GBA/RPA 3: Employee Benefits and Social Insurance

Comprehensive vocabulary flashcards covering ERISA governance, benefit tax rules, audit requirements, retirement and health analytics, Social Security, Medicare, and global benefit arrangements.

Employee Retirement Income Security Act (ERISA) Scope

A federal law that primarily regulates private-sector pension plans and employee welfare benefit plans.

Employee Benefit Plan Existence Criteria (Donovan Factors)

The four objective elements that allow a reasonable person to recognize a plan: intended benefits, eligible beneficiaries, the source of financing, and procedures for obtaining benefits.

Payroll-Practice Exclusion

An exclusion from employee welfare plan regulation for normal compensation paid out of an employer's general assets during certain employee absences, such as short-term illness.

Voluntary-Benefit Safe Harbor

A safe harbor from regulation requiring four conditions: no employer contributions, completely voluntary employee participation, no employer consideration received other than reasonable administrative compensation, and no employer endorsement.

Plan Administrator (Default Rule)

The entity responsible for administering an employee benefit plan; if none is named in the official plan document, the plan sponsor (usually the employer) fills this role.

Plan Fidelity Bond

A required bond covering every individual who handles employee benefit plan funds, designed to protect the plan against fraudulent or dishonest acts.

Wrapper Plan Document

A document that adds missing legal and compliance provisions to existing insurance policies or certificates, which can also bundle multiple benefit programs under a single plan.

Summary Plan Description (SPD)

A primary disclosure document explaining participant rights, obligations, benefits, and operations; it must be redistributed at least every $5\text{ years}$ if material changes occurred, or every $10\text{ years}$ if no changes occurred.

Summary of Material Modifications (SMM)

A written notice informing participants of material changes to a plan, required generally within $60\text{ days}$ after any material reduction in covered health plan benefits.

Summary of Benefits and Coverage (SBC)

A concise, uniform summary of health coverage required prior to enrollment or reenrollment, formatted in at least $12\text{-point}$ font and restricted to $4\text{ double-sided pages}$.

Summary Annual Report (SAR)

A participant-oriented summary of the plan's Form 5500 financial filing; totally unfunded welfare plans paying benefits solely from general assets are generally exempt from distributing it.

Section 125 Cafeteria Plan

A plan allowing employee premium contributions to be made on a pretax basis by offering participants a choice between at least one taxable benefit (such as cash) and at least one qualified tax-free benefit.

Group-Term Life Insurance Exclusion Threshold

The statutory threshold allowing the first $\$50,000$ of employer-provided group-term life insurance to be excluded from an employee's gross taxable income.

Health Reimbursement Arrangement (HRA)

An employer-funded account providing tax-free reimbursement for qualified medical care; it is funded entirely by the employer without employee pretax salary reductions and allows unused funds to carry forward if the plan permits.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

An arrangement allowing eligible employers with fewer than $50$ full-time employees (including equivalents) and no group major medical coverage to provide tax-advantaged health reimbursements.

Health Savings Account (HSA) Catch-Up Contributions

Permitted additional HSA contributions for eligible account holders who are age $55$ or older, allowable up until enrollment in Medicare.

Health FSA Use-It-or-Lose-It Rule

The requirement that unused health flexible spending account balances at year-end be forfeited, unless the plan incorporates an optional limited dollar carryover or an optional $2\frac{1}{2}\text{-month}$ grace period.

Applicable Large Employer (ALE)

An employer that employed an average of at least $50$ full-time employees, including full-time equivalent employees, triggering ACA employer shared responsibility provisions and Form 1095-C reporting.

Investment Policy Statement (IPS)

A formal governance document outlining investment objectives, selection rules, performance monitoring benchmarks, and evaluation processes for a retirement plan.

Settlor Function

A discretionary employer business decision—such as designing, establishing, amending, or terminating a plan—which is not subject to ERISA fiduciary standards.

Ministerial Function

A routine, non-discretionary administrative duty performed within an established framework of rules, policies, and procedures.

FASB ASC Topic 960

The accounting standard codification topic governing the accounting and reporting framework for defined benefit pension plans.

FASB ASC Topic 962

The accounting standard codification topic governing the accounting and reporting framework for defined contribution pension plans.

FASB ASC Topic 965

The accounting standard codification topic governing accounting and reporting for health and welfare benefit plans.

ERISA Section 103(a)(3)(C) Audit

The formal auditing designation under Statement on Auditing Standards Number 136 for what was historically known as a limited-scope employee benefit plan audit.

Material Weakness in Internal Control

A deficiency, or combination of deficiencies, in internal control creating a reasonable possibility that a material misstatement in plan financial statements will not be prevented or timely detected and corrected.

Significant Deficiency in Internal Control

A control deficiency that is less severe than a material weakness, yet important enough to merit attention by those responsible for plan governance.

Tibble v. Edison International

A U.S. Supreme Court case establishing that plan fiduciaries have an ongoing, continuous duty to monitor investments and remove imprudent options, separate from their initial selection duty.

Basis Point

A unit equal to one-hundredth of one percentage point ($0.01\%$ or $0.0001$), where $100\text{ basis points}$ equal $1\%$

Qualified Default Investment Alternative (QDIA)

An approved fiduciary default investment vehicle—such as a target-date fund—applied to retirement plan contributions when a participant fails to make an affirmative investment election.

