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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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Face Page

This is the first page of an insurance agreement. This page typically includes the name of the insured party, their age and the name of the policyowner if it is different from the insured's name. This page also states the amount of the premiums, the agreement number, date on which the parties entered into an agreement. Lastly, this page normally has the signatures of both the president and the secretary of the company.

Face Validity

When a technique clearly appears to do what it’s intended to do.

Facility-Of-Payment Clause

A provision of life insurance which allows the insurer to pay part of or all of the proceeds of the policy either to a blood relation or the insured party or to anyone who has a valid claim. This clause permits the insurer to pay benefits on time when it is not possible to pay benefits to the beneficiary who is identified in the insurance agreement.

Factor Comparison Method

A method of evaluating jobs whereby a series of job rankings are performed in order to establish which particular job incorporates the most or the least of the factors considered to be compensable.

Factor Table

Used by underwriters to establish the net worth of an applicant by specifying what that the applicant's income should be multiplied by in order to arrive at the maximum permissible insurance coverage.

Factor Weight

The weight assigned, in job evaluation, to compensable factors indicating their relative importance.

Fair Credit Reporting Act (FCRA)

A federal law meant to ensure that consumer-reporting agencies are fair in their reporting (especially where the consumer's right to privacy is concerned. See consumer-reporting agency.

Fair Labor Standards Act Of 1938 (FLSA)

This is a federal law that governs, amongst other things, child labor law, minimum wage and record-keeping requirements.

Fair Market Value (FMV)

The price of stock is typically measured as an average of the low and high market prices of a company's share of stock, on a specific day and on a recognized stock exchange.

Family Benefit

This is a life policy providing term coverage for spouses and children of the insured's.

Family Deductible

Relieves a family from having to satisfy a deductible for each member of the family. The family deductible sets a single deductible for the entire family unit.

Family Income Insurance

Typically, this type of specialized individual insurance policy combines decreasing term with the whole life insurance. The former provides income for a pre-established period for the insured's family and the latter portion is normally paid in a lump sum when the insured party dies.

Family Insurance Policy

This type of insurance policy covers the entire family unit under the one policy.

Family Leave

Paid or unpaid time off granted an employee for the purpose of caring for a family member who is seriously ill or who has a serious medical condition. Also granted when a new baby is born or a child is adopted.

Fasb Statement No. 35

Issued by the Financial Accounting Standards Board (FASB) in 1985, the statement 35 deals with rules with which to measure and report a defined pension plan's value in accounting reports issued by the benefit pension plan.

Fasb Statement No. 87

Statement 87 governs the ways in which an employer accounts for and reports the costs of pension benefits offered to its employees. It requires that, for accounting purposes, employers use a cost method known as the projected unit credit method in order to establish the net periodic cost of pension benefits offered to employees. Statement 87 further requires employers to recognize a liability if the net periodic cost is higher than employer contributions to the plan and an asset if the net periodic cost is lower.

Fasb Statement No. 88

Statement 88 determines accounting requirements for employers whose defined benefit pension plans have been limited and or terminated, or who have experience other unusual events, (e.g., settlement of a pension obligation through a lump-sum payment of benefits to a plan beneficiary.

Fasb, Financial Accounting Standards Board

This Board published rules by which U.S. CPAs conducted their accounting. It replaced the Accounting Principals Board (APB) in 1974.

Federal Insurance Contributions Act (FICA)

Established the payroll deduction of OASDI and Medicare taxes from employers and employees. Under Chapter 9 of the Internal Revenue Code of 1939 and Subchapters A and B of Chapter 21 of the Internal Revenue Code of 1954, as such codes have been and may from time to time be amended.

Federal Rule of Evidence 702

Federal Rule of Evidence 702 was enacted by Congress to simplify and widen the admission of expert-witness testimony. It was hoped that Rule 702 would clear up the inconsistencies by the Frye decision. This rule was intended to support and extend Frye, not replace it. See DLC Course 11: Daubert Criteria in Expert Witness Testimony.

Federal Unemployment Tax Act

FUTA, as it is commonly known, imposes tax on employers in order to pay for the unemployment benefits system. The tax represents the wages paid to employees.

Federally Qualified HMO

This is a HMO, which fulfills Health Maintenance Organization Act of 1973 requirements. Federally qualified HMOs may receive some grants and loans from the government and they may be used by employers to meet the provision to provide dual choice.

Fee Basis

Under FLSA, administrative and professional employees may be paid on a fee basis. An employee will be considered to be paid on a ‘‘fee basis’’ within the meaning of these regulations if the employee is paid an agreed upon sum for a single job regardless of the time required for its completion. These payments resemble piecework payments with the important distinction that generally a ‘‘fee’’ is paid for the kind of job that is unique rather than for a series of jobs repeated an indefinite number of times and for which payment on an identical basis is made over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a given single task are not considered payments on a fee basis. (Section 541.605)

Fee Schedule

A list, which represents the maximum benefits payable under a company medical contract for specified procedures. See also relative value schedule. May also be known as schedule.

