Abbott, Langer Association Surveys

Abbott-Langer & Associates Business Glossary

This glossary of business definitions contains over 2,000 business terms used in compensation and benefits administration. Continually updated, this specialized business dictionary focuses on definitions of Human Resources terms and business terms.

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Early Retirement Age (Pension Plans)

This is the minimum age at which an employee may retire. An employee who chooses to retire early may also chose to start receiving his or her retirement income at once or may chose to have it deferred. If immediate receipt of income is elected, typically, it would be paid at a reduced rate.

Early Retirement Agreements

There are two ways in which early retirement agreements can occur. In some retirement plans early retirement is built in. This is especially true of defined benefit plans. Many such plans define an early age when the employee may retire at a reduced monthly payment, based upon age, tenure, and salary. In a defined contribution plan, the employee would be able to draw out his/her account at an early age. Organizations may choose to initiate an early retirement program in lieu of lay offs. These must be voluntary early retirement agreements. This is done by adding years to workers' ages and lengths of service. Some firms make the offer more attractive by offering outplacement assistance. Employees may be more likely to elect early retirement if the employer makes it easier to find new jobs through outplacement counseling.

Earned Time Off

ETO is earned each pay cycle, but is available the cycle after it first accrued. As an employee's years of service increase so does the rate of ETO accrual.

Earnings

Earnings include base pay, premium, overtime and bonuses. They are the total wages and or cash earned within a specific period of time.

Earnings And Profits

This represents EARNINGS and PROFITS as computed for tax purposes.

Earnings Per Share (EPS)

Term used to describe the total earnings of an organization divided by the number of outstanding shares. EPS is sometimes used as a basis for executive incentives. Also see DILUTED EARNINGS PER SHARE.

Earnings Statement

A detailed summary of the income and expenses of a business over a period of time (usually quarterly, semiannually or annually) showing the net income or loss incurred.

Economic Benefit

Measurable benefit not necessarily in the form of cash.

Economic Value Added (EVA)

This is a species of Residual Income. EVA is determined by subtracting from the income, the sum of cost of capital multiplied by the invested capital. EVA is often the measure employed in the determination of an organization’s economic profit. It is not uncommon for EVA to be used as a basis for incentive programs.

Edgar Extracts

EDGAR is a database maintained by the Securities Exchange Commission (SEC). All publicly traded companies in the U.S. must register data into this database. EDGAR can be reached through the Internet. Financial data is available on all publicly traded companies.

Education Individual Retirement Account (IRA)

A taxpayer can establish an education IRA to pay the qualified higher education expenses of a named child or grandchild, under the age of 18.

Educational Benefits

Companies may include educational benefits in their benefit package in a number of forms. The most common is an educational reimbursement plan, in which employees are reimbursed for the costs of schooling or training that can be shown to be related to their job or to their career in the company.

Effective Date

Several definitions: (1) The date on which a health insurance policy and/or retirement plan kicks into effect and the insured party's coverage actually begins. (2) The date on which an increase in salary or pay rate goes into effect.

Effective Tax Rate

The ratio of income tax actually paid divided by gross income, showing the percentage of income actually paid in taxes.

Effort Bargain

The effort bargain is what an employee receives (level of compensation, benefits, etc.) from an employer in exchange for what the employee: brings to the table (knowledge and experience) AND does (the tasks of the job or the “effort” made) for that employer. The terms of the bargain are typically outlined in an employment contract.

Elder Care Programs

Programs designed to assist the elderly in day-to-day activities. Usually this refers to the care of an elderly relative (financially, emotionally or even mentally).

Election Period

This represents the 60 days, after having been notified of one's COBRA eligibility, during which an ex-employee may opt to accept the continuation of health coverage or decline.

Elective Contributions Or Elective Deferrals

Contributions made to an employee's 401(k) plan, made by an employer on the behalf of the employee. Contributions are made with before tax monies from a reduction in the employee's pay check.

Elective Surgery

Under a health insurance program, elective surgery is a covered procedure, but one that requires adequate time to schedule any necessary diagnostic tests and/or initiation of treatment. This type of surgery usually requires the employee to obtain a second opinion as to the necessity of the surgery and/or review by the insurance company.

