PHR/SPHR Flashcards (Total Rewards)

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Module 4 Flashcards: Total Rewards

Employees

Workers who are covered by Fair Labor Standards Act regulations as determined by the IRS

Omnibus Budget Reconciliation Act (OBRA)

Act that reduced compensation limits in qualified retirement programs

Employee Commuting Flexibility Act

Amendment to the Portal-to-Portal Act; clarifies that commuting time is not paid working time

Exclusive provider organization (EPO)

Plan in which participants must use providers in the network of coverage or no payment will be made

Older Worker's Benefit Protection Act (OWBPA)

Act that amended Age Discrimination in Employment Act to include all employee benefits; also provided terminated employees with time to consider group termination or retirement programs and consult an attorney

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Act that provides individuals and dependents who may lose medical coverage with opportunity to pay to continue coverage

Pension Benefit Guaranty Corporation (PBGC)

Set up by ERISA to insure payment of benefits in the event that a private-sector defined benefit pension plan terminates with insufficient funds to pay the benefits

Frequency table

Shows the number of people or organizations associated with data organized in a frequency distribution

Red-circle rates

Describe situations where employees' pay is above the range maximum

Roth IRA

Account providing tax-free income growth; contributions are made with after-tax dollars

Savings Incentive Match Plan for Employees (SIMPLE)

Retirement plan by which employees can contribute each year to a 401(k) plan or IRA

Cost-of-living adjustment (COLA)

Periodic compensation payment given to eligible employees regardless of their performance or company profitability; usually linked to inflation

Economic Growth and Tax Relief Reconciliation Act (EGTRRA)

Act that adjusts minimum vesting schedules, increases retirement plan compensation and contribution limits, permits catch-up contributions by participants age 50 or older in certain retirement plans, and modifies distribution and rollover rules

Consumer-directed health care

Health-care options intended to help employers better control costs while allowing employees to make more decisions about their health care

In loco parentis

"In place of a parent"; term used in expansion of FMLA coverage to employees who stand in place of a parent with day-to-day responsibilities to care for and financially support a child or who have a day-to-day responsibility to care for or financially support a person who stood "in loco parentis" for them

Health savings account (HSA)

Tax-sheltered savings account similar to an IRA but created primarily to pay for medical expenses

Nonduplication of benefits

In health plans, requires a secondary carrier to reimburse only up to the level of reimbursement they would have paid

Consumer price index (CPI)

Instrument that measures change over time for costs of a group of goods and services

Travel pay

Typically paid to nonexempt workers for the time they spend traveling to or between work assignments

Individual retirement accounts (IRAs)

Tax-deferred accounts to which wage earners can contribute an amount up to a yearly maximum

Time-based step-rate pay

System in which pay is based on longevity in the job and pay increases occur on a predetermined schedule

Health reimbursement account (HRA)

Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses

Multinational enterprises (MNEs)

Organizations that conduct business and have offices in a number of different countries

Physician hospital organizations (PHOs)

Consist of hospital and physician practices that merge into vertically integrated structures

Indirect compensation

Form of compensation commonly referred to as benefits

Health Insurance Portability and Accountability Act (HIPAA)

Act that made changes to improve health-care coverage portability and accessibility and provide medical record privacy and security

Prudent person rule

States that an ERISA plan fiduciary has legal and financial obligations not to take more risks when investing employee benefit program funds than a reasonably knowledgeable, prudent investor would under similar circumstances

Golden Handcuffs

System of overlapping short- and long-term incentives to make it less likely that key employees will leave a company

Total rewards

All forms of financial and nonfinancial returns that employees receive from their employers

Weighted average

Average of data that takes other factors such as the number of incumbents into account

Out-of-pocket maximum

Stated amount out of pocket the insured can pay for medical costs in a 12-month period before copayments end

Internal equity

Occurs when people feel that performance or job differences result in corresponding differences in pay rates

Utilization review

Audit of health-care use and charges to identify which benefits are used and to make certain that care is necessary and costs are in line

Commission

Payment made to salespeople, usually calculated as a percentage of sales

Walsh-Healey Act

Act that extended concept of prevailing wage to employers who manufacture or supply goods under government contracts and required time and a half

