This is a great article from our friends at HR360.com on general employee benefit terms. Easy to understand!
Dependent care reimbursement accounts.
Also known as flexible spending accounts, dependent care reimbursement accounts can be part of a flexible benefit plan or stand alone. Employees participating in these accounts allocate a declared pretax amount, up to a set limit, for out-of-pocket qualified expenses, including childcare, elder care, or services to a disabled dependent. Any money not used by the end of the plan year is forfeited.
A service to help employees make decisions related to savings, borrowing, investing, home purchases, education expenses, and retirement income.
Flexible benefit plans.
Also known as cafeteria benefit plans, flexible benefit plans are operated under provisions of Section 125 of the Internal Revenue Code. Section 125 allows employees to make a choice between cash (taxable) and noncash (nontaxable) benefits. The code permits companies providing flexible benefit plans to offer employees the following options: accident and health insurance plans, including health care spending accounts; group term life insurance and dependent coverage; disability benefits and accidental death and dismemberment plans; employee contributions to 401(k) plans or other thrift or savings plans (either pretax or after tax); dependent care assistance plans, including spending accounts; vacation days; and group legal services. Flexible benefit plans may be funded solely by the employer or through joint employer-employee contributions. Employers usually grant each employee credits to purchase benefits covered by the plan. Many plans include a core group of benefits (for example, life insurance coverage of $25,000) and allow employees to purchase additional levels of the core benefit as well as benefits not included in the core group. An example would be offering an additional $20,000 in life insurance coverage.
Health care reimbursement accounts.
Also known as flexible spending accounts, health care reimbursement accounts can be part of a flexible benefit plan or stand alone. Employees participating in these accounts allocate a declared pretax amount, up to a set limit, for out-of-pocket health care expenses such as deductibles, copayments, coinsurance, and other qualified health care expenses not covered by their health insurance. Any money not used by the end of the plan year is forfeited.
Health savings accounts (HSAs).
Portable accounts owned by employees and used to pay for medical expenses with tax-exempt contributions. HSAs are used in combination with employer-provided high-deductible health plans (HDHPs) with annual maximum limits on out-of-pocket and deductible expenses. Other features include the rollover of unused contributions from year to year and tax-free interest.
Pretax savings with no employer contributions.
These are cash or deferred arrangements used to fund savings and retirement plans authorized by section 401(k), 403(b), or 457 of the Internal Revenue Code. The employees’ contributions reduce their salaries for tax purposes.
Long-term care insurance.
A health plan that provides long-term (more than 1 year) custodial care, home care, or nursing home care. Coverage may be extended to active employees, retirees, parents of active employees, or dependents of active employees and retirees. Premiums are generally, though not necessarily, paid by employees. These plans are separate from coverage for extended care facilities or home health care found in health insurance plans that provide posthospitalization benefits for a limited period.
Retiree health care.
A health plan that provides coverage to a retiree beyond what is mandated by COBRA or other health continuation laws. Coverage must include provisions typically found in a medical plan, such as hospitalization and doctor’s care. The retiree plan does not have to be the same plan provided to active employees, nor does it matter whether the retiree pays the entire premium. Plans that cover only dental, vision, or prescription drugs are not included.
Nonproduction bonuses: Nonproduction bonuses are payments to employees that are not directly related by any formula to individual employee productivity.
A payment to employees who achieve a specified attendance goal. For example, all employees who take 2 or fewer days of sick leave within a given year are paid an attendance bonus of $500.
Cash profit sharing.
Payment to employees in recognition of their contribution to company profitability. Payments may vary with length of service.
Employee recognition bonus.
A payment to employees that rewards performance or significant accomplishments, such as an employee of the month award.
A payment to employees near the end of the year as a sign of appreciation for working hard throughout the year.
A payment made by an employer to induce an individual to accept employment with the company.
A payment to employees at a holiday as a sign of appreciation. This payment is usually a token payment, with all employees receiving the same amount.
A bonus or a lump-sum payment of some kind (for example, a government savings bond or an add-on to severance pay) paid to employees on the basis of their length of service.
Management incentive bonus.
A payment to managers or supervisors rewarding them for their ability to direct the performance of a group of employees in their charge in the attainment of a specified goal. For example, a manager receives a bonus for having the highest sales.
Payment in lieu of benefits.
A payment to employees in lieu of the employer’s providing a benefit, such as health care. In some cases, the employer offers cash to employees who waive employer-sponsored benefits, such as sick leave. When this occurs, the employer passes the savings from the waived benefit to the employee.
A payment to employees for maintaining a high level of safety in the workplace. For example, a department receives a bonus for experiencing no injury days during a quarter.
A payment to employees whose innovative suggestions to create better work processes and improve efficiency in the establishment have been considered or implemented.
A payment given to employees for recommending a qualified applicant who is hired by the establishment.
A payment made by an employer to an incumbent to retain that individual with the establishment.
A payment to employees covered by a collective bargaining agreement upon signing a new labor contract or in lieu of a general wage increase.
A payment to employees that is not applicable to other listed nonproduction bonus categories-for example, birthday bonuses and retirement bonuses.
Quality of life benefits:
Provides either the full or partial cost of caring for an employee’s children in a nursery or daycare center or by a babysitter. Care can be provided in facilities either on or off the employer’s premises.
Employee assistance programs (EAPs).
A structured plan, closely related to employee wellness programs, that typically deals with more serious personal problems than the essentially medical problems covered by wellness programs. EAPs can offer referral services, or referral services in combination with counseling services. Both the referral services and the counseling services may be supplied by company personnel, by an outside organization under contract, or by a combination of both.
Flexible work schedule.
Permits employees to set their own schedules within a general set of parameters. Employees generally are required to work a minimum number of core hours each day.
Permits workers to work an agreed-upon portion of their work schedule at home or some other approved location, such as a regional work center. Such arrangements are especially compatible with work requiring the use of computers linking the home or work center to the central office.
A structured plan, independent from health insurance, that offers employees two or more of the following benefits: smoking cessation programs, exercise/physical fitness programs, weight control programs, nutrition education, hypertension tests, periodic physical examinations, stress management programs, back care courses, and life style assessment tests.
Stock options: Stock option plans allow establishment employees the right to buy company stock at a fixed price by a fixed time. Stock options are available only to employees of for-profit private industry establishments.
Stock options offered to employees only if certain company performance criteria are met, such as earnings-per-share targets.
Stock options offered to employees to join a firm by giving them a chance to make a significant capital gain.