{"id":357828,"date":"2016-04-04T10:45:29","date_gmt":"2016-04-04T15:45:29","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/employment\/wages-and-benefits\/dictionary-employee-benefits.html"},"modified":"2025-04-14T13:45:00","modified_gmt":"2025-04-14T18:45:00","slug":"dictionary-employee-benefits","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/employment\/wages-and-benefits\/dictionary-employee-benefits.html","title":{"rendered":"Glossary: Employee Benefits"},"content":{"rendered":"\n
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Glossary: Employee Benefits<\/h1>\n
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\n By Olivia Wathne, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

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There are many legal and financial terms used when discussing employer-sponsored benefits. The vocabulary used to describe different aspects of retirement plans, health insurance, and other employee benefits can be difficult to decipher. This can leave employees unsure of their options and entitlements.<\/p>\n\n <\/div>\n\n

Employee benefits are a crucial aspect of any employment arrangement. They encompass a range of offerings from health insurance and retirement benefits to sick leave<\/a> and beyond. <\/p>\n

The legal terminology used when discussing employer-sponsored benefits can be confusing. Contact a local employment attorney<\/a> for clear, straightforward guidance in plain language.<\/p>\n

Before entering into any employment agreement, it is essential to understand the details of these plans and consider how they align with your needs and expectations. <\/p>\n

Findlaw has assembled a glossary of definitions of common employee benefit plans along with the terms often used in those plans. The legal dictionary below is separated into three categories with terms listed alphabetically in each section:<\/p>\n

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  1. Health insurance plans<\/a><\/li>\n
  2. Retirement plans and pensions<\/a><\/li>\n
  3. Employee benefits in general<\/a><\/li>\n<\/ol>\n

    <\/a>Glossary: Employer Health and Medical Plans<\/h2>\n

    Below, you\u2019ll find terms to know concerning health benefits with plain language descriptions.<\/p>\n

    Affordable Care Act (ACA):<\/b> Also known as Obamacare, The ACA <\/a>is a healthcare reform law that expands access to affordable health insurance coverage and reduces healthcare costs for individuals and the government.<\/p>\n

    Affiliation Period:<\/b> A period of time that must pass before health insurance coverage provided by an HMO (Health Maintenance Organization)<\/a> becomes effective. If a group health plan provides coverage to you through an HMO with an affiliation period, the affiliation period cannot be longer than two months (three months for a late enrollee) from your enrollment date.<\/p>\n

    During the affiliation period, the plan cannot charge you premiums. The HMO is not required to provide benefits.<\/p>\n

    Certificate of Creditable Coverage: A written certificate issued by a group health plan or health insurance issuer that shows your prior health coverage.<\/p>\n

    COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985):<\/b> COBRA <\/a>provides rights to temporary continuation of group health plan coverage for certain employees, retirees, and family members. It does so at group rates when coverage is lost due to certain qualifying events. Learn more at FindLaw’s page How Does COBRA Insurance Work?<\/a><\/p>\n

    COBRA Continuation Coverage: <\/b>The temporary continuation of group health plan coverage available after a qualifying event to certain employees, retirees, and family members who are qualified beneficiaries. Those who are eligible may be required to pay for COBRA continuation coverage. You are generally entitled to coverage for a limited period (from 18 months to 36 months) depending on certain circumstances.<\/p>\n

    Coinsurance:<\/b> A form of cost-sharing in health insurance where the insured pays a percentage of the cost of covered medical services after meeting their deductible. For example, with an 80\/20 coinsurance plan, the insurance company covers 80% of the costs, while the insured is responsible for the remaining 20%. This arrangement continues until the insured reaches their out-of-pocket maximum for the policy period.<\/p>\n

    Copayment: <\/b>Also called a copay, this is what you pay your healthcare provider upfront for a covered service. Copayment amounts are usually small and don\u2019t count toward your plan\u2019s deductible.<\/p>\n

    Covered Employee:<\/b> An individual who is provided coverage under a group health plan subject to COBRA because that individual was employed by one or more persons maintaining the group health plan.<\/p>\n

    Creditable Coverage:<\/b> Prior health coverage you have had in the past. This includes coverage under a group health plan, an HMO, an individual health insurance policy, or Medicare or Medicaid<\/a>. This prior coverage was not interrupted by a significant break in coverage.<\/p>\n

    Department of Labor (DOL):<\/b> The DOL <\/a>enforces and administers laws related to labor and employment in the United States. The DOL oversees and enforces regulations such as the Employee Retirement Income Security Act (ERISA)<\/a>. The DOL ensures that employers follow these laws, protecting employees’ rights to fair treatment and their access to employer-provided health benefits.<\/p>\n

    Drug Formulary:<\/b> A list of all the medicines and prescription drugs covered by your group health plan.<\/p>\n

    Elect:<\/b> When referring to health coverage, this means to choose, generally in writing, to participate in a group health plan.<\/p>\n

    Election Notice:<\/b> Written notification that you are eligible for COBRA continuation coverage. This notice should explain how long you have to elect COBRA continuation coverage. The election notice should explain how much you must pay for coverage and when and to whom the payments are due.<\/p>\n

    Employee Organization:<\/b> A collective group or union formed by employees to advocate for their interests in the workplace. These organizations may negotiate with employers to secure favorable health benefits packages for their members. An employee organization can also be an employee beneficiary association.<\/p>\n

