as to highly compensated employees.
Approved Plan
A pension, deferred profit-sharing or stock bonus plan that meets the requirements of the applicable Revenue Canada regulations. Such approval qualifies the plan for a favorable tax treatment. Approval of a pension plan does not indicate any judgment regarding the plan’s actuarial soundness.
Attained Age
An individual’s age at his or her last birthday.
Attitude Survey
A device such as a questionnaire designed to elicit information about employee ideas, feelings, concerns, expectations and preferences on a broad range of managerial issues. The survey can uncover the causes of problems, probe feelings about situations or conditions, and draw out ideas for prevention.
Bear Market
A market where prices decline sharply against a background of widespread pessimism, growing unemployment and business recession. The opposite of bull market.
Birthday Rule
Coordination-of-benefits rule whereby, if both spouses are working and carry dependent coverage, the responsibility for primary coverage falls to the parent having the earlier birthday in the calendar year, regardless of which parent is older. In the event that the birthday occur on the same day, the employer-provided health insurance plan that has covered a parent the longest pays first. (Does not apply to self-funded programs.)
Brand-Name Drug
A drug protected by a patent issued to the original innovator or marketer. The patent prohibits the manufacture of the drug by other companies as long as the patent remains in effect. See also Generic Equivalent Drugs.
Bridge Benefit
A supplemental pension benefit payable from the date of early retirement until the age of entitlement for government pensions.
Bull Market
An advancing stock market. The opposite of bear market.
Call Option
An option to buy a specified number of shares at a definite price within a specified period of time. See also Puts and Calls - Options.
Conversion
• (Insurance) Privilege given to participant to convert to individual policies on termination of group coverage
without evidence of insurability.
• (Investment) A type of options management that involves the purchase of a put option and the sale of a call option. An almost riskless transaction, this is an alternative to money market instruments.
• (Pension Plans) Refers to employers changing from one type of plan to another. For example, from a defined benefit plan to a defined contribution plan, or from a traditional pension plan to a cash balance plan.
Coordination of Benefits (COB)
A group health insurance policy provision designed to eliminate duplicate payments and provide the sequence in which coverage will apply (primary and secondary) when a person is insured under two contracts.
Core-Plus Plan
A type of flexible benefits plan that provides a minimum level of benefits to all employees. Individuals then have the option of increasing the levels of some or all of these benefits above the minimums.
Cost-of-Living Adjustment (COLA)
• An across-the-board increase (or decrease) in wages or pension benefits according to the rise (or fall)
in the cost of living as measured by some index, often the Consumer Price Index (CPI).
• In expatriate compensation, the amount by which base pay is increased or decreased to adjust for
a geographic area’s cost of living.
Deferred Compensation Plan
Any plan where employees can accumulate money on a tax-deferred basis. A qualified plan can have the option of permitting employees to withdraw assets without penalty for certain “emergency” situations specified in the plan. Many also give employees the option of taking the benefit in cash. A deferred compensation plan can be combined with other plans, such as profit-sharing plans.
Deferred Profit-Sharing Plan
A plan established and maintained by an employer to provide for participation in its profits by its employees or their beneficiaries. The plan must provide a definite predetermined formula for allocating the contributions made to the plan among the participants and for distributing funds accumulated under the plan after a fixed number of years, the attainment of a stated age, or upon the prior occurrence of some event such as lay-off, illness, disability, retirement, death or severance of employment.
Disability Management
The proactive employer-centered process of coordinating the activities of labor, management, insurance carriers, health care providers and vocational rehabilitation professionals in order to minimize the impact of injury, disability or disease on a worker’s capacity to successfully perform his or her job.
Discrimination
• Occurs when a plan discriminates in favor of highly compensated employees, officers or stockholders;
steps must be taken to avoid or rectify such discrimination in order to retain qualified status.
• It is permissible to discriminate by group definition, such as salaried only, union employees only or
hourly workers only.
• Artificial, arbitrary and unnecessary barriers that bring about disparate treatment of certain groups,
based upon race, sex, religion, national origin, age or other such classification. Discrimination also may
include the failure to remedy the effects of past discrimination.
