Employee Benefits Glossary

A tax-advantaged employee benefit plan authorized by Section 125 of the Internal Revenue Code. Allows employees to pay for qualified benefits with pre-tax dollars, reducing their taxable income and the employer's payroll taxes.

The combined tax benefits for employers and employees through Section 125 plans. Employees reduce income tax and FICA taxes, while employers save on FICA taxes (7.65%) on every pre-tax dollar.

IRS-approved benefits that can be purchased with pre-tax dollars through a Section 125 plan, including health insurance, dental, vision, HSA/FSA contributions, and certain supplemental benefits.

IRS requirement that unused funds in Flexible Spending Accounts (FSAs) are forfeited at the end of the plan year, with limited exceptions for grace periods or carryover amounts.

The simplest type of Section 125 plan that only allows pre-tax payment of health insurance premiums. Most common starting point for employers new to Section 125 benefits.

The expiration of enhanced premium tax credits on December 31, 2025, causing marketplace insurance premiums to increase 15-25% for middle-income Americans starting January 2026.

Temporary premium tax credit improvements (2021-2025) that expanded eligibility beyond 400% Federal Poverty Level and capped premium costs at 8.5% of income for all earners.

Requirement that employers with 50+ full-time equivalent employees offer affordable, adequate health coverage or pay penalties. Also known as the "Play or Pay" rule.

Maximum percentage of employee income that can be charged for the lowest-cost self-only health plan to meet ACA requirements. Set at 8.39% for 2026.

Basic level of health insurance required to avoid ACA individual mandate penalties (where applicable). Includes employer-sponsored plans, marketplace plans, Medicare, and Medicaid.

Requirement that employer health plans cover at least 60% of expected healthcare costs (actuarial value) to satisfy ACA compliance.

Employees who have health insurance but avoid using it due to high out-of-pocket costs, deductibles, or coverage gaps. Represents 28% of insured Americans who delay or skip medical care due to cost concerns.

Additional benefits that complement major medical insurance, designed to fill coverage gaps and provide immediate value. Often includes prescription discounts, telehealth, and fixed indemnity payments.

Insurance plans that pay fixed amounts for covered services regardless of actual costs or other insurance coverage. Provides cash payments directly to employees for medical events.

Employee-paid supplemental benefits offered through the employer but funded entirely by employee payroll deductions. No direct cost to the employer beyond administration.

Supplemental insurance designed to work alongside existing major medical coverage, filling gaps in prescription costs, deductibles, and out-of-pocket expenses.

Federal law governing employer-sponsored benefit plans, establishing standards for plan administration, fiduciary responsibilities, and employee rights.

Federal law requiring employers with 20+ employees to offer continued health insurance coverage to eligible employees and dependents after qualifying events like job loss or divorce.

Federal law protecting the privacy of health information and establishing rules for health plan portability and non-discrimination based on health status.

Required document explaining employee benefit plan features, coverage details, claims procedures, and participant rights in easy-to-understand language.

Annual reporting form required for most employee benefit plans, providing information about plan financial condition, investments, and operations to the Department of Labor.

Health insurance plan with higher deductibles and lower premiums. For 2026: minimum deductible of $1,650 (individual) or $3,300 (family). Required for HSA eligibility.

Tax-advantaged account paired with HDHPs. Contributions, growth, and withdrawals for qualified medical expenses are all tax-free. Funds roll over year to year.

Pre-tax account for medical or dependent care expenses. Funds must be used within plan year (with limited carryover/grace period options).

Percentage of expected healthcare costs covered by an insurance plan. Bronze plans cover 60%, Silver 70%, Gold 80%, Platinum 90% of average healthcare expenses.

Maximum amount an individual pays for covered healthcare services in a plan year. After reaching this limit, insurance covers 100% of covered services.

Healthcare providers (doctors, hospitals, pharmacies) who have contracted with an insurance plan to provide services at negotiated rates. Using in-network providers typically costs less.

List of prescription drugs covered by an insurance plan, typically organized into tiers with different cost-sharing levels. Generic drugs usually have lowest cost-sharing.

Annual period when employees can enroll in, modify, or cancel benefit elections. Typically occurs once per year unless qualifying life events occur.

Life changes that allow benefit modifications outside open enrollment, including marriage, divorce, birth/adoption, job change, or loss of other coverage.

Comprehensive approach to employee compensation including salary, benefits, recognition, development opportunities, and work-life balance initiatives.