Payroll Definitions: Employee Benefits Glossary of Terms

If you are unfamiliar with some payroll definitions you will likely encounter when selecting a service, use this glossary to help you sort through the various offerings.

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accidental death and dismemberment policy (AD&D): This plan is coupled with the basic life insurance policy. In the case of an employee's accidental death, an amount equal to their life insurance policy is also paid. The plan also pays a percentage of the AD&D benefit (in accordance with the contract provisions) to the employee for loss of sight or loss of a limb through an accident.

accrual method: An accounting method under which you report income in the year you earn it, regardless of when you receive the payment. You also deduct expenses in the tax year you incur them, regardless of when you pay them.

Americans with Disabilities Act (ADA): The Americans with Disabilities Act (ADA) is a Federal civil rights law that prohibits the exclusion of people with disabilities from everyday activities, such as buying an item at the store, watching a movie in a theater, enjoying a meal at a local restaurant, exercising at the local health club, or having the car serviced at a local garage. To meet the goals of the ADA, the law established requirements for private businesses of all sizes. These requirements first went into effect on January 26, 1992, and continue for both for-profit and non-profit organizations.

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applied for: A doctor who is registered with a particular agency and has not yet received an ID number is in "applied for" status. The majority of tax agencies (state and SUI) that Taxpay files with will accept a doctor in an applied for status (some exceptions are Indiana and Utah).

arbitration: The voluntary submission of a dispute to an impartial person or people for final and binding determination.

benefit class: Variables that are specific to one or more employees. For example, benefit classes are established to distinguish between full-time and part-time employees, or executives and staff.

benefit level: Defines how many months an employee must be employed in order to qualify for more benefit time.

benefit type: Description or name applied to time away from work. There are four benefit types that our system will track: vacation, sick, holiday, and miscellaneous.

cafeteria plan: A written benefit plan under which employees may choose their own employee benefit structure from among cash and taxable and nontaxable benefits. The cafeteria plan provides a statutory exclusion to the doctrine of constructive receipt of income. These can be administered by most payroll processing services.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA): Enacted to prevent health plan participants and their dependents from losing insurance coverage due to termination or changes in employment status.

defined benefit plan: Payroll Definitions - A class of retirement plans that limits the benefits to which the participant is entitled. A defined benefit plan is always a pension plan. This can be administered by most payroll processing services.

defined contribution plan: A class of retirement plans that limits contributions that can be made. Profit-sharing plans, money-purchase plans, simplified employee pension plans, and qualified stock bonus plans are all types of defined contribution plans. This can be administered by most payroll processing services.

Dependent Care (DCA): Payroll Definitions - An option within the Flexible Spending Account plan (based on IRC section 129) in which a participant can set aside pretax dollars for eligible dependent care expenses as defined in IRC section 21.This can be administered by most payroll processing services.

disability insurance (DBL): Covers injuries or illnesses to an employee that are not job-related. Disability insurance is mandatory in some states. Disability may be an employer tax, an employee tax, or both.

Employee Assistance Program (EAP): A hotline for employees that can provide counseling for marriage and family problems, stress related problems, financial and legal difficulties, and psychological and workplace conflict. Employee Assistance Programs furnish professional counselors, who provide confidential assessment and short-term counseling to employees and their families in order to assist in dealing with these, and related, matters.

Flexible Spending Account (FSA): Payroll Definitions - A type of section 125 plan in which participating employees are reimbursed on a pretax basis for eligible out-of-pocket health expenses (excluding insurance premiums) or child care expenses that are not covered by an employer-provided benefit plan. Some payroll processing services can administer this; some use a third party.

group term life insurance (GTL): An employer-provided, non-cash fringe benefit offered to a group of employees on a nondiscriminatory basis. The insurance plan must meet all specified conditions regarding groups of employees covered, general death benefits, employer-carried policies, amount of insurance provided, permanent benefits, and number of employees covered.

Human Resource Information System (HRIS): Payroll Definitions - An in-house developed program used by multiple HRS departments to process and track client and employee services.

indemnity plan: A health plan in which patients are able to choose the doctor and hospital they want for treatment. The employee pays a deductible for services received.

STD (Short Term Disability): Short term disability coverage provides income for eligible employees absent from work on a full or partial basis for more than seven consecutive calendar days due to non-occupational illness, injury, or pregnancy-related disability.

Summary Plan Description for Section 125: The Summary Plan Description is an ERISA-required document distributed by the employer to all plan participants within 90 days of the employee's participation.

waiting period: Payroll Definitions - A period after the effective date of enrollment during which a new member of a health insurance plan is not covered for a pre-existing medical condition.

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