Double Dipping
Variously applied to mean:
1. Qualifying for, and obtaining, pension benefits under two or more plans;
2. Qualifying for, and obtaining, pension benefits under one plan while remaining employed by another employer;
3. Qualifying for, and obtaining, Social Security retirement benefits while also qualifying for and obtaining retirement benefits under a civil service retirement system, particularly a federal plan.
Dow Jones Industrial Average (DJIA)
A popular gauge of the stock market based on the average closing prices of active representative stocks, as published by Dow Jones & Co. since July 3, 1884. Nine of the original 11 stocks were rails. The DJ Averages currently consist of 65 stocks (30 industrials, 20 transportation, 15 utilities). They include only high-quality, common stocks listed on the New York Stock Exchange.
Drop-Out Months
Under the Canada Pension Plan, certain low earnings months that are not counted in calculating average contributory earnings on which the contributor’s pension is based.
Drug Formulary
A restricted list of prescription medications covered under a managed care plan, which are approved for use for specific treatments and dispensed through participating pharmacies to plan members.
Elder Care
Financial, emotional, and physical support to parents and older relatives, including adult day care.
Electronic Data Interchange (EDI)
A generic name for electronic, computer-based networks that transmit health care data between participating organizations. For example, claims can be processed electronically using EDI, and data can be gathered for use in outcomes research, in order to improve efficiency and save costs.
Employee Assistance Program (EAP)
An employment-based health service program designed to assist in the identification and resolution of a broad range of employee personal concerns that may affect job performance. These programs deal with situations such as substance abuse, marital problems, family troubles, stress and domestic violence, as well as health education and disease prevention. The assistance may be provided within the organization or by referral to outside resources.
Experience Rating
The process of determining the premium rate for a group risk, wholly or partially on the basis of that group’s experience.
Final Average (Earnings) Formula
A defined benefit formula that applies the unit of benefit credited for each year of service to the employee’s average earnings for a specified number of years just prior to retirement.
Final Average Salary
A measure of a participant’s level of earnings that is based on his or her average rate of salary for a specified period of time, usually the three, five or ten years immediately preceding retirement. A participant’s final average salary may be one of the factors used in determining the amount of his or her benefits.
Flat Benefit Formula (Flat Benefit Plan)
A benefit formula that bases benefits on a fixed amount per year of service, such as $20 of monthly retirement income for each year of credited service. A flat benefit plan is a plan with such a formula.
Focus Group
A group of employees brought together to discuss their attitudes and perceptions toward a proposed company initiative.
Frozen Plan
A qualified retirement plan that has stopped employer contributions and benefit accrual by participants. The plan sponsor continues to distribute plan assets and maintain the trust.
Fully Insured Plan
A group insurance plan in which an insurer pays all claims and assumes all risks for an employer in exchange for payment of a regular premium.
Generic Equivalent Drugs
Equal in therapeutic power to the brand-name originals because they contain identical active ingredients at the same doses.
Golden Handcuffs
A method of retaining executives - locking them to the corporation - through use of restricted pay devices such as deferred compensation plans.
Golden Handshakes
Additional benefits paid to employees to induce early retirement.
Golden Parachute
A substantial payment made to corporate executives who are terminated upon change or threatened change of ownership or corporate control. Such a provision in an employment contract discourages hostile takeovers and protects executives of potential target companies with monumental lump-sum bailout benefits, if they are fired.
Grandfather Clause
An exception to a restriction that allows all those already doing something to continue doing it even if they would be stopped by the new restriction.
Health Maintenance Organization (HMO)
A prepaid medical group practice plan that provides a comprehensive predetermined medical care benefit package. The HMO can be sponsored by the government, medical schools, hospitals, employers, labor unions, consumer groups, insurance companies and hospital-medical plans. HMOs are both insurers and providers of health care.
Hour Bank
• A method of banking or crediting the hours worked by a worker to his or her individual account and
then drawing out the required hours at each determination date, to establish or maintain the worker's
eligibility for health insurance benefits.
• A variation of the system puts only the hours (or some portion of the hours) worked in excess of those
required to maintain current eligibility in the hour bank account. Hour bank provisions usually specify the
maximum number of hours that can be held in the account.
Human Resource Information System (HRIS)
A computer-based system for gathering, storing, manipulating, analyzing, retrieving and distributing relevant timely and accurate data and information regarding the staff of an organization, for both organizational effectiveness and legal compliance.
