Benefits A–Z
Benefits A–Z explains the terms small employers run into when offering health coverage, keeping up with the rules, and adding benefits beyond health insurance. Definitions follow official sources such as HealthCare.gov, the IRS, the U.S. Department of Labor and CMS, and any year-specific figure names its year and source. This is general information, not insurance, tax, legal or financial advice; for your situation, contact your state insurance department, the Department of Labor's Employee Benefits Security Administration, or a licensed professional such as a CPA, benefits attorney or licensed agent.
- 401(k) plan
- A qualified retirement plan that lets employees have part of their wages put into an individual account, pre-tax or, if the plan allows, as Roth deferrals. The IRS describes traditional, safe harbor and SIMPLE 401(k) versions; traditional plans must pass yearly nondiscrimination tests, while safe harbor plans require employer contributions that are fully vested when made.
- Related:SIMPLE IRASEP (Simplified Employee Pension)Retirement plans startup costs tax credit
- Affordability (employer coverage)
- The test of whether an employee's share of the premium for job-based coverage is low enough that the employee can't get a Marketplace premium tax credit instead. The IRS ties the test to a required contribution percentage that changes yearly: IRS Revenue Procedure 2025-25 sets it at 9.96% of household income for plan years beginning in 2026, and Revenue Procedure 2026-26 sets it at 10.22% for 2027. For the employer mandate, the test uses the employee's cost for the lowest-cost self-only coverage that provides minimum value. Because employers rarely know household income, the IRS offers applicable large employers three affordability safe harbors based on Form W-2 wages, the employee's rate of pay, or the federal poverty line.
- Related:Minimum valuePremium tax creditEmployer shared responsibility payment (ESRP)
- Applicable large employer (ALE)
- An employer that averaged at least 50 full-time employees, including full-time equivalent employees, during the prior calendar year, according to the IRS. ALE status is decided each calendar year, and only ALEs are subject to the Affordable Care Act's employer shared responsibility provisions and the related reporting on Forms 1094-C and 1095-C.
- Related:Full-time employee (ACA)Full-time equivalent employee (FTE)Employer shared responsibility payment (ESRP)
- CHIP premium assistance notice (CHIPRA notice)
- A yearly notice, required under the Children's Health Insurance Program Reauthorization Act (CHIPRA), that tells employees about possible premium assistance available in the state where they live. The Department of Labor's