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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IBNR (Incurred But Not Reported)

Claims that have been incurred but have not been reported to the insurer as of some specific date. Often a disputed figure since carriers must estimate this liability for accounting purposes based on their experience with claims lags.

Identifying The Customer

Understanding who the prospect is and the cycle of the sales process.

Illness Perils

A systematic classification method to classify the type and degree of a peril, for a specific industry, to a specific occupation. An insurance company does the system of classification.

Immediate Annuity

An annuity under which income payments begin one annuity period (e.g., one month or one year) after the annuity is purchased.

Immediate Participation Guarantee Contract (IPG)

A group insurance contract under which the employer's unallocated account is credited with its share of actual investment income for the year. There is generally no guarantee of principal or a minimum rate of interest. Annuity payments are charged directly against the account as they are paid.

Immigration Prevailing Wage Rates

A special set of definitions exist for determining the competitive rate of pay that should be paid to immigrants who hold temporary work permits in the United States. These rules are spelled out in General Administrative Letter 2-98.

Impairment

The amount by which stated capital is reduced by distributions and losses.

Impairment Rider

A rider attached to a health insurance contract that waives the insurance company's liability for all future claims on a pre-existing condition.

Implied Authority

Authority that, while not specifically granted to the agent in the agency agreement, the agent can assume he or she has through common sense. Authority that is apparently necessary for an agent's ability to carry out day-to-day or routine responsibilities.

Improshare

Cost-saving group incentive plan in which a standard cost of production is established and the employees share in the cash savings of production costs under that amount. Improshare stands for improved productivity through sharing.

Incentive

Additional pay (above and beyond the base salary or wage) awarded to an employee.

Incentive Compensation

Rewarding the performance of an individual in an institution with added compensation, typically in the form of bonuses or percentage increments above the base salary.

Incentive Pay

Additional pay, a higher wage, or a bonus paid to promote the productivity of an employee.

Incentive Stock Option (ISO)

Gives an employee a right to purchase company stock usually at a bargain price.

Incident Of Ownership

Rights that will result in the inclusion of life insurance policy proceeds in the policyholder's estate for federal estate tax purposes.

Income Protection Insurance Policy

A disability income policy, which specifies that an insured be disabled if he or she suffers an income loss caused by a disability, therefore qualifying him or her for benefits under the policy.

Income Replacement Benefit

A residual or partial disability benefit that is to be paid upon satisfaction of the company's elimination period, and the employee experiences another loss of earnings due to a previous partial or total disability.

Income Replacement Ratio

The amount of gross income that is replaced by the retirement plan.

Income 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.

Incontestable Clause

A clause that provides that the insurer may not contest the validity of the contract after it has been in force for a period of years.

Increasing Term Insurance

Term life insurance coverage that increases in face value each year (or certain period) from the date of policy issue to the date of expiration.

Incumbent

Holding an indicated position, role, office, etc., currently.

Indemnification

The compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.

Indemnity

A benefit paid by an insurer for a loss insured under a policy.

Independent Contractors

As distinguished from an employee by the IRS, the worker, not the employer, largely determines a person who works for another whose labor and how it is performed. Independent contractors pay their own taxes the employer does not, for example, pay Social Security or unemployment taxes for the worker.

Independent Investor Test

This test considers the return on investment indicated by the increase in the value of a corporation’s stock along with dividends paid during the time period in question. It looks at the company’s performance throughout the year to determine if the compensation to key employees is reasonable. Basically, an “independent” investor should be happy with the return on his/her investment and not object to the compensation paid to key employees. The rate of return must be high enough to warrant their pay.

Independent Life Brokers

An insurance solicitor, licensed by the state, who places business with a variety of insurance companies and who represents the buyers of insurance rather than the companies even though he or she is paid commissions by the companies.

Independent Physicians Association (IPA)

A type of managed care organization composed of a group of independent physicians who have formed an association as a separate legal entity for contracting purposes. IPA physician providers retain their individual practices, work in separate offices, continue to see their non-managed care patients and have the option to contract directly with managed care plans.

Independent Property / Casualty Broker

A Broker is any person who, on behalf of the insured, for compensation as an independent contractor, for commission, or fee, and not being an agent of the insurer, solicits, negotiates, or procures insurance or reinsurance or the renewal or continuance thereof, or in any manner aids therein, for insureds or prospective insureds other than him.

