Understanding Healthcare Benefits and Compliance Terms
This comprehensive glossary defines key terms related to the Employee Retirement Income Security Act (ERISA) and the Affordable Care Act (ACA) to help you navigate healthcare benefits and compliance requirements.
A
Affordable Care Act (ACA)
Federal healthcare reform law enacted in 2010, also known as “Obamacare,” that expanded healthcare coverage and established new regulations for health insurance and employer-sponsored benefits.
Applicable Large Employer (ALE)
Under the ACA, an employer with 50 or more full-time equivalent employees who may be subject to the employer shared responsibility provisions.
Administrative Services Only (ASO)
An arrangement where an employer self-funds their employee benefit plan and contracts with a third party to handle administrative services.
B
Beneficiary
A person designated to receive benefits from an employee benefit plan, typically in the event of the participant’s death.
Benefits Administration
The process of managing and overseeing employee benefit programs, including enrollment, claims processing, and compliance.
C
COBRA (Consolidated Omnibus Budget Reconciliation Act)
Federal law requires group health plans to offer continuation coverage to employees and their families after certain qualifying events.
Continuation Coverage
Temporary extension of group health plan benefits for qualified beneficiaries who lose coverage due to specific life events.
Cafeteria Plan
An employee benefit plan under Section 125 of the Internal Revenue Code that allows employees to choose between cash and qualified benefits on a pre-tax basis.
D
Dependent
A spouse, child, or other family member who is eligible for coverage under an employee’s benefit plan.
Discrimination Testing
Required tests under ERISA and the Internal Revenue Code to ensure employee benefit plans don’t unfairly favor highly compensated employees.
DOL (Department of Labor)
Federal agency responsible for enforcing ERISA and overseeing employee benefit plan compliance.
E
Employee Retirement Income Security Act (ERISA)
Federal law enacted in 1974 that sets standards for employee benefit plans, including health, retirement, and welfare benefits.
Essential Health Benefits
Ten categories of healthcare services that ACA-compliant health plans must cover, including ambulatory care, emergency services, and prescription drugs.
Employer Shared Responsibility
ACA provision requires applicable large employers to offer affordable, minimum value health coverage to full-time employees or pay penalties.
F
Fiduciary
Under ERISA, a person or entity with discretionary authority over a benefit plan who must act in the best interest of plan participants.
Fiduciary Responsibility
Legal obligation of plan fiduciaries to act prudently and solely in the interest of plan participants and beneficiaries.
Full-Time Employee
Under the ACA, an employee who works an average of at least 30 hours per week or 130 hours per month.
G
Group Health Plan
An employee welfare benefit plan that provides medical care to employees, former employees, or their families.
Grace Period
Extended timeframe allowing participants to use unused funds from the previous plan year, typically applicable to FSAs and HSAs.
H
Health Savings Account (HSA)
Tax-advantaged account that allows individuals to save money for qualified medical expenses, available with high-deductible health plans.
High-Deductible Health Plan (HDHP)
Health insurance plan with higher deductibles and lower premiums, required for HSA eligibility.
HIPAA (Health Insurance Portability and Accountability Act)
Federal law protects the privacy and security of health information and provides portability of health coverage.
I
Individual Mandate
Former ACA requirement (repealed in 2019) that most Americans have qualifying health coverage or pay a penalty.
Internal Revenue Code (IRC)
Federal tax law that governs the tax treatment of employee benefit plans.
L
Life Event
Qualifying change in circumstances (marriage, birth, job loss, etc.) that allows employees to make mid-year changes to benefit elections.
M
Medical Loss Ratio (MLR)
ACA requirement that health insurers spend at least 80-85% of premium revenue on medical care and quality improvement activities.
Minimum Essential Coverage
Types of health insurance that satisfy the ACA’s coverage requirements and avoid penalties.
Minimum Value
ACA standard requires employer health plans to cover at least 60% of the total allowed costs of benefits.
N
Notice Requirements
ERISA and ACA mandates requiring employers to provide specific disclosures and communications to employees about their benefit plans.
O
Open Enrollment
Annual period when employees can enroll in or make changes to their benefit plan elections.
P
Plan Administrator
Person or entity responsible for the day-to-day operations and administration of an employee benefit plan under ERISA.
Plan Document
Written document that governs the operation of an employee benefit plan and describes benefits, eligibility, and procedures.
Plan Participant
Employee or former employee who is or may become eligible to receive benefits from an employee benefit plan.
Plan Sponsor
Employer or organization that establishes and maintains an employee benefit plan.
Pre-existing Condition
Health condition that exists before the start of new health coverage (ACA prohibits discrimination based on pre-existing conditions).
Q
Qualified Medical Expenses
IRS-approved healthcare expenses that can be paid for with tax-advantaged accounts like HSAs and FSAs.
Qualifying Event
Specific life changes that trigger eligibility for COBRA continuation coverage or special enrollment periods.
R
Reportable Event
Significant plan changes or events that must be reported to government agencies under ERISA or ACA requirements.
Rollover
Transfer of unused funds from one plan year to the next, subject to specific rules and limitations.
S
Section 125 Plan
See Cafeteria Plan – allows employees to pay for benefits with pre-tax dollars.
Self-Insured Plan
Health plan where the employer assumes the financial risk for providing healthcare benefits to employees.
Special Enrollment Period
Time outside of open enrollment when individuals can enroll in or change health coverage due to qualifying life events.
Summary Plan Description (SPD)
ERISA-required document that explains employee benefit plan features in plain language.
Summary of Benefits and Coverage (SBC)
ACA-required standardized document that summarizes health plan benefits and coverage.
T
Third-Party Administrator (TPA)
Organization that handles administrative functions for self-insured employee benefit plans.
U
Uniform Glossary
ACA requirement for standardized definitions of health insurance and medical terms across all health plans.
V
Vesting
Employee’s right to employer-contributed benefits based on years of service or other qualifying criteria.
W
Welfare Benefit Plan
ERISA-covered employee benefit plan that provides medical, disability, life insurance, or other welfare benefits.
Wraparound Coverage
Supplemental insurance that provides additional benefits beyond those offered by a primary health plan.
Need Help?
Understanding ERISA and ACA requirements can be complex. Ameriflex’s benefits administration experts can help you navigate compliance requirements and optimize your employee benefit programs.
Contact us today to learn more about our comprehensive benefits administration solutions.
This glossary is for informational purposes only and should not be considered legal advice. Always consult with qualified legal and benefits professionals for specific compliance guidance.