Incurred but Not Reported (IBNR)
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.
Incurred Claims
Incurred claims equal the claims paid during the policy year plus the claim reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year. The difference between the year-end and beginning of the year claim reserves is called the increase in reserves and may be added directly to the paid claims to produce the incurred claims.
Individual Pension Plan
A personalized, employer-sponsored registered pension plan that provides a guaranteed lifetime pension. When used with an RRSP, the plan can boost tax-sheltered retirement savings. The plan can be structured in either defined benefit or defined contribution format; it is primarily used for executives.
Individual Stop-Loss Coverage
Insurance coverage that may be purchased to limit an employer’s liability for paying claims on behalf of a covered individual after the employer has paid claims of a given amount for that individual.
Integration With OAS, CPP/QPP
The usual option provides a larger pension from the plan from retirement until eligibility for these government benefits, reducing at that age by the amount of the government benefits; it thus provides a level total pension throughout retirement.
Internet
A worldwide network of computer networks that can share information because a common set of language protocols is used by all. The Internet was created by the U.S. government in the late ‘60s to link defense researchers and contractors. Now computer systems at universities, libraries, government agencies, schools, businesses and homes with personal computers with Internet access are all connected.
Intranet
An internal computer network accessible to employees only. These private networks combine text, graphics and even video to distribute news, answer employee questions, update personnel records and connect workers in remote locations.
Lag
The period of time between the incurring of a claim an the payment of that claim.
Median
The middle item in a set of ranked data points containing an odd number of items. When an even number of items are ranked, the average of the two middle items is the median.
Modular Plan
A type of flexible benefits plan that offers a choice of benefits packages rather than a selection of individual levels of coverage.
Multinational Pooling (International Benefits)
Arrangement that links together the worldwide insured benefit plans of a multinational company to secure cost savings, improved financial information, and improved service and facilities.
Occupational Hazards
Occupations that expose the insured to greater-than-normal physical dangers by the very nature of the work in which the insured is engaged, and the varying periods of absence from the occupation, due to disability, that can be expected.
Outsourcing
• The practice of purchasing parts or finished goods from domestic nonunion shops or from foreign companies.
• Means of eliminating in-house management, administrative and/or clerical duties by contacting with an external
service provider specializing in that particular benefit area.
Over the Counter (OTC)
Pharmaceutical products available without a prescription.
Paid Claims
The dollar value of all claims paid (e.g., hospital, medical, surgical) during the plan year, regardless of the date that the services were rendered. Measures a plan’s performance.
Past Service Benefit
Credit toward a pension, provided by the employer, for all or part of a participant’s years of service with the company before the adoption or amendment of a pension plan, or before the employee’s entry into the plan.
Pension Adjustment (PA)
The value of pension benefits accruing to a plan member during a year as defined in the Income Tax Act. The PA is subtracted from the member’s comprehensive retirement contribution limit (18% of pay, subject to specified dollar limits) to determine the maximum RRSP contribution allowed for the following year.
Preexisting Condition
A physical and/or mental condition of an insured person that existed prior to the issuance of his or her policy. Some plans may cover these conditions after a waiting period of six months to a year, while others may permanently exclude a person with a preexisting condition from coverage.
Preferred Provider Organization (PPO)
A group of hospitals and physicians that contract on a fee-for-service basis with employers, insurance companies or other third party administrators to provide comprehensive medical service. Providers exchange discounted services for increased volume and prompt payment. Participants’ out-of-pocket costs are usually lower than under a fee-for-service plan.
Prime Rate
The minimum rate on bank loans set by commercial banks and granted only to top business borrowers. It is affected by overall business conditions, the availability of reserves and the general level of money rates; it may vary geographically. Lending rates are also greatly influenced by the size of the loan; the largest loans naturally command the lowest rates.
Put Option
A security that gives the owner the right to sell a particular stock at a certain price within a designated period of time. See also Puts and Calls - Options.
Puts and Calls - Options
Options, better known as puts and calls, give one the right to buy or sell a stated amount of stock at the stated price within a specified period of time, regardless of the market price of the stock. A call is an option contract to buy (from the writer of the call) shares of stock at a stated price, expiring on the stated date. A put is an option contract to sell shares of stock at a stated price, expiring on a stated date. Options may now be traded on the Chicago Board Options Exchange (CBOE), thereby providing standardization of securities option contracts and trading practices.