Independent Variable

A variable in a functional relation whose value determines the value or values of other variables, as x in the relation y = 3x2.

Indeterminate Premium Life Insurance

A type of nonparticipating whole life insurance that allows premium rate modifications throughout the life of the policy and guarantees that the premium rate will never exceed a stated maximum rate.

Indexation

Modifying contracts so that their dollar terms adjust to the inflation rate as measured in an index, such as the consumer price index.

Indexed Options

An option based on the market value of a particular group of stocks. Unlike stock options, index options--when exercised--are settled in cash.

Indexing

A statistical model expressed in terms of percentages of a base year or years that serves as a reference in judging investment performance. The index most often used for stock market performance is the Standard & Poor's 500 Index, which measures the average performance of 500 widely held common stocks. Other frequently used indexes are the Dow Jones Industrial Average, the NASDAQ and the Russell 2000, used for smaller company stocks, the Toronto Stock Exchange 300 Composite Index (TSE 300), used in Canada, and the Morgan Stanley Capital International Europe, Australia, Far East Index (EAFE), which is used as a benchmark for foreign company stocks.

Indirect Labor

Workforce not directly engaged in the manufacture of a product line.

Individual Account Plan

A defined contribution plan or profit-sharing plan that provides an individual account for each participant, allows participants to choose, from a broad range of investment options, how their accounts will be invested, and whose benefits are based solely on the amount contributed to the participant's account, including income, expenses, gains and losses. Defined contribution retirement plans such, as 401(k) plans are examples of individual account plans.

Individual Contract Pension Plan

A type of pension plan, frequently used for small groups, administered by trustees who are authorized to purchase individual level premium policies or annuity contracts for each member of the plan. The polices usually provide both life insurance and retirement benefits.

Individual Insurance

An individual life or health insurance policy purchased on an individual basis (as distinct from group and blanket insurance.) Sometimes called personal insurance.

Individual Pay Rate

A pay level assigned to an individual or to a particular position.

Individual Practice Association

A type of managed care organization composed of a group of independent physicians who have formed an association as a separate legal entity for contracting purposes. IPA physician providers retain their individual practices, work in separate offices, continue to see their nonmanaged care patients and have the option to contract directly with managed care plans.

Individual Retirement Account

Individuals, whether they are covered by a pension or not, are now permitted to save money on a tax-deferred basis in a qualified IRA plan. Although money can be withdrawn, a 10% penalty has been placed on those assets withdrawn prior to the individual turning 59 1/2, in addition to the normal taxes, which must be paid upon withdrawal. An individual can set up his own plan with a bank, insurance company, brokerage house or mutual fund. A company can also deduct an agreed-upon amount from employees' paychecks and send it along to a designated agent, or set up its own plan where managers are selected to manage the assets.

Individual Retirement Account (IRA)

Individuals, whether they are covered by a pension or not, are now permitted to save money on a tax-deferred basis in a qualified IRA plan. Although money can be withdrawn, a 10% penalty has been placed on those assets withdrawn prior to the individual turning 59 1/2, in addition to the normal taxes, which must be paid upon withdrawal. An individual can set up his own plan with a bank, insurance company, brokerage house or mutual fund. A company can also deduct an agreed-upon amount from employees' paychecks and send it along to a designated agent, or set up its own plan where managers are selected to manage the assets.

Industrial Insurance

Life insurance issued in small amounts, usually less than $1,000, with premiums payable on a weekly or monthly basis.

Industry Wage Surveys

Surveys conducted and collected by a variety of sources to provide wage information for a wide variety of industries.

Inferential Statistics

That branch of statistics dealing with procedures used to make inferences about a population from information contained in a sample.

Inflation

A phase of the business cycle characterized by abnormally high prices, a decrease in the purchasing power of money, and spiraling costs and wage rates. Inflation may occur when purchasing power is in excess of goods and services for sale, and/or buyers stampede to convert money into commodities or when production costs and prices advance to consecutively higher levels.

Initial Deductible

Several definitions: 1) Amount of expenses which the insured party must pay before receiving any benefits from the insurance company. (2) An item or expense which is taken away from an individual's gross income in order to reduce the amount of taxable income (e.g. mortgage interest, state taxes, business expenses which are not reimbursed and charitable contributions). See also calendar year deductible, corridor deductible, family deductible, integrated deductible and per cause deductible.

