Glossary Of Cafeteria Plan Terms And Definitions
Cafeteria Plan Terms And Definitions
A Section 125 Cafeteria Plan is an employer-sponsored benefit plan that allows employees to choose between taxable compensation and certain qualified pre-tax benefits, as authorized under Section 125 of the Internal Revenue Code.
The following is a glossary of terms for Cafeteria Plans.
Actively-At-Work Clause (Section 125)
A health care plan provision that delays eligibility for coverage for employees that are not actively at work on the day health care coverage would normally begin. Administrative Simplification
The rules of HIPAA (the Health Insurance Portability and Accountability Act) regarding electronic transactions of health care data, security of electronic transactions of health care data, and the privacy rules regarding use and disclosure of protected health information. Alternative Method
A method of calculating prior creditable health care coverage with reference to coverage under any one of five categories of benefits; mental health, prescription drugs, drug and alcohol substance abuse treatment, dental care, and vision care. The alternative method may be chosen by a health care plan in lieu of the standard method of crediting coverage. Cafeteria Plan
An employer-sponsored, written plan, which offers eligible employees a choice between cash and qualified, nontaxable benefits such as health care. Certified Cafeteria Plan Administrator
An HR professional who has completed the Cafeteria Plan Training & Certification Program and passed the accompanying certification exam. Certificate of Creditable Coverage (Certificate of Prior Creditable Coverage)
The certificate required by HIPAA that shows the amount of creditable coverage an individual had (or currently has). Certificate of Creditable Coverage must be provided any time an individual loses coverage under the plan. Carryover
An optional feature allowing unused Health FSA funds (up to an IRS-set limit) to roll into the next plan year. COBRA
The Consolidated Omnibus Reconciliation Act of 1985 (COBRA) allowing qualified beneficiaries the right to continue group health plan coverage after a qualifying event. Creditable Coverage
the period of coverage an individual has under a group health plan subject to the HIPAA portability rules, individual insurance, Medicare, and other specified health plans. Dependent Care Assistance Program (DCAP)
A pre-tax account for eligible dependent care expenses, such as daycare or elder care. Election
An employee’s choice to enroll in, change, or decline benefits under the cafeteria plan. Employer Contributions
Amounts the employer contributes toward benefits, which may or may not be offered through the cafeteria plan. Employer Contributions
Amounts the employer contributes toward benefits, which may or may not be offered through the cafeteria plan. Enrollment Date
The earlier of the first day of a waiting period imposed by a group health plan, or the first day of actual enrollment. ERISA
Employee retirement Income Security Act of 1974. Excepted Benefits
Certain benefits that offer health coverage but are not subject to the HIPAA portability rules. Exclusion
Conditions or treatments that will not be covered by a health care plan. Forfeiture
Unused FSA funds that are lost at the end of the plan year and may be used by the employer to offset plan expenses. Grace Period
An optional period (up to 2½ months) after the plan year ends to incur additional eligible expenses for a Health FSA. Health Flexible Spending Account (Health FSA)
A pre-tax account used to pay eligible medical expenses. Health Savings Account (HSA)
A tax-advantaged savings account used with an HSA-eligible high-deductible health plan; contributions may be made through a Section 125 plan. Health Insurance Issuer
An insurance company, insurance service, HMO, or insurance organization licensed by a state to do business as a health insurance company, subject to state law. Highly Compensated Individual (HCI)
An employee who meets IRS criteria for high compensation or ownership and is subject to nondiscrimination testing. Key Employee
A subset of highly compensated employees defined by IRS rules for nondiscrimination purposes. HIPAA
The Health Insurance Portability and Accountability Act of 1996. Irrevocable Election Rule
The rule that elections generally cannot be changed during the plan year unless a permitted status change occurs. Late Enrollee
An individual that enrolls in a group health plan after the initial available enrollment period and who is not a special enrollee. Look-back Rule
The six-month period prior to an individual’s enrollment date (or first day of a waiting period, whichever is first), for which medical advice, diagnosis, care, or treatment were received for which a preexisting condition exclusion may be applied. Medicare
Government funded health insurance for elderly and disabled individuals who have contributed to FICA (Social Security and Medicare taxes). NMHPA
The Newborns and Mothers Health protection Act requiring plans that offer maternity benefits a minimum hospital stay of 48 hours after delivery of a child, 96 hours if it was a cesarean delivery. Non-Confinement Clause
Typically applicable to dependents, a health plan provision that delays eligibility for individuals that are confined to a hospital or other health care facility. Participant
An employer or former employee who is eligible for benefits from a plan. Plan Administrator
Under ERISA, the person or entity designated to act as the plan administrator in the plan documents. If no plan administrator is designated in the plan documents, the plan sponsor is the plan administrator. Often, in a single employer plan, the employer will be the plan administrator. Plan Sponsor
In situations where there is a single employer plan, the employer is the plan sponsor. If more than one employer or groups of employees participates in a health care plan, the organization or association will be the plan sponsor. Preexisting Condition
A condition, whether physical or mental, for which medical advice, diagnosis, care, or treatment were received within the six-months prior to the individual’s enrollment date (see enrollment date). Qualified Beneficiary