Fee Schedule Basis

Compensation plan found in HMOs and PPOs whereby physicians are paid a pre-established amount for specific services that they provide. See Capitation basis.

Feedback

The outcome or state of a system, which may be utilized in the modification of system's operation. This term is usually used in terms of compensation and as such, relates to the system whereby information is obtained regarding performance versus compensation.

FICA

The Federal Insurance Contributions Act established the payroll deduction of OASDI and Medicare taxes from employers and employees. Under Chapter 9 of the Internal Revenue Code of 1939 and Subchapters A and B of Chapter 21 of the Internal Revenue Code of 1954, as such codes have been and may from time to time be amended.

Fiduciaries

A fiduciary is a person who has a position of trust with respect to any other person. In employee benefit plans, covered by ERISA, there is a standard of conduct imposed upon such a person.

Field Allowance

Compensation in form of a payment to an expatriate for additional costs and difficulties and working in different locations.

Field Force

Insurer's field offices that house insurance agents.

Field Office

Local sales office.

Field Underwriter

An underwriter who works out of a sales office.

Field Underwriting

Underwriting of a prospective client that takes place out in the sales field or sales office.

Financial Accounting Standards Board

A private entity created by the accounting profession to develop and promulgate financial accounting standards and practices. Its membership is composed of top-level accounting professionals from business, government and education professions. It derives its authority from official recognition by the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA) and from the general support of corporate and investment communities. While the Securities and Exchange Commission (SEC) has the authority to regulate accounting standards, it nearly always defers to the FASB.

Financial Accounting Standards Board Statement 87 (FAS 87)

Issued in the United States by the Financial Accounting Standards Board (FASB) in 1985, Statement 87 governs the ways in which an employer accounts for and reports the costs of pension benefits offered to its employees. The Statement, titled 'Employers' A

Financial Institution

An institution that uses its funds chiefly to purchase financial assets (deposits, loans, securities) as opposed to tangible property.

Financial Intermediary

Often referred to as financial institutions, they act as the middleman between investors and firms raising funds.

Financial Planning

Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against that plan.

Financial Settlement

A payment made under a contract.

Financial Statements

A financial statement (sometimes called an income and expense declaration) is a court paper, which requires a party to specify her monthly income and expenses.

First Dollar Coverage

Insurance that provides payment for the full loss up to the insured amount with no deductibles.

First In, First Out

A method of valuing the cost of goods sold that uses the cost of the oldest items in inventory first.

First Year Commission

Commission amounts paid for a policy's first year of premium, based on an annual amount.

Fiscal Year

A 12-month period used by an organization as the accounting period. Can begin on any date. Is used as the time frame for financial reporting, preparation of profit and loss statements, etc.

Fiscal Year Budget (FYB)

A 12-month operating budget for an organization that can begin on any date. This time frame is used for financial reporting, preparation of profit and loss statements, etc.

Fixed Benefit Retirement Plan

A type of retirement plan providing benefits only on a fixed amount or at a fixed percentage # such as 1 percent of monthly salary times the number of years of credited employment or 25 percent of the employee's average pay over the last few years prior to retirement.

Fixed Liabilities

Also known as liabilities. These are often divided into current liabilities, which are due within a year of the date entered on the balance sheet and non-current liabilities, which are due more than a year after the date on the balance sheet.

Fixed Period Option

Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.

Flat Extra Premium Method

A method of rating a sub-standard life insurance risk when the extra risk is considered to be constant or temporary.

Flexible Benefit Plan

A benefit program under Section 125 of the Internal Revenue Code that offers employees a choice between permissible taxable benefits, including cash, and nontaxable health and welfare benefits such as life and health insurance, vacation pay, retirement plans and child care. Although a common core of benefits may be required, the employee can determine how his or her remaining benefit dollars are to be allocated for each type of benefit from the total amount promised by the employer. Sometimes employee contributions may be made for additional coverage.

Flexible Benefits

Many flexible benefit programs include flexible spending accounts, which give employees the opportunity to set aside pretax funds for the reimbursement of eligible tax-favored welfare benefits. FSAs can be funded through salary reduction, employer contributions or a combination of both. Employees can purchase additional benefits, pay health insurance deductibles and copayments, or pay for child care benefits with the money in their FSAs.

Flexible Compensation

An approach to expatriate compensation. Allowances can be changed depending upon the needs and desires of the expatriate.

Flexible Premium Annuity

An annuity under which the policyholder or contract holder may vary the amounts or timing of premium payments.

