GLOSSARY OF TERMS

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Administrative Services Only (ASO) — An uninsured agreement between a plan sponsor and a service provider (generally an insurer) to administer and manage specific elements of a group benefit plan, most cmmonly health and dental benefits. The plan sponsor assumes 100% of the net operating cost of such an arrangement.

Aggregate Stop Loss — An insurance feature designed to limit the total dollar amount of all claims charged under a specific group benefit, such as life insurance or health care, in a given policy year. For example, a 125% Aggregate Stop Loss feature under a group life insurance plan means that total claims exceeding that percentage of paid premium is absorbed or pooled by the insurer and the amount under that percentage is directly charged against the premium.

Base Salary — An employee’s gross earnings used to determine coverage levels under a benefit or pension plan that can include or exclude extra compensation such as an incentive bonus or overtime.

Bed Complement — The total number of beds normally available for inpatient use in a hospital.

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Beneficiary — Person(s) or estate named by a participant in an insurance or retirement plan to receive any benefits provided by the plan if the participant dies. A person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit under the plan.

Benefit — Rights of the participant to either cash or services after meeting the eligibility requirements of the pension or benefit plan. Pension benefits usually refer to monthly payments payable on retirement or disability.

Benefit Booklet — A booklet for plan members that contains a general explanation of coverage and the related provisions of a group benefit and/or pension plan.

Benefit Consultant — An objective expert in all areas of group benefit plans who provides counsel to plan sponsors, generally in the Human Resources and/or Finance departments of a company.

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Benefit Fund — The monies set aside by the plan sponsor with a trustee or insurance company for the payment of benefits.

Benefit Package — A package of specific benefits provided by a group benefit plan.
Benefit Year — The period during which plan co-payments and maximums apply, normally a calendar year.

Benefits-at-a-Glance — Generally a concise summary and quick reference guide for employees outlining the highlights of a benefit or pension plan.

Binding Receipt — A receipt for a premium payment that accompanies an application for insurance. Upon approving the policy, this binds the insurer to implement policy on the intended effective date.

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Birth Rate — Generally, the number of live births per 1,000 population, calculated by dividing total population into number of live births and multiplying by 1,000.

Cafeteria Plan — A flex benefit program where employees have complete choice over what benefits they want—life, disability, health programs, stock option, vacation time, retirement plans, etc. These types of plans generally do not include mandatory or core coverage requirements.

Canada Pension Plan/Quebec Pension Plan (CPP/ QPP) — Canada’s two major social security programs offering residents retirement and disability income. Plans are funded through employer and employee premium contributions.

Change of Status — A provision in a benefit plan that allows the employee to make coverage changes when a life-changing event occurs, such as marriage, birth of child or a new position.

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Claims Fluctuation Reserve (CFR) — Also known as PSF or Premium Stabilization Fund, this reserve, established from declared surplus under a group benefit plan, operates to offset deficits arising under a group benefit plan and is normally fully refundable to the policyholder upon termination of a contract.

Coinsurance — The amount a plan member pays of their health or dental expense before being reimbursed by the group benefit plan. Coinsurance normally exists to control plan costs and/or to implement cost sharing with employees. Its original intention, to develop a more savvy benefits consumer, is the subject of debate within the industry and the medical community.

Contributory Plan — A pension, retirement, or group benefit plan that requires employee contributions on a voluntary or mandatory basis.

Conversion-Privilege — The rights given to a plan member that permit the conversion of group life insurance coverage to an individual policy upon termination of coverage, without evidence of insurability.

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Coordination of Benefits (COB) — A method of determining the amount payable by each plan when a claimant is covered under two or more group health plans. The insurance industry uses guidelines to determine which carrier or plan is the primary (i.e., pays first, thus paying its normal benefits) and which is secondary (pays balance of allowable expense incurred). The objective is to dovetail payments so the claimant does not incur any out-of-pocket costs for allowable medical expenses, yet does not receive total payments that exceed 100% of the expense cost.

Co-payment — see Coinsurance.

Core Coverage — Mandatory coverage provided to all eligible employees under a Flex Benefit Plan.

Cosmetic Treatment — Services not deemed medically necessary provided by physicians or dentists. A procedure aimed at improving appearance, except when required for the prompt repair of accidental injury or for improving the function of a malformed body member.

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Cost/Benefit Analysis — A comparison of the cost of an action with the economic benefits it produces through elimination of other direct and indirect costs.

Cost Containment — Activities aimed at controlling the cost of a group benefit plan or reducing its rate of increase.

Cost-of-Living Allowance or Adjustment (COLA) — A regular adjustment to wages or pension benefits based on the rise (or fall) in the cost of living as measured by some index, often the Consumer Price Index (CPI).