Electronic signature

An electronic sound, symbol, or process attached to or logically associated with a contract or record. This is executed by a person whose intent is to sign a record or contract. An electronic signature may be a number or code inputted on a telephone key pad, or the clicking of an I Accept box on a webpage. It indicates acceptance of terms.

Eligibility Date

This is the date on which an employee and/or his or her dependents are eligible for benefits.

Eligibility For A Plan

The foundation for establishing the employees or class of individuals who are qualified to participate in a specific plan (e.g., supplemental benefit or incentive plan).

Eligibility Period

Typically 31 days (sometimes 3 months) within which a recently employed individual has to elect to participate in an employer’s insurance plan (which is contributory in nature).

Eligibility Requirements

Requirements that an individual must meet before being able to participate in a company's life insurance plan, health coverage plan or retirement, benefit.

Eligible Payroll

Established by calculating the total amount of salaries / wages of employees who, though eligible, do not receive a salary increase.

Elimination Period

(1) Duration between the start of employment and date upon which the employee is actually eligible to receive benefits. (2) The time frame between an individual's disability and the beginning of benefits from the policy. Also known as qualification period (Canada) or WAITING PERIOD.

Emergency Room Coverages

Emergency room services are typically covered in most health plans. In managed care plans, the participant may be required to use a specified emergency room, unless out of area. Emergency room services are covered in Part B of Medicare.

Emerging Issues Task Force

This task force was created by FASB to deal with matters not expressly falling under GAAP. Jurisdiction includes but not limited to matters concerning stocks granted to employees.

Employee Achievement Awards

Any employer can establish an employee achievement award program, using whatever criteria wished to determine achievement. However, under IRS rules, the employer may establish a qualified plan based upon length of service and /or safety.

Employee Assistance Programs

An Employee Assistance Program (EAP) is an employer-initiated program to assist employees in dealing with problems such as substance abuse, marital discord, and employment problems.

Employee Benefits

Forms of compensation (excluding cash) available to employees. Benefits include but are in no way limited to the following: health coverage, vacation, income protection, retirement savings.

Employee Contributions

Payments made by an employee to fund a specific benefit, thereby contributing to or covering the employer's entire cost.

Employee Counseling Services

Counseling for the mental and physical health of the employee is not taxable. Neither is retirement counseling. Other kinds of counseling are taxable. In Quebec, counseling for physical and mental health is defined narrowly as stress management, tobacco, drug and alcohol abuse.

Employee Discounts

Employers may grant discounts to employees for their products or services. These discounts can be qualified as exclusions from gross income, provided that certain requirements are met.

Employee Participation

Several definitions: (1)The extent to which employees are involved with the implementation and or the administration of benefits and pay. This may also include the extent to which employees are involved with other company programs. (2) The level of voluntary participation of an employee in company benefits plan.

Employee Retirement Income Security Act Of 1974 (ERISA)

A Federal statute that establishes the following: (1) Rights of beneficiaries to pension benefits. (2) Standards that must be followed when investing pension plan assets. (3) Requirements that must be met before the disclosure of pension provisions and or funding. The Pension Benefit Guaranty is also established by ERISA.

Employee Services And Allowances

A category of benefits inclusive of relocation packages, subsidies on company-provided food service, discounts, and more.

Employee Stock Option Plan (ESOP)

A contract between a company and an employee giving the employee the right to purchase a specific number of shares in the company for a fixed price, during a certain period of time. Employee Stock Option Plans should not be confused with the term EMPLOYEE STOCK OWNERSHIP PLANS (also ESOPs), which are retirement plans.

Employee Stock Ownership Plan (ESOP)

Typically, this is benefit plan that requires that an employee meet certain requirements in order to participate and that has a portion of its investments (if not all) on company stock. An Employee Stock Ownership Plan (ESOP) is a type of defined contribution retirement plan in which the account of the employee consists of company stock.

Employees

Employees are persons who are compensated for services performed and whose duties are under the control of an employer.

Employee's Cost Basis

This is the amount taken away from the total amount paid to a pension beneficiary, so as to determine the part of the distribution that is taxable.