Reasonable and Customary (R & C) Charge
The prevailing charge made by physicians of similar expertise for a similar procedure in a particular geographic area.
Relocation Services
Benefits offered by an employer to a current employee accepting an assignment in a new location. Examples include reimbursement for house-hunting expenses, household moving costs or interim travel expenses; or help in orienting to a new culture or learning a new language.
Retirement Allowance
An amount paid by an employer to an employee (or former employee) upon retirement from office or service in recognition of long service or in respect of loss of office or employment.
Retirement Compensation Arrangement
A funded supplementary pension arrangement that provides retirement benefits, but is not a registered pension plan.
Return-to-Work Program
An employer-sponsored program of rehabilitation, job modification and monitoring to get disabled employees back to work as soon as possible.
Rule of 72
A convenient technique for either mental or pencil and paper estimation of compound interest rates, derived from the fact that 7.2% return per year is the interest rate that will double the value of an investment in ten years. Hence, “years to double” an investment with a given annual rate of return can be estimated by dividing the rate of return into 72.
Sexual Harassment
Unwelcomed sexual advances, requests for sexual favors or other verbal or physical conduct of a sexual nature, when (1) submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment or (2) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual.
Sick Leave
Plans that provide employees protection against short-term disability and typically specify a maximum number of benefit days per year or per disability that an employee may take at full pay before insured short-term or long-term disability benefits are initiated.
Standard & Poor’s 500 Stock Price Index (S & P 500)
A well-known gauge of stock market movements computed by Standard & Poor’s Corporation and determined by the price action of a carefully selected list of 400 leading industrial issues, plus 20 transportation issues, 40 utilities and 40 finance issues.
Stop-Loss Insurance
Contract established between a self-insured group and an insurance carrier providing carrier coverage if claims exceed a specified dollar amount over a set period of time. May apply to an entire plan or a single component. Also called excess loss insurance.
Supplemental Executive Retirement Plan (SERP)
A nonqualified pension plan that allows an employer to offer greater benefits to its highly paid employees.
Supplemental Unemployment Benefits (SUB)
Amounts provided under a labor contract as additions or supplements to the unemployment compensation provided by law.
Therapeutic Substitution
The practice of substituting one drug for another when both are thought to produce the same therapeutic effects.
Third Party Administrator (TPA)
The party to an employee benefit plan that may collect premiums, pay claims and/or provide administrative services. Usually an out-of-house professional firm providing administrative services for employee benefit plans. (synonyms: administrative agent, contract administrator)
Turnover, Turnover Rate
• The rate at which securities within a portfolio are exchanged for other securities.
• Termination of employment for a reason other than death or retirement.
• In general labor terms, the number of persons hired to replace those leaving or dropped, within a stated
period of time; also, the ratio of this number to the average workforce maintained. In pension plans,
the ratio of those leaving or dropped to the total number of plan participants at any age or length of service.
Vacation Trading
A feature of flexible benefit plans that permits participants to trade excess time off for other benefits, including cash.
Vocational Provisions
The specific stipulations written into a workers’ compensation law regarding the employer’s duties specific to providing vocational rehabilitation.
Wellness (Health Promotion) Programs
A broad range of employer or union-sponsored facilities and activities designed to promote safety and good health among employees. The purpose is to increase worker morale and reduce the costs of accidents and ill health such as absenteeism, lower productivity and health care costs. May include physical fitness programs, smoking cessation, health risk appraisals, diet information and weight loss, stress management and high blood pressure screening.
World Wide Web (WWW)
An application to run on the internet that makes its vast amount of information available to the masses. Users now access the Web using front end software called Web browsers such as Netscape and Mosaic that are relatively simple to use.
Year’s Maximum Pensionable Earnings (YMPE)
The maximum amount of annual earnings, prior to reduction of the amount of the year’s basic exemption, upon which benefits and contributions for purposes of the Canada Pension Plan and the Quebec Pension Plan are based. The YMPE has been subject to yearly adjustments and is targeted, at some future point, to equal the average wage of industrial workers in Canada.