    ERISA (Employee Retirement Income Security Act of 1974):<\/b> ERISA <\/a>is a federal law that establishes standards for pension retirement benefits and health plans offered by private employers. It sets guidelines for plan administration, disclosure, and fiduciary responsibilities. Learn more at FindLaw’s What is ERISA?<\/a> article.<\/p>\n

    Enrollment Date:<\/b> The first day of coverage or, if there is a waiting period, the first day of the waiting period. If you enroll when first eligible for coverage, your enrollment date is often the first day of employment. If you enroll as a late enrollee, your enrollment date is the first day of coverage.<\/p>\n

    Exhausted COBRA Coverage:<\/b> This means your COBRA continuation coverage has ended. This may be because the period that this coverage was available to you has lapsed. Additional reasons for the exhaustion of COBRA coverage are possible besides the time being up. You may have exhausted your coverage because your employer failed to pay the premiums on time.<\/p>\n

    Another reason may be that you no longer live or work in an HMO service area and there is no similar COBRA coverage available to you.<\/p>\n

    Fair Labor Standards Act (FLSA):<\/b> The FLSA <\/a>sets minimum wage, overtime pay, record-keeping, and youth employment standards for employees. The FLSA also indirectly impacts employer health benefits by establishing certain standards for employee compensation and working conditions.<\/p>\n

    Family and Medical Leave Act (FMLA):<\/b> The FMLA <\/a>allows eligible employees to take up to 12 weeks of unpaid, job-protected leave for specific family and medical reasons. This includes caring for a newborn, adopted, or foster child. It also applies to one’s serious health condition or that of a family member.<\/p>\n

    Flexible Spending Account (FSA):<\/b> A special savings account that allows employees to set aside pre-tax dollars (usually through payroll deductions) to pay for eligible medical expenses. These expenses can include costs like copayments, deductibles, prescriptions, out-of-network services, and other healthcare services not covered by insurance.<\/p>\n

    Group Health Plan:<\/b> An employee benefit plan established or maintained by an employer, an employee organization (such as a union), or both. The plan provides medical care to employees and their dependents directly or through insurance reimbursement.<\/p>\n

    Health Savings Account (HSA):<\/b> Similar to a Flexible Spending Account, an HSA allows employees to save money for medical expenses. HSAs are generally available to individuals with high-deductible health plans and allow contributions that can roll over from year to year. HSAs typically offer more flexibility in terms of account ownership and portability.<\/p>\n

    HMO (Health Maintenance Organization):<\/b> A legal entity consisting of participating medical providers that provide or arrange for care to be furnished to a given population group. HMOs are used as alternatives to traditional indemnity plans.<\/p>\n

    HIPAA (Health Insurance Portability and Accountability Act):<\/b> The Health Insurance Portability and Accountability Act<\/a> of 1996 (HIPAA) is a federal law that prompted national standards to protect sensitive patient health information from being disclosed without the patient’s consent or knowledge.<\/p>\n

    Late Enrollee:<\/b> An individual who enrolls in a group health plan on a date after the earliest date on which coverage can begin under the plan terms or on a special enrollment date.<\/p>\n

    Newborns’ and Mothers’ Health Protection Act (Newborns’ Act):<\/b> The Newborns’ Act<\/a> is a federal law that prohibits group health plans, insurance companies, and HMOs from restricting a mother’s or newborn’s benefits for hospital stays to less than 48 hours following a vaginal delivery or 96 hours following delivery by cesarean section.<\/p>\n

    The attending doctor, nurse, midwife, or other licensed healthcare provider can discharge earlier after consultation with the mother.<\/p>\n

    Plan Administrator: <\/b>The person responsible for managing the plan<\/a> for the benefit of participants and beneficiaries. The plan administrator is a person designated by the terms of the plan. If the plan does not make such a designation, then the plan sponsor is often the plan administrator.<\/p>\n

    Plan Sponsor:<\/b> The plan sponsor is the employer, the employee organization (such as a union), or both, that establishes or maintains a plan<\/a>, including a group health plan.<\/p>\n

    Pre-Existing Condition:<\/b> An illness or condition that was present before an individual’s first day of coverage under a group health plan. Health insurers are now prohibited from charging higher rates or refusing coverage based on pre-existing health conditions. As a result, they cannot impose benefit limits for these conditions.<\/p>\n

    Preferred Provider Organization (PPO):<\/b> A type of health insurance plan where you have a network of doctors, hospitals, and other healthcare providers. You can visit any provider in the network without a referral from a primary care physician. You may also go out of network, but it will usually cost you more.<\/p>\n

    Qualified Beneficiary: <\/b>Qualified beneficiaries include covered employees, their spouses, and their dependent children who are covered under the group health plan on the day before a qualifying event. In certain cases, retired employees, their spouses, and dependent children may be qualified beneficiaries.<\/p>\n

    Any child born to, or placed for adoption with, a covered employee during a period of COBRA continuation coverage is a qualified beneficiary.<\/p>\n

    Qualifying Event: <\/b>A specific life event that triggers a special enrollment period<\/a>. This allows individuals to make changes to their health insurance coverage outside of the regular open enrollment period. Examples of qualifying events include:<\/p>\n