White Space Health Care Data

Valuable health analytics data residing outside structured claims systems, such as clinical progress notes, health risk assessments, and standalone spreadsheets.

Administrative Claims Audit

A systematic operational review by self-funded employers to uncover claims processing mistakes, billing errors, and eligibility issues, typically recovering approximately $1\%$ to $3\%$ of annual claims spending.

Retirement Income Generator (RIG)

A mechanism or systematic strategy—such as guaranteed lifetime annuities or structured withdrawals—used to convert accumulated defined contribution balances into dependable retirement cash flow.

Qualified Longevity Annuity Contract (QLAC)

A deferred fixed annuity designed to protect against late-life longevity risk that begins payments no later than age $85$, has no cash surrender value, and is excluded from required minimum distribution (RMD) calculations.

ERISA Section 3(21) Fiduciary

An investment advisor who provides non-binding investment recommendations and advice to a plan, while leaving the final investment decisions with the plan sponsor or trustee.

ERISA Section 3(38) Investment Manager

A qualified entity (such as a registered investment advisor, bank, or insurance company) that accepts written fiduciary responsibility and possesses full discretionary authority to manage, acquire, and dispose of plan assets.

Collective Investment Trust (CIT)

A tax-exempt pooled investment fund maintained by a bank or trust company exclusively for qualified retirement and employee benefit plans.

Top-Hat Deferred Compensation Plan

An unfunded deferred compensation plan maintained by an employer primarily to provide benefits for a select group of management or highly compensated employees.

De Novo Review

A court review standard applied to benefit denial disputes where the court evaluates the claim completely afresh without granting deference to the plan administrator's prior findings.

Abuse-of-Discretion Review

A deferential judicial standard of review applied when plan documents grant the administrator explicit discretionary authority to interpret plan terms and determine benefit eligibility.

Social Adequacy

A foundational social insurance principle wherein benefit structures are heavily weighted to guarantee a baseline standard of living for all recipients rather than reflecting direct mathematical equity to contributions.

Social Security Fully Insured Status

The insured status required for standard retirement benefits, achieved by earning $40\text{ work credits}$ (up to a maximum of $4\text{ credits}$ per calendar year).

Average Indexed Monthly Earnings (AIME)

A calculation converting a worker's past wage history into current wage-indexed levels, derived from the highest $35\text{ years}$ of earnings to establish basic Social Security entitlement.

Primary Insurance Amount (PIA)

The baseline monthly Social Security retirement benefit payable to a worker upon reaching full retirement age before any adjustments for early or delayed claiming.

Substantial Gainful Activity (SGA)

The statutory earnings and work-capacity threshold used by the Social Security Administration to evaluate whether an applicant is too severely impaired to perform remunerative work.

Unemployment Insurance Experience Rating

A rating mechanism that adjusts an employer's state unemployment tax rate based on the frequency and volume of unemployment claims filed by their former workers.

Medicare Part A

The Hospital Insurance portion of Medicare covering inpatient hospital care, up to $100\text{ days}$ of skilled nursing facility care per benefit period, hospice, and certain home health services.

Medicare Part B

The Supplementary Medical Insurance portion of Medicare covering physician services, outpatient medical care, clinical lab services, and durable medical equipment, funded partly by beneficiary premiums.

Medicare Advantage (Part C)

Private health plan options approved by Medicare—such as HMOs, PPOs, and Special Needs Plans—that deliver Part A and Part B coverage to enrolled beneficiaries.

Medicare Hospital Benefit Period

A measurement period starting on the day a beneficiary enters an inpatient facility and ending once the individual has gone without inpatient hospital or skilled nursing care for $60\text{ consecutive days}$.

Medigap Insurance

Standardized private supplemental health insurance policies designed to pay out-of-pocket expenses not reimbursed by Original Medicare Parts A and B, including deductibles and coinsurance.

Medicare Assignment

A provider agreement to accept the Medicare-approved reimbursement schedule as complete payment for covered medical services, precluding balance billing of the beneficiary.

Diagnosis-Related Group (DRG)

A prospective inpatient hospital payment system that assigns predetermined reimbursement amounts based on patient diagnosis, surgical procedure, and clinical severity.

Secondment

An international mobility arrangement in which an employee is assigned to provide services for a host organization while remaining continuously employed on paper by the home country entity.

Tax Equalization

An expatriate tax policy that ensures an employee pays no more and no less income tax than they would have incurred had they remained working entirely in their home country.

Internal Revenue Code Section 3121(l)

A tax provision allowing an American corporation to enter into a formal agreement extending United States Social Security and Medicare coverage to U.S. citizens employed by foreign affiliates.

Bilateral Social Security Totalization Agreements

International agreements that eliminate dual social security tax liability on the same earnings and coordinate work credits to qualify cross-border workers for retirement, disability, and survivor benefits.

Multinational Pooling

An arrangement that aggregates insured employee benefit contracts across various foreign subsidiaries of a multinational company to negotiate better terms, lower costs, and earn potential international dividends.

Captive Reinsurance

The global benefit strategy of using an employer-owned captive insurance company to reinsure insured employee benefits from local fronting insurers, thereby centralizing risk and retained underwriting profits.