Flexible Spending Accounts

Many flexible benefit programs include flexible spending accounts, which give employees the opportunity to set aside pretax funds for the reimbursement of eligible tax-favored welfare benefits. FSAs can be funded through salary reduction, employer contributions or a combination of both. Employees can purchase additional benefits, pay health insurance deductibles and copayments, or pay for child care benefits with the money in their FSAs.

Flextime

A system of working according to which people work a set number of hours within a fixed period of time, but can vary the time they start or finish work.

FLSA

The Fair Labor Standards Act is a U.S. federal law that governs, amongst other things, child labor law, minimum wage and record-keeping requirements.

Foreign Corporation

A corporation, which was incorporated under the laws of a foreign country, here also called alien corporation. Also, a corporation doing business in a state other than the one in which it is incorporated here also called out-of-state corporation.

Foreign Employees

Employees that are employed in another country.

Foreign Insurer

An insurer is a foreign company in any state other than the one in which it is incorporated.

Foreseeability

A key issue in determining a person's liability. If a defendant could not reasonably have foreseen that someone might be hurt by his or her actions, then there may be no liability.

Forfeiture

The loss or surrender of money, property, a right or privilege due to failure to perform.

Forfeiture Loss

Loss of money or anything of value due to failure to perform, such as a deposit given to insure performance.

Form 10-K

A company's annual audited report filed with the Securities and Exchange Commission, due within 90 days of the end of the company's fiscal year.

Form Of Payment

All payments must be by cash, certified check, cashiers or treasurer's check or by a United States postal, bank, express, or telegraph money order.

Former Employee

An individual who was once an employee of a particular company or organization. Termination may be voluntary or not.

Fractional Premium

In insurance, a proportionate amount of the annual premium, that is, one-twelfth of the annual premium per month for each month involved. A premium less than the mode premium, usually used when a change in premium date is desired and the premium must be set to cover the tie period between the original payment date and the new one.

Fraternal Benefit Society

Fraternal benefit societies are open to men, women and children to provide social, educational and community service opportunities. In addition, fraternal benefit societies offer members life, accident and health insurance and/or annuities.

Fraternal Insurance

Insurance offered to a social organization for their members.

Fraudulent Claim

The submission of a claim, which contains false information, is a crime. You may not claim any item, which you did not own or did not ship. It is also illegal to deliberately falsify purchase prices, dates of purchase, quantities, or similar information.

Fraudulent Misrepresentation

A false statement of fact, made by a person who does not believe the truth of the statement or is recklessly indifferent to whether it is true or not, to another with the intention that the other person will rely on it.

Free Examination Period

A period of time where a policy or product can be reviewed and return it if satisfaction has not been met, with a full refund.

Frequency

Several definitions: 1) Number of times an average person or home is exposed to a media vehicle (or group of vehicles), within a given time period. (2) The position of a television or radio station's broadcast signal within the electromagnetic spectrum.

Frequency Distribution

Table of statistical data arranged to indicate the number of occurrences of each value.

Fringe Benefits

Non-salary employee compensation.

Front Loaded Policy

With this type of life insurance certificate, most of the expense charges take the form of deductions from each premium payment and continue throughout the premium-payment period.

Front Pay

The amount of lost earnings accruing between the time a plaintiff wins a legal judgment and is reinstated to his/her job or takes another job. Like back pay, front pay essentially is the equivalence of lost earnings. Neither Back Pay or Front Pay is subject to the Civil Rights Act of 1991 $300,000 liability cap. Each can be awarded over and above any compensatory or punitive damages.

Frozen Plans

Plans that have not been terminated but have ceased accruing benefits and are no longer accepting new participants.

Fully Contributory

A general term used with group health insurance plans in which the employee pays a portion of the premium.

Fund

To finance or underwrite.

Funding Agency

A financial institution or individual that provides for the accumulation or administration of the pension contributions that will be used to pay pension benefits.

Funding Standard Account

A pension plan funding approach under which a separate account is charged with certain liabilities and credited with certain amounts. The funding standard is satisfied when there is no accumulated funding deficiency, that is, when the balance in the account is zero.

FUTA

The federal government and the various states impose a tax on employers with respect to certain categories of employee service. A few states also require employees to contribute to the cost of providing unemployment benefits.

FUTA Tax

The Federal Unemployment Tax Act (FUTA) levies an excise tax on employers to pay for the unemployment benefits system. The tax is a percentage of the wages paid to employees. Contributions to state unemployment funds are generally a credit against the FUTA tax.

Future Service

For pension benefit purposes, the period of time beginning with the current date and ending with the anticipated date of an employee's retirement.

Future Value

The value at some point in the future of a present amount of money.