An employee, spouse, or child of the employee who, had coverage the day before a qualifying event and are now eligible for COBRA continuation coverage. This includes a child born to, or adopted by, an employee or former employer while on COBRA continuation coverage. Qualifying Event
The event that gives rise to an individual’s right to elect COBRA continuation coverage (termination, reduction in hours, death, divorce, loss of dependent status, and entitlement to Medicare). Section 125 Plan
See Cafeteria Plan (a Cafeteria Plan is authorized under Section 125 of the Internal Revenue Code; hence, the terms "Cafeteria Plan" and ‘section 125 Plan" are synonymous). Special Enrollment
Mid-year enrollment rights that must be offered to individuals who have lost coverage under another plan or who have experienced marriage, or a birth or adoption of a child. Standard Method
A method of determining the amount of creditable coverage an individual has without regard to categories of benefits. WHCRA
The Women's Health and Cancer Rights Act requiring group health plans that offer mastectomy coverage to include benefits for reconstructive Catch-up contribution
In addition to the maximum contribution amount, a "catch-up contribution", may be made by or on behalf of individuals age 55 or older who are not enrolled in Medicare Co-insurance
A percentage the participant is responsible for even after a deductible has been met. Co-pay
Usually a set fee for office visits, such as $20 for an appointment with the family physician. Consumerism
Making the user responsible for his or her consumption by allowing the user to see and be partly responsible for the actual costs of health care Custodian
Federal law requires that HSA investments be held in a trust or custodial account, and that a qualified HSA trustee or custodian be named. Generally, any entity that can be a trustee or custodian for Individual Retirement Accounts can be a trustee or custodian for HSAs. Deductible
The amount the individual is responsible for before the health plan will pay for any expenses Distribution
A distribution is any amounts that an eligible individual removes from his or her HSA, regardless of whether the amount was for eligible or ineligible expenses. Election
An employee's choice to enroll in, change, or decline benefits under the cafeteria plan.FSA HDHP
See High-Deductible Health Plan Health Savings Accounts
Tax-exempt trusts or custodial accounts created exclusively to pay for the qualified medical expenses of an eligible individual, spouse, or dependent(s) High-Deductible Health Plan
An insured or self-insured health plan that satisfies certain requirements with respect to deductibles and out-of pocket expenses. Generally for individual coverage, the plan must have an annual deductible of not less than $1,000; for family coverage, the plan must have an annual deductible of not less than $2,000. HIPAA
Health Insurance Portability Accountability Act HRA
Health Reimbursement Arrangement HSA
See Health Savings Account Irrevocable Election Rule
The rule that elections generally cannot be changed during the plan year unless a permitted status change occurs. Mid-Year Election Change
A permitted change to benefit elections outside of open enrollment due to a qualifying life event. Non-Qualified Benefits
Benefits that cannot be offered under a Section 125 plan, including cash, tuition reimbursement, and most fringe benefits. Open Enrollment
The annual period when employees can enroll in, change, or waive Section 125 benefits. Permitted Coverage
An individual may be eligible for "permitted insurance" or "permitted coverage" in addition to a high-deductible health plan and still be eligible to make or receive a contribution to an HSA. "Permitted coverage" includes coverage (whether provided through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care. Permitted Insurance
An individual may be eligible for "permitted insurance" or "permitted coverage" in addition to a high-deductible health plan and still be eligible to make or receive a contribution to an HSA. Benefits for "permitted insurance" must be provided through insurance contracts and not on a self-insured basis. Plan Document
The formal, written legal document that governs the cafeteria plan and outlines eligibility, benefits, and rules. Plan Year
The 12-month period during which benefits and elections apply. Pre-Tax Premium Only Plan (POP)
A Section 125 plan that allows employees to pay insurance premiums with pre-tax dollars only. Pre-Tax Contributions
Employee contributions deducted from pay before federal income tax, Social Security, and Medicare taxes are calculated (state tax treatment may vary). Prohibited transaction
An individual also is prohibited from making certain investments that are considered "prohibited transactions". These transactions involve certain sales, exchanges, or leasing of property between an individual and his or her HSA, or (any other interference with the independent status of the account). QDROs
See Qualified Domestic Relation Orders Qualified Benefits
Benefits permitted under Section 125 plan Qualified Domestic Relation Orders
The IRS has indicated that an individual's HSA assets can be subject to a court order for legal separation or divorce, and that some or all of these assets can be transferred to another individual. Such orders ? once specific procedures are followed - are called qualified domestic relation orders (QDROs). Rollover
A situation in which a participant receives a distribution from an HSA and then deposits it into another HSA within specified time limits Salary Reduction Agreement
An agreement under which an employee elects to reduce taxable salary in exchange for pre-tax benefits SAR
Summary Annual Report Summary Plan Description (SPD)
A participant-friendly explanation of the plan's terms, rights, and obligations. Trustee
Federal law requires that HSA investments be held in a trust or custodial account, and that a qualified HSA trustee or custodian be named. Generally, any entity that can be a trustee or custodian for Individual Retirement Accounts can be a trustee or custodian for HSAs Uniform Coverage Rule
A rule requiring that the full annual Health FSA election be available from the first day of the plan years Use-It-or-Lose-It Rule
The rule requiring unused Health FSA funds to be forfeited at the end of the plan year unless a grace period or carryover applies.
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