Benefits Glossary

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  • Affordable Care Act acronym. Comprehensive health care reform legislation signed into law by President Obama on March 23, 2010. Also known as the Patient Protection and Affordable Care Act (PPACA) or Obamacare.

  • Actual Contribution Percentage Test acronym. In a 401(k) Plan, this is the test that is performed to determine if the employer matching contribution is discriminatory in favor of HCEs.

  • An annual measurement, generally at the beginning of the Plan Year, of a pension plan’s assets versus liabilities, using investment, economic, demographic and other actuarial assumptions to determine the funded status of the plan. It is used to provide financial information required by the IRS, PBGC, plan auditors and other interested parties, and for plan accounting purposes.

  • The value of a pension plan’s investments and other property, used by the Actuary for the purpose of an Actuarial Valuation. It may or may not equal the market value of the pension fund.

  • A business professional who analyzes the financial consequences of risk in areas with uncertain future events such as pensions and insurance. Actuaries determine how much needs to be contributed to pension plans in a given year so that benefits will be available when employees retire.

  • Actual Deferral Percentage Test acronym. In a 401(k) Plan, this is the test that is performed to determine if the contributions (average salary deferral percentages) of HCEs are too high in comparison to the NHCEs. This is the test that is most often failed in a traditional 401(k) Plan, resulting in refunds to the HCEs.

  • Coverage is defined as affordable if the participant’s cost for self-only coverage does not exceed 9.5% of the participant’s household income. There are three allowable method to determine the household income amount: the employee’s W-2 pay, the rate of pay, and the FPL.

  • Adjusted Funding Target Attainment Percentage acronym. It is calculated in the same way as the FTAP, except that both the numerator and the denominator are increased by the aggregate amount of annuities purchased by the plan for participants (other than HCEs) during the 2 preceding Plan Years.

  • The total of all employer contributions, employee contributions (not including rollovers), and forfeitures allocated to a participant's 401(k) Plan account during a year.

  • A pension plan must give participants this notice no later than 120 days after the end of each Plan Year. The notice must include, among other things, the plan’s funding percentage, a statement of the value of the plan’s assets and liabilities, a description of how plan assets are invested as of specific dates, and a description of the benefits under the plan that are guaranteed by the PBGC.

  • A series of periodic payments, payable monthly or at other specified intervals, often over the lifetime of the recipient. Pension payments are often paid to retirees in the form of an Annuity.

  • Any company or organization that has an average of at least 50 full-time employees or "full-time equivalents" (FTE). For the purposes of the Affordable Care Act, a full-time employee is someone who works at least 30 hours a week.

  • Administrative Services Only acronym. An arrangement in which an employer hires a third party to deliver administrative services to the employer such as claims processing and billing; the employer bears the risk for claims. This is common in self-insured health care plans.

  • The process of spreading investment gains and losses over a period of time. Rather than using the market value of a pension fund’s assets, an Actuary may calculate the Actuarial Value of Assets by taking a multi-year average of the investment gains or losses in order to help reduce volatility related to a plan's assets for purposes of calculating the Minimum Required Contribution.

  • A 401(k) Plan feature that allows an employer to enroll an eligible employee in the employer's plan unless the employee affirmatively elects otherwise. A minimum default employee contribution usually is set, but employees may choose to contribute a different percentage.
  • A 401(k) Plan feature that automatically increases an employee's contribution amount. For example, an employee’s contribution (as a percentage of pay) may automatically increase by 1% each year up to 10% of pay. Plan participants are allowed to opt out of automatic escalation.