Employees Profit Sharing Plan (EPSP)

In Canada, this is a profit sharing species, whereby the employer makes a deposit of funds in a trust account, but is able to withdraw the amount deposited for tax purposes. Employees typically are taxed on contributions made on their behalf during the year in which the contribution is made and also taxed on interests earned, if any.

Employment Contract

In a way, all employment is an employment contract, but at times it is in the interests of the company to establish a written agreement. This is usually for a key employee. Such a contract usually includes a written guarantee of receiving certain rewards, regardless of the results produced on the job beyond a stipulated period. The employment contract may also have other stipulations, such as a no competition clause (where the new employee agrees not to compete with the business of the present employer for a certain amount of time).

Employment Taxes

In the United States, employers are required to pay a number of taxes on their payroll. These include Social Security, Medicare, and Unemployment taxes. Employees must also pay toward Social Security and Medicare. In addition, employees have deductions for income taxes.

Endorsement

Also known as a RIDER, this is an amendment made to an insurance contract, which then becomes part of the agreement by expanding or by limiting the existing terms.

Endorsement Method

The way the beneficiary to a life insurance policy is changed. Change may be effected in the following ways: (1) The owner of the policy may return the contract to the insurer. The insurance company then ‘ endorses’ it with the name(s) of any new beneficiary or (2) the policy is not actually returned to the insurer. Instead, the policy owner requests (over the telephone) that a change be made reflecting, the fact that there are new beneficiaries. Then the insurer mails an endorsement, reflecting the change, to the policy owner. Compare with recording method.

Endowment Insurance

A kind of life insurance policy providing benefits (1) if death occurs within a pre-determined number of years, or (2) if after a pre-determined number of years, the insured is still living.

Enhancement Type Policy

A life insurance policy whereby part of the dividend is used to provide paid-up-additions and the other is used to produce a pre-established death benefit.

Enrolled Actuary

An actuary of a pension who has met the requirements and who has been enrolled by the Joint Board for the Enrollment of Actuaries (a federal agency).

Entertainment Expenses

Employees are entitled to reimbursement for business-related entertainment expenses; these payment are not considered wages if maintained separately. Business must be the purpose of the entertainment or meal such that there is at least discussion of business during the time. While meals are the most common entertainment items, sporting events, concerts, or other entertainment is allowable.

Entire Contract Provision

This is an insurance clause that states that only the actual policy and the application for it are binding on the parties.

Equal Employment Opportunity Commission (EEOC)

The purpose of the Equal Employment Opportunity Commission (EEOC) is to administer the various discrimination laws of the federal government. EEOC has the authority to investigate and conciliate charges of discrimination because of race, color, religion, sex, or national origin by employers, unions, employment agencies, and joint apprenticeship or training committees.

Equal Pay Act Of 1963

Makes gender based differentials in pay (wage discrimination) illegal, for jobs that are similar in terms of qualification requirements and that are performed under similar working conditions

Equal Pay For Comparable Work

This doctrine goes beyond the Equal Pay Act of 1963. It states that women must be paid the same in a female dominated job type as a man for a job that is substantially of the same value in a male dominated job type. This doctrine is in effect saying that job value / worth can be measured.

Equal Pay For Equal Work

The intention of this doctrine is to protect women from gender based discrimination in pay and the U.S. Equal Pay Act of 1963 embodies it.

Equitable Assignment

A transfer which though it does not meet the requirements needed for a legal assignment, will be enforced because it is the right thing (the equitable or the fair thing to do).

Equity

Several definitions: 1) In legal terms, equity came about as a means or righting wrongs not recognized / or provided for under the British Common Law. (2) The word equity is often used to describe ownership in stock or other forms of securities. (3) In terms of accounting, equity may be used to describe the percentage by which a company's assets exceed the company's liabilities. (4) Also, in terms of accounting, equity is used to describe investments of business owners in a business.

Equity Allocation

A term used to describe when a part of a retirement plan is funded by common stock investments (investments in equity).

Equity Investment

An investment which grants the investor an ownership title and or voting rights.

Equity Method

An accounting technique used by an investor who owns 20% to 50% of the voting shares / voting common shares. See cost method and consolidated subsidiary accounting.

Equity Pension

A pension plan providing benefits, partially at least, which varies according to the success of the investment in common stocks (or other investments). The equity part of the pension benefit is intended to provide benefits that grow as the rate of inflation rises.