Default Coverage — The coverage package in which an employee is automatically enrolled if they do not choose their coverage by the deadline under a Flex Benefit Plan.

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Dependent — An immediate family member of an employee (such as spouse and child) who is eligible for certain coverages under a group benefit or pension plan.

DLR (Disabled Life Reserve) — An actuarially calculated reserve set up to fund the long term expected costs of a Long Term Disability claim. The reserve reflects the age, sex, benefit level and expected recovery of each claim.

Disability — A medical state whereby an employee cannot perform their regular work functions.

Eligibility — The rules within a group benefit or pension plan that determine who and when coverage starts, suspends, and stops.

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Enrollment — The process of joining a group benefit or pension plan that normally involves completing forms such as an application form and beneficiary designation.

Enrollment Cycle — The period, normally 12 months, that must pass under a Flex Benefit Plan before employees can review and change their coverage choices.

Evidence of Insurability — see Medical Evidence

Flex Credits — The credits provided employees by their employer to purchase coverage under a Flex Benefit Plan. Flex Credits normally have no cash value.

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Flex Plan — Also known as a Flexible Benefits Plan, is a group benefit plan that allows an employee to select the type and/or levels of coverage they want and need. Flex Plans can come in many different styles such as Cafeteria, Core Plus Options, and Modular.

Health Care Spending Account (HCSA) — An account funded with credits by the employer and/or employee used to purchase defined health-related goods and services. Revenue Canada guidelines determine the taxation of payments from this account such as eligible medical services are not taxed while fitness memberships are.

IBNR Reserve — A reserve established for a particular benefit under a group benefit plan to cover the cost of claims incurred under an active contract but reported after the date the contract ends.

Initial Enrollment — The first time an employee or eligible dependent enrolls in a group benefit or pension plan.

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Leave of Absence — A period of time during which an employee is temporarily absent from active employment. Leaves can be paid or unpaid, many types of which are regulated by provincial and federal employment standards laws.

Lock-in — Rules under a group benefit plan (commonly a Flex Plan) that dictate how long an employee must remain in a particular benefit before they can make a choice.

Long Term Disability — A benefit that provides a disabled employee with monthly income for extended periods of disability. This benefit normally starts after a period of disability lasting for an extended period (such as 17 or 26 weeks) and continues until the employee is no longer disabled or reaches age 65.

Medical Evidence — Also called Evidence of Insurability or Proof of Good Health, is the requirement under a group benefit plan where a person must pass a health questionnaire or a medical exam before coverage takes effect.

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Premium Stabilization Fund (PFS) — see Claims Fluctuation Reserve

Premium Waiver — A provision contained in a life or disability benefit that waives the further payment of premium for a disabled employee upon approval of the claim.

Premium Waiver Reserve — An actuarially calculated reserve established to fund the future cost of a life insurance claim for a disabled employee. The reserve reflects the age, sex, coverage level, and expected mortality factors of each claim.

Proof of Good Health — see Medical Evidence

Retirement, Compulsory — Where an employee must retire at a given age. Generally prohibited by most Human Rights laws.

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Retirement, Deferred — Where an employee works after the normal retirement age.

Retirement, Early — Where an employee retires before normal retirement age.

Retirement, Normal Age — The earliest age an employee can retire with full benefits.

Retirement Allowance — An amount paid by an employer to an employee (or former employee) upon retirement in recognition of long service or in respect of loss of office or employment.

Retirement Annuity — An insurance term describing a contract where there is no element of pure insurance. The death benefit would be the larger of the reserve, or the premium paid, without interest.

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Retirement Annuity Policy — An individual deferred annuity contract expressed in units of $10-a-month annuity benefit payable beginning at a specified age. This type of contract does not provide life insurance.

Retrospective Premium — An arrangement where a policyholder agrees to pay an additional premium at the end of the contract year if claims and retention exceed paid premium.

Return — The amount of money received annually from an investment, usually expressed as a percentage.

Salary Continuance Plan — see Short Term Disability

Short Term Disability — An employer sponsored benefit that provides a disabled employee with a weekly income for a fixed period, such as 17 or 26 weeks. The plan normally precedes Long Term Disability coverage and is also referred to by such names as Weekly Indemnity, Salary Continuance or a Sick Leave Plan.

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Sick Leave Plan — see Short Term Disability

Stock Purchase Plan — A deferred profit-sharing plan where the employees’ share of the fund may be invested at his/her option in the employer’s securities, insurance contracts or government obligations.

Stop-Loss Insurance/Reinsurance — Also called aggregate stop loss reinsurance, is a form of reinsurance that indemnifies the original insurer against losses exceeding a certain amount during a specified period, usually 12 months. The amount (limit) can be either a predetermined dollar amount or a percentage of the premiums (i.e., loss ratio).

Weekly Indemnity Plan — see Short Term Disability

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