Glossary of Tax-Free Benefit Plan Terms

Cafeteria Plan

A Plan under which employees may choose between cash or qualified benefits (see Flexible Benefit Plan).

Elective Contributions

An employee's salary reductions used to pay for qualified benefits.

Enrollment Period

The time period specified in the Plan document during which employees are given the opportunity to elect to participate in a Flexible Benefit Plan or Qualified Transportation Expense Plan.

ERISA

The Employee Retirement Income Security Act of 1974. This act deals with specific employee rights under benefit plans.

FICA

Federal Insurance Contributions Act. Commonly referred to as Social Security Tax.

FSA (Flexible Spending Account)

An account funded with tax-free dollars that can be used to reimburse Plan participants for eligible expenses. There are two types of accounts: medical or dependent care.

Flexible Benefit Plan

Eligible employees may choose among two or more benefits consisting of cash and nontaxable benefits.

FUTA

Federal Unemployment Tax Act.

Non-elective Contributions

Employer's funds provided to the employee for the purchase of benefits. These are sometimes referred to as a "Benefit Credit."

Plan Administrator

The entity or individual who has complete control over the operation of a Flexible Benefit Plan, monitors movement within the Plan, and reserves the right to make changes or terminate the Plan. The employer is usually the Plan Administrator.

Plan Document

A formal written document that describes the employer's intention under the law.

Plan Highlights/Plan Specifications

These documents may contain specific information regarding eligibility requirements, Plan effective date, eligible benefits, etc.

Plan Year

The period of time specified in the Plan Document for the actual operation of the Plan.

QTE (Qualified Transportation Expense)

Work-related mass transit or parking expenses as defined under IRC Section 132(f) as eligible expenses.

Summary Plan Description/Plan Summary

A separate document which summarizes the Plan's eligibility requirements, benefits and election requirements. This document must be written in an easy-to-understand style and must be provided for each employee eligible to participate in the Plan.

"Use It or Lose It Rule"

Any funds that remain in a Medical or Dependent Care Flexible Spending Account after the grace period following the end of the Plan Year will be forfeited by the participant.

W-2.

Form issued by the employer to the employee to indicate earnings and withholdings at the end of the tax year. This form must be issued by January 31 for the previous calendar year.