Equity Theory

This principle states that job satisfaction or motivation comes from the comparison of an individual's input (investment) and the related outcome that follows with the input and result / outcome of another individual. If the result of the comparison is equal, then equity is said to exist.

Equity-Based Insurance Product

A life policy or an annuity whereby the value and benefit fluctuate depending on the performance of the equity investments. Owners of this kind of insurance policy, in effect are accepting and or risking to sharing in the insurer's gains and losses.

Equivalent Annual Percent Increase (EAPI)

Same as annualized increase percent.

Equivalent Level Annual Dividend (ELAD)

An amount presented as part of interest-adjusted method of comparing cost of life policies, to consumers. The equivalent level annual dividend is meant to represent the part of the interest-adjusted payment and the cost that is, in effect, not guaranteed by the insurer, because dividends will change in the future as the insurer's experience changes. This amount gives the buyer an idea of the extent that nonguaranteed amounts affect the interest-adjusted payment and the cost of a policy.

Equivalent Single Payment

A payment which is equal in amount to a series of other lesser payments and which may be made in place of several other payments.

Equivocal Suicide

A suicide which leaves no doubt as to the deceased's intention to die as a result of a self-inflicted destructive act.

e-Recruiting

Recruiting services provided over the Internet are called eRecruiting and offer the ability for job seekers to log in and post their resumes. Similarly, organizations may post job openings with these online services, using email and chatboards to further communication. Typically, the Internet service provider chargers the organization a fee for posting the open position information.

Ergonomics

A methodical application of known information about every aspect (physical, psychological and social attributes) of human beings to the establishment and use of everything that may affect a person's working condition. This includes working environment, layout, training, the organization of the work-load and the job itself.

ERI Data Observations / Counts

ERI's software data is based upon a plethora of original sources, including hundreds of surveys. Some of these surveys do not specify the number of enterprises surveyed or the number of incumbent observations reported. Other surveys do enumerate the number of observations, but their totalities may involve redundant counts. In keeping with our constant insistence on accuracy and statistical precision, ERI declines to estimate how many total job incumbents are represented by the current consensus updated figures we report by industry, location, relevant experience, or size dimension from every possible source. Instead, we provide only the reliability statistics for one single identifiable survey out of the hundreds that we analyze. This source's counts can be proven accurate and precise (even if somewhat conservative, given all the many additional sources we also reference). For the Salary Assessor software, this source is the Bureau of Labor Statistic's OES; for the Executive Compensation Assessor software this is the SEC Edgar list of all ~14,000 registered US corporations. For Canada, we receive no similar reliability statistics from Statistics Canada.

ERI Distance Learning Center (DLC)

The ERI Distance Learning Center (DLC) provides compensation and benefit courses. Online education lets you attend class in your home, your office, or while traveling - 24 hours a day, 7 days a week. All you need is a computer with an Internet connection. Each course examines a topic used daily by HR professionals. The DLC offers downloadable course materials, interactive self-study exercises, instantly graded exams, and the ability to track credits and print completion certificates. Courses are free, and continuing education credit costs just $19 per certificate. DLC courses are approved for PHR/SPHR, CBP/CCP/GRP, CPE, JCA, CLE, and CE credit. To enroll, go to www.eridlc.com and click on Enroll Now! at the top of the page.

ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) was passed to ensure that pensions offered by private-industry employers met certain standards and were received by employees. ERISA does not require employers to offer pension programs. But ERISA does require that those who offer pension programs follow certain rules if they want favorable tax treatment for their contributions and employee’s deferral of income. ERISA’s four basic requirements cover participation, vesting, funding and fiduciary duties. For more information on ERISA, see DLC Courses 15, 42 and 74.

ERP

ERPs are the most common form of EDUCATIONAL BENEFIT. Under an ERP an employer could fully or partially reimburse an employee for education or training expenses on a pay-as-you-go basis.

Error And Omissions (E&O;) Insurance

A type of insurance which is designed to cover claims resulting from negligent acts and or mistakes of an insurance agent, including but not limited to (1) his or negligent acts or omissions or (2) mistakes made by individuals for whom the agent is vicariously liable.