Initial Premium

In life and health insurance, the first premium, generally payable with the application or upon delivery of the policy. In group insurance, especially health, an amount paid at the inception of an insurance contract that permits adjustments to be made based upon future experience.

Initial Public Offering

The original sale of a company's securities to the public.

Initial Reserve

In life insurance, the reserve amount determined at the beginning of the policy year. It equals the preceding year's terminal reserve, plus the annual net premium.

Inside Build Up

In terms of life insurance policy, this is the amount of money, before adjustments are made for factors such as policy loans or late premiums, that the policy owner will receive if the policy owner allows the policy to lapse or cancels it and surrenders the policy to the insurance company. Cash values are a feature of most types of permanent life insurance. Compare to cash surrender value. Also known as inside build-up and policy owner's equity.

Inside Director

A member of a company's board of directors who is also an employee of the company.

Inside Payroll Costs

Payroll costs that are not separated out.

Insider

A stockholder who owns 10% or more of a company, a member of the board of directors or an elected officer of a corporation, or anyone else who possesses information that is not publicly known about the company, but which is important in valuing its stock. Securities and Exchange Commission (SEC) regulations place restrictions on stock purchases and sales by insiders.

Insiders

Section 16 of the SEC regulations identifies 'insiders' as those precluded from profiting, unfairly from the sale and or purchase of company stock.

Insolvency Clause

In reinsurance, a clause that holds the reinsurer liable for its share of loss assumed under the treaty, even though the primary insurer is insolvent.

Inspection Receipt

In life and health insurance, a receipt obtained from an applicant when a policy (upon which the first premium has not been paid) is left with him or her for further inspection. It states that the insurance is not in effect and that the policy has been delivered for inspection only.

Installation

The act of installing or condition of being installed.

Installment Certificate

A certificate given to the beneficiary of an insurance policy stating the benefit payment information.

Installment Refund Option

An insurance option that states if any proceeds from a policy remain after the beneficiary's death, they will be paid to the contingent payee in a series of installments.

Insurability Provision

An insurance provision stating that the policy will not become effective unless the insured is still considered insurable at the time of delivery.

Insurability Statement

A statement ascertaining if there have been changes in insurability between the time of application and policy issue.

Insurability Type Temporary Insurance Agreement

An agreement that provides temporary insurance for a short period of time, such as during the period in which regular insurance is being written.

Insurable Interest

A person's or party's interest--financial or emotional--in the continuing life of an individual, a person or party must have an insurable interest in the life of a proposed insured in order to purchase an insurance policy on the proposed insured's life.

Insurance

A means of providing or purchasing protection against some of the economic consequences of loss. Risk of loss is transferred to a third party in exchange for a 'consideration' or premium. This exchange creates an insurance contract.

Insurance Act

This Act, except as provided, applies to every insurer that carries on any business of insurance in British Columbia and to every contract of insurance made or deemed made in British Columbia.

Insurance Agent

A sales representative of an insurance company.

Insurance Coverage

Generally refers to the amount of protection available and the kind of loss which would be paid for under an insurance contract with an insurer.

Insurance Network

An HMO model that contracts with multiple physician groups to provide services to HMO members, may involve large single and multispecialty groups.

Insurance Regulatory Information System (IRIS)

Formerly known as Early Warning System or Early Warning Tests, financial ratio and performance criteria designed by the National Association of Insurance Commissioners to identify insurance companies, which may need close surveillance by state insurance departments.

Insured Plan

A pension plan in which the benefits are at least partially insured by an insurance company. Such plans provide a death benefit to beneficiaries if the employee dies before retirement.

Insurer

The insurance company or party that provides the insurance policy.

Insurer Administered Organization Insurance Plan

A group insurance plan in which the insurer handles all administrative work.

Integrated Deductible

A deductible that can be satisfied by payments in another portion of the plan.

Integrated Dental Plan

A major medical plan that has a dental plan as part of their features.

Integrated Pension Plan

A pension plan that is integrated with Social Security retirement benefits.

Intensive Care Units

The specialized center in a hospital where intensive care is provided.

Intercept

The x-intercept, or y-intercept, or z-intercept, etc., a point where a curve crosses the x-axis, or crosses the y-axis, or crosses the z-axis, etc. EX. A linear equation when graphed has at most one x-intercept.

