Benefits Glossary

A 401(k) Plan that is designed in such a way that the plan automatically passes Discrimination Testing or avoids it all together. It is similar to a traditional 401(k) Plan, but the employer is required to make Matching Contributions or Non-Elective Contributions for each employee.

DC Plans in which employees may contribute a predetermined portion of earnings (usually pre-tax) to an individual account. Employers may match a fixed percentage of employee contributions or a percentage that varies by length of service, the amount of employee contribution, or other factors. Contributions are invested as directed by the employee or employer.

Summary of Benefits and Coverage acronym. An easy-to-read summary used to make apples-to-apples comparisons of costs and coverage between health plans. Individuals can use the SBC to compare plan options based on price, benefits, and other features.

Also known as a Flexible Benefits Plan. An employer-sponsored benefits plan that offers employees a choice between permissible taxable benefits, including cash, and nontaxable benefits such as life and health insurance, vacations, retirement plans and child care. The plan may be funded solely by the employer or through joint employer-employee contributions.

Under this type of plan, the employer directly assumes the major cost of health insurance for its employees. Some self-insured plans bear the entire risk while other insure against large claims by purchasing stop-loss coverage. Some plans use insurance carriers or third-party administrators for claims processing and administration, while others are self-administered.

Simplified Employee Pensions acronym. An IRA is established for each eligible employee. The employee is immediately vested in employer contributions and generally directs the investment of the money. These arrangements are sometimes called SEP IRAs.

Special Enrollment Period acronym. A time outside the yearly Open Enrollment Period when an individual can sign up for health insurance. To qualify for a SEP, an individual must have a QLE, such as losing health coverage, becoming eligible for Medicare coverage, moving, getting married, having a baby, or adopting a child.

A plan category in the ACA Marketplace which describe health insurance plans that pay for more out-of-pocket costs than Bronze or Catastrophic Health Plan but fewer costs than Gold or Platinum Health Plans. Silver Health Plans pay, on average, 70% of the cost for covered benefits.

Savings-Incentive Match Plan for Employees acronym. A plan limited to employers with fewer than 100 employees who do not have any other qualified retirement plan. SIMPLE plans can be either part of a 401(k) Plan or established as IRAs. Employers must either make Matching Contributions of up to 3% of pay or make 2% of pay Non-Elective Contributions to all eligible employees.

Summary Plan Description acronym. An SPD is a document that an employer must automatically provide at no cost to plan participants. The SPD is an understandable summary of the benefits the plan provides and how the plan works.

Contributions are placed in a trust fund that invests in securities, including those of the employing company. This type of plan is financed by the employer or jointly by the employer and employee. Upon the employee’s retirement or separation from the company, proceeds from the trust fund are paid out in the form of company stock or cash.

Health coverage available at reduced or no cost for people with incomes below certain levels. The employer and employee share the cost of coverage, if any. Examples of Subsidized Coverage include Medicaid and the CHIP. Marketplace insurance plans with Premium Tax Credits are sometimes known as Subsidized Coverage too.

A feature of 401(k) Plans, 403(b) Plans and most 457 Plans that permits an eligible employee aged 60 to 63 to contribute up to 150% of the standard catch-up contribution limit to the plan. See also catch-up contribution.

View current IRS limits for retirement plans.