Service Contract Act

Act that extended prevailing wage rate and benefit requirements to employers providing services under federal government contracts

Coordination of benefits

Eliminates the duplication of payments when an employee, spouse, or dependents have health coverage under two or more plans

Fee-for-service health-care plan

Full-choice health-care plan that allows covered employees to go to any qualified physician or hospital and submit claims to the insurance company; also known as indemnity health-care plan

Workers' compensation

State insurance program designed to protect workers in cases of work-related injuries or diseases

Fully insured health-care plan

Health-care plan in which the employer pays a third-party insurance carrier premiums that cover medical charges, administrative costs, sales commissions, taxes, and profits

Nonexempt employees

Employees covered under FLSA regulations, including overtime pay requirements

Performance bonus

One-time payment made to an employee; also called a lump-sum increase (LSI)

Job classification

Evaluation method that groups jobs into a predetermined number of grades or classifications, each having a class description to use for job comparisons

Excess deferral plans

Nonqualified deferred compensation plans that provide benefits to selected management or highly compensated employees beyond Section 401 or 415 limitations

Base pay

Basic compensation an employee receives, usually as a wage or salary

Equal work

Work having equal skills, equal effort, equal responsibility, and equal working conditions, all performed at the same location

Person-based pay

Pay systems in which employee characteristics, rather than the job, determine pay

Profit-sharing plans

Plans that distribute a portion of an organization's profits to its employees

Parachutes

Clauses written into executive contracts that provide special payments to key executives who might lose their position or be otherwise disadvantaged if another company took control of the organization through a merger or acquisition; also known as golden parachutes

Paired-comparison method

Job ranking method in which evaluator compares each job with every other job being evaluated

Section 125 benefit plans

Written benefit plans maintained by the employer that allow employees to use pretax dollars to pay for certain qualified benefits

Uniformed Services Employment and Reemployment Rights Act (USERRA)

Act that protects employment, reemployment, and retention rights for persons who voluntarily or involuntarily serve or have served in the uniformed services

Long-term disability (LTD) coverage

Replaces a portion of an employee's lost income after short-term disability coverage ends

Compensable factors

Reflect the dimensions along which a job is perceived to add value to the organization; these factors are used to determine which jobs are worth more than others

International social security agreements

Bilateral social security agreements that coordinate the U.S. Social Security program with the comparable programs of other countries; also known as totalization agreements

Copayment

Specified percentage (typically 20% to 30%) of covered medical expenses that employee pays or fixed dollar amount that a covered person pays each time he or she visits a physician

Pay ranges

Set the upper and lower bounds of possible compensation for individuals whose jobs fall in a pay grade

Differential pay

Pay that is based on when the employee works (e.g., overtime pay, shift-pay differential) or where the employee works; also called variable pay

Hourly wage

Form of base pay that is dependent on the number of hours worked

Rabbi trust

Grantor trust designed to segregate nonqualified deferred compensation benefits from an employer's general accounts

Qualifying event

Under the Consolidated Omnibus Budget Reconciliation Act, an event, such as termination for reasons other than gross misconduct, that allows employees to continue their group health-care coverage for a specified period of time

Unemployment Compensation Amendments (UCA)

Imposed a mandatory 20% federal income tax withholding requirement on most qualified retirement plan proceeds that a recipient does not roll over into another qualified retirement plan or individual retirement account

Broadbanding

Combining several salary grades or job classifications with narrow pay ranges into one band with a wider salary spread

Supplemental wages

Pay beyond base salary or wages such as bonuses and commissions

Indemnity health-care plan

Full-choice health-care plan that allows covered employees to go to any qualified physician or hospital and submit claims to the insurance company; also known as fee-for-service health-care plan.