Interest Adjusted Cost

In life insurance, a method of comparing costs of similar policies by using an index that takes into account the time value of money due at different times through interest adjustments to the annual premiums, dividends and cash value increases at an assumed interest rate.

Interest Option

In life insurance, a settlement option under which all or part of the proceeds of a policy are left with the insurance company for a definite period at a guaranteed minimum rate of interest. The principal remains with the company for a specified period of time. Interest may be paid (usually subject to certain minimums) annually, semiannually, quarterly or monthly # or, in some cases, may be added to the proceeds.

Interest Rate

That percentage of a principal sum earned from investment or charged upon a loan.

Intermediate Sanctions

Under Section 4958 of the IRS code, the agency may impose penalty taxes on “disqualified persons” and organization managers” when an “applicable tax-exempt organization” engages in an “excess benefit transaction” with the disqualified person[s]. Definitions of the above are as follow.

Applicable tax-exempt organization are those exempt under Section 501(c)(3) or (4). A disqualified person is one who in the past five years was in a position to exercise substantial influence over the affairs of the exempt organization. An organization manager is any officer, director, trustee, or person having similar powers or responsibilities in the exempt organization. An excess benefit transaction is one in which the disqualified person received an economic benefit from the exempt organization that exceeds the value of the benefit the disqualified person provided to the organization. In terms of compensation, this means there was unreasonable compensation under Section 162.

The penalty taxes consist of: 1) Correction by repayment of the overpayment. 2) An excise tax of 25% on the correction. 3) An additional tax of 200% of the correction if payment is not made in 90 days.

Internal Equity

Refers to the pay relationships among jobs.

Internal Revenue Code (IRC)

The federal agency responsible for administering and enforcing the Treasury Department's revenue laws, through the assessment and collection of taxes, determination of pension plan qualification, and related activities. See also 1099, 401(k) plan, amended return, audit, backup withholding, deficiency, determination letter, imputed interest, itemized deduction, over-55 home sale exemption, revenue ruling, standard mileage rate, wash sale rule.

Internet

Short for Internet work. A network of networks, a group of networks interconnected via routers. Contrast with The Internet (with a capital I), the world's largest Internet.

Interpleader

The procedure when two parties are involved in a lawsuit over the right to collect a debt from a third party, who admits the money is owed but does not know which person to pay. The debtor deposits the funds with the court ('interpleads'), asks the court to dismiss him/her/it from the lawsuit and lets the claimants fight over it in court.

Interquartile Range

Statistics. The range including the central 50% of the observations in a data set.

Intrinsic Motivation

An incentive that originates from the behavior itself rather than from an external reward or reinforcement. Thus, intrinsically motivated behavior.

Intrinsic Rewards

Reward employees for their good work.

Invention, imagination, originality, or talent

Distinguishes from work that primarily depends on intelligence, diligence, and accuracy.

Investigative Consumer Report

A special type of credit report, which contains more detail than a routine credit report. For example, it includes information regarding a consumer's character, general reputation, and personal characteristics.

Investment Companies

A company or trust managed by investment professionals that invests its capital in other companies for purposes of diversification, the two principal types of which are the closed-end and open-end or mutual fund. Closed-end funds have a fixed capitalization, and are usually listed and traded on the New York Stock Exchange like any other security, and may sell at a premium or discount to net asset value. Open-end funds whose shares are not listed stand ready to sell new shares continuously to investors and to redeem them when called upon to do so.

Investment Managers

Long-term, risk-return targets developed principally from careful consideration of plan sponsor factors, investment factors and a forecast of the future. Critical in the adoption of investment objectives is the asset allocation decision.

Investment Sensitive Insurance

A form of life insurance (also called Universal Life II or flexible life) offering a guaranteed death benefit that combines the flexible premium features of universal life with the investment component of variable life.

Investment Year Method (IYM)

Any dividend calculation method that recognizes differences in earned interest rates depending upon the year in which the investment is made.

Involuntary Plan Termination

The termination of a pension plan by a party other than the plan sponsor, generally a governmental organization.

Irrevocable Beneficiary

An unalterable beneficiary. The owner gives up the right to change the beneficiary designation without the beneficiary's consent.

Issuing Bank

A bank that opens a straight or a negotiable letter of credit. This bank assumes the obligation to pay the beneficiary or a correspondent bank if the documents presented are in accordance with the terms of the letters of Edit.