ESOP

A contract between a company and an employee, giving the employee the right to purchase a specific number of shares in the company for a fixed price, during a certain period of time. Employee Stock Option Plans should not be confused with the term EMPLOYEE STOCK OWNERSHIP PLANS (also ESOPs), which are retirement plans.

Estates

Both assets and liabilities left by an individual upon his or her death. This includes any monies owed to the employee by the employer (wages are the most obvious but these could, theoretically include interest stemming from a retirement program and or life insurance policy which the company provides.

Estoppel

Estoppel is a legal term that creates a bar to alleging or denying a fact because of one's own previous actions or words to the contrary.

European-Style Option

A stock option contract that may be exercised only during a specified period of time just prior to its expiration. This is in contrast to American-style options, which may be exercised at any time between the purchase date and expiration date.

Evergreen Authorization

A term employed to describe a situation where shares are set aside to be granted in the future under an option which represents a portion of shares that are outstanding for every year the plan exists. Shares that remain unused from a previous year get carried forward to be used in a later evergreen plan. Typically, such plans remain in full effect until cancelled by the board of directors.

Evergreen Plan

A plan that has no specific date, upon which grants will no longer be permitted. Typically, a grant such as this remains in effect until specifically canceled by the board of directors.

Evidence Of Insurability

This is proof that an individual is an insurable risk.

Excess Benefit Plans

Excess Benefit Plans are one form of non-qualified deferred compensation arrangements to supplement other retirement benefits for highly compensated executives. These plans are initiated in order to attract retain and attract motivated executives. They may also be used for early retirement, takeovers, and firing of top executives.

Excess Benefit Transaction

A transaction in which a DISQUALIFIED PERSON receives an economic benefit from a tax-exempt organization that exceeds the value of the benefit the disqualified person provided to the organization. In terms of compensation, this means it was unreasonable compensation under Section 162.

Excess Contributions

Excess Contributions are those contributions that exceed the deductible limits. A contribution to a profit-sharing or stock bonus plan is limited to 15 percent. The excessive amounts are subject to an excise tax of 10 percent.

Excess Interest

An interest amount, which is above the guaranteed amount, which an insurance company must pay, when interest rates increase, on a settlement option.

Excess Plan

Several definitions: 1) A plan providing benefits, only in excess of limits imposed on plans that are tax-qualified. (2) Also a plan providing benefits to company executives who have limited 401(k) plans.

Exchange Program

A program which permits the insured to exchange a policy with another without the requirement of proving insurability.

Exchange Rate

Several definitions: 1) The price that the currency of one country is in relation to the currency of another country.

Excise Taxes

Excise taxes are a wide variety of taxes levied on employers for two main reasons. The first is as a penalty for failing to perform a required action or purposely or accidentally doing something wrong. The second type of excise tax is like a license to perform something. You pay for the privilege of having the right to do something. Most of these excise taxes have to do with the administration of benefit programs or taxes.

Exclusion Ratio

A term used to refer to the taxable part of an annuity plan. May also be used to describe the ratio of an employee's cost basis in relation to the employee's anticipated return.

Exclusion Rider

Also known as impairment rider, this is a supplement to a health policy excluding or limiting insurance for a particular health defect.

Exclusions

These are losses not covered by an insurance policy. In terms of Accidental death policies, exclusions would be causes of death not deemed to be accidental. In terms of health insurance, this would be losses not insured (those that were pre-existing, surgeries that are cosmetic in nature or injuries that are self inflicted.

Exclusive Agents

Known also as captive agents, exclusive agents are those who work exclusively for one insurance company and who may not represent another company.

Exclusive of Board, Lodging, or Other Facilities

Under FLSA, the phrase ‘‘exclusive of board, lodging, or other facilities’’ means ‘‘free and clear’’ or independent of any claimed credit for non-cash items of value that an employer may provide to an employee. (Section 541.606)

Exclusive Territory

This is a territory no other agent may operate and offer insurance products. May be contrasted with nonexclusive territory and overlapping territory.

Exculpatory Statute

In community-property states, this is a law that permits an insurance company to pay proceeds of a life policy according to the terms of the agreement without the risk of incurring double liability.