Qualified domestic relations orders (QDROs)

Create or recognize the right of an alternative payee to receive all or a portion of the benefits under a retirement plan

Fair Labor Standards Act (FLSA)

Act that regulates employee status, overtime pay, child labor, minimum wage, record keeping, and other administrative concerns

Revenue rulings

Rulings published by the IRS as general guidelines to all taxpayers or organizations

Vesting

Process by which a retirement benefit becomes nonforfeitable

Managed care

General term for a medical plan that seeks to ensure that the treatments a person receives are medically necessary and provided in a cost-effective manner

Single-rate pay

Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as flat-rate pay

Mental Health Parity Act (MHPA)

Act that addresses parity between mental health benefits and medical benefits

External equity

When an organization's pay rates are at least equal to market rates

Gatekeeper

Individual, usually a primary-care physician, who is given control of patient access to specialists and services in a managed care organization

457 plans

Plans that allow employees of states, political subdivisions or agencies of states, and certain tax-exempt organizations to defer receipt of wages

Overtime pay

Required for nonexempt workers under FLSA at 1.5 times the regular rate of pay for hours over 40 in a workweek

Defined contribution plan

Plan in which the employer and sometimes the employee make an annual payment to the employee's retirement plan account

Gainsharing plans

Group incentives where a portion of the gains an organization realizes from group efforts is shared with the group

Taxpayer Relief Act (TRA)

Act that created tax-advantaged savings mechanisms

Minimum wage

Minimum hourly amount, determined by Congress, that nonexempt employees can be paid

Nonqualified deferred compensation plan

Income deferral benefit offered to a select group of management or highly compensated employees in the organization

Line-of-sight

Concept that states that employees must be able to influence the attainment of a goal and see a direct result of their efforts in order for incentive pay plans to be effective

Lifetime maximum benefit

Maximum dollar amount of covered medical expenses that a health-care plan will pay on behalf of any covered person during that person's lifetime

Salary compression

Occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority; also known as pay compression

Serious health condition

As defined in DOL regulations, a condition that involves employee incapacity for more than three calendar days plus "two visits to a health-care provider."

Davis-Bacon Act

Act that established prevailing wage and benefit requirements for contractors on federally funded construction projects

Employee Retirement Income Security Act (ERISA)

Act that established uniform minimum standards for employer-sponsored retirement and health and welfare benefit programs

401(k) plans

Plans that allow employees to make tax-favored pay deferrals toward retirement savings through a payroll deduction plan

Supplemental unemployment benefits (SUB)

Benefits paid to unemployed workers beyond required government unemployment benefits

Private-letter rulings

Rulings issued by the IRS to specific taxpayers or organizations that request an interpretation of the law

Benchmark jobs

Jobs used as reference points when setting up a job classification system and when designing or modifying a pay structure

Premium sharing

Situation in which employee pays a portion of the required monthly premium for health-care coverage

Long-term care insurance

Insurance coverage that provides a daily monetary benefit to people who are chronically ill and who require living assistance either at home or in a residential facility

Premium pay

Extra pay for working holidays or vacation days

Highly compensated employee (HCE)

Determined by an array of issues such as business ownership and/or salary

Call-back pay

Pay that employees receive when they are called back for an extra shift in the same workday

Shift pay

Refers to supplemental pay paid to employees who work less-desirable hours, such as second or third shifts

Revenue Act

Act that added Sections 125 and 401(k) to the Tax Code

Family and Medical Leave Act (FMLA)

Act that provides employees with up to 12 weeks of unpaid leave to care for family members or because of a serious health condition of the employee

Unweighted average

Raw average of data that gives equal weight to all factors with no regard to individual factors such as the number of incumbents or companies

Performance-sharing plans

Organization-wide incentive plans in which funds are made available for incentive awards based on predetermined criteria and standards

Coverdell Education Savings Account (ESA)

Trust created exclusively for the purpose of paying the qualified education expenses of a designated beneficiary

On-call pay

Pay that employees receive when they are on call but not actually working

Voluntary deductions

Payroll deductions selected by the employee such as charitable contributions

Job ranking

Evaluation method that establishes a hierarchy of jobs from lowest to highest based on overall importance to the organization

Preferred provider organizations (PPOs)

Formed by an insurance company, an employer, or a group of employers who negotiate discounted fees with networks of health-care providers; in return, the employers guarantee a certain volume of patients

Point-of-service (POS) organizations

Combination of a PPO and an HMO; provide direct access to specialists

Medicare

Social Security Administration program that provides medical care for people after age 65

Equal Pay Act (EPA)

Act that prohibits wage discrimination by requiring equal pay for equal work

Totalization agreements

Bilateral social security agreements that coordinate the U.S. Social Security program with the comparable programs of other countries; also known as international social security agreements

Green-circle rates

Situation where an employee's pay is below the minimum of the range

Job evaluation

Systematic determination of the relative worth of jobs within an organization

Health maintenance organizations (HMOs)

Form of health care that provides services for a fixed period on a prepaid basis

Perquisites

Special privileges for executives that are usually noncash items

Top hat plan

Nonqualified deferred compensation plan that provides retirement benefits to select group of management or highly compensated employees

Performance-based pay

Situation where an individual's performance is the basis for either the amount or timing of pay increases; also called merit pay

Golden parachutes

Clauses written into executive contracts that provide special payments to key executives who might lose their position or be otherwise disadvantaged if another company took control of the organization through a merger or acquisition; also known as parachutes

Group-term life insurance

Form of insurance carried by employers for their employees that provides a lump-sum payment to the employees' beneficiaries

Employee stock-ownership plans (ESOPs)

Stock bonus plans by which employees gain ownership in the organization for which they work

Merit pay

Situation where an individual's performance is the basis for either the amount or timing of pay increases; also called performance-based pay

Involuntary deductions

Payroll deductions such as tax levies and court-ordered child support that an employee must pay

Small Business Job Protection Act (SBJPA)

Act that made changes to rules regarding the ability of tax-exempt organizations to institute retirement plans modeled after 401(k) and IRA accounts and to the definition of highly compensated employees

Stop-loss coverage

Insurance policy that protects employers with partially self-funded insurance plans by limiting individual and group-wide claims

Flexible spending account (FSA)

Type of Section 125 plan that allows employees to use pretax dollars to pay for out-of-pocket health and dependent-care expenses

Medicare carve-out

Health plan where benefits are reduced for employees eligible for Medicare; Medicare becomes the primary provider

Paid-time-off (PTO) bank

Large bank of time comprising all of an employee's paid time off (i.e., vacation, sick leave, and holidays) that the employee can use as he or she sees fit

Work Opportunity Tax Credit (WOTC)

Tax credit to encourage employers to hire people from targeted groups

Excess group-term life insurance

Amount of employer-provided group-term life insurance over $50,000

Deductible

Initial amount of covered medical expenses an individual must pay before receiving paid benefits under a health-care plan

Social Security

Social Security Administration program that provides retirement, disability, death, and survivor's benefits

Experience rating

Rating system that bases insurance rates on claims history

Productivity-based pay

Pay based on the quantity of work and outputs that can be accurately measured

Premium-only plan (POP)

Type of Section 125 plan that allows employees to pay for certain qualified benefits with pretax dollars

Sarbanes-Oxley Act (SOX)

Act that requires administrators of defined contribution plans to provide notice of covered blackout periods; provides whistleblower protection for employees

Pay compression

Occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority; also known as salary compression

Maturity curves

Correlate pay with time spent in a professional field such as teaching or research

Tax Reform Act

Act that made significant changes in employee benefit programs, especially retirement plans

Independent contractors

Workers who are not covered by Fair Labor Standards Act regulations as determined by the IRS

Lump-sum increase (LSI)

One-time payment made to an employee; also called performance bonus

Workweek

Any fixed, recurring period of 168 hours (7 days times 24 hours = 168 hours).

Reporting pay

Pay provided to employees who report for work as scheduled but then find that no work is available

Variable pay

Pay that is based on when the employee works (e.g., overtime pay, shift-pay differential) or where the employee works; also called differential pay

Financial Accounting Standards Board (FASB)

Private body that decides how financial executives should report their firms' financial information to their shareholders

Hazard pay

Pay earned by employees who work in an environment that is considered more risky from a safety or health point of view

403(b) plans

Plans that allow employees of certain tax-exempt organizations to contribute pretax dollars toward retirement savings

Flat-rate pay

Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as single-rate pay

Cash balance plan

Form of defined benefit plan that defines the promised benefit in terms of a hypothetical account balance and features benefit portability

Graded vesting

System by which qualified retirement plan participants become incrementally vested over a period of years of service

Health insurance purchasing cooperative (HIPC)

Purchases health-care plans for large groups of employers to provide small businesses the economic advantages large companies have

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