Executive

In relation to businesses, an executive is taken to be anyone who a sizeable amount of responsibility where the management of a company is concerned.

Executive Benefits

Provided to a limited number of executives, this is a form of non-cash compensation that is over and above the benefit packages given to the other employees. These may include but are not limited to company car and supplemental insurance.

Executive Officer

Responsible for a significant business/company function. Usually an executive officer is involved in policy-making.

Exempt Employees

Employees who are not subject to (i.e., they are exempt from) FLSA minimum wage and overtime provisions. These employees are typically paid on salary.

Exercise (Of A Share Option Or Other Executive-Plan Feature)

When a share option holder (owner) actually takes possession of the proceeds of the shares or of the shares themselves, he or she is said to have exercised their share option. In other words, the actual buying of shares under the terms of stock option grant.

Exercise Period

Time frame / the specific days during which stock option may be purchased by the holder of the option.

Exoneration Statutes

A statute the effect of which is to pardon an insurer if a claim of policy proceeds is made when the insurer has already made payment to another party without knowing of other conflicting claims (e.g., the payment was made in good faith).

Expatriate

Also known as an international assignee or international staff, this is an individual who has been assigned to a country other than his or her home base for a period of time.

Expatriate Premium

This term is used to describe any number of supplemental payments which is made to an international assignee / expatriate employee in order to compensate for any hardship, education of dependent children in their mother tongue or other conditions that may be specific to the location.

Expectancy Theory

This is a theory that states that individuals make choices according to what they anticipate will give them the most payoffs. When applied to salaries, it follows that employees must hold the belief that the greater the effort that they make, the better their performance will be (the greater their results) and therefore the higher the salary they will command.

Expense Accounts And Allowances

Expense Accounts are ordinarily a feature of perquisites for executives. Since executives create expenses as a part of their jobs, they are allowed to keep an account, which allows them to be reimbursed periodically for these expenses.

Experience Rating

This rating system makes use of a group's premium and their claim experience to establish premium rates. Depending on the previous year's claim experience the insured party's premium will go up or down. See blended rates and manual rates.

Experience Refund

Several definitions: 1) The part of an insurance premium, which is given back to, the policyowner who experiences better than predicted claim experience. May also be known as an experience rating refund and or retroactive rate reduction. See dividend. (2) The part of a reinsurance premium which is returned to the ceding company in a situation whereby the actual claim experience is better than that which was predicted.

Experience-Rated Arrangement

This is an insurance policy whereby the premiums are set according to the insured's previous claim experience.

Experimental Underwriting

As the name suggests, this is when an insurance company accepts to cover a risk on an experimental basis (risks which, under normal circumstances, they would not insure against).

Expiration Date

The date on which an option is nullified, if it is not exercised. The day that the option to exercise ceases.

Express Authority

This is an authority specifically granted upon an agent. Compare with implied authority and or apparent authority.

Extended Spouse's Allowance

Peculiar to Canada, this is an Old Age Security (OAS) benefit which is payable had been dependent on and was receiving a 'spouse's allowance', when their spouse dies. Such a person is entitled to receive this benefit until they either remarry or until they attain the age of 65. See and compare with spouse's allowance.

Extended Term Insurance Option

A non-forfeiture option providing for cash value of a policy to be applied as a net one time payment to purchase a term insurance at the same price as the death policy which is being surrendered minus and loans outstanding. The insured party still will have the same coverage but typically for a shorter time. See non-forfeiture options.

External Equity

The measure of a company's pay scales (pay levels or the going market rate) compared to the rate of other similar companies. External equity indicates that a company's pay levels are comparable to the market rate.

External Wage Structure

Defines the wide variety that exists in pay rates that a company faces in the different labor and occupation markets.

Extraordinary Items

Either a gain or a loss stemming from an unusual event, which is non-recurring. An extraordinary item would typically be recorded separately on a company's financial statement.

Extra-Percentage Tables Method

A plan commonly used to rate substandard risks. Using this system, each substandard risk is charged a premium a specific percentage above the standard rate. To be contrasted with the standard premium method.

Extrinsic Rewards

Rewards related to work and which is received for performance that can be measured in monetary terms. Contrast with intrinsic rewards, which stem from personal satisfaction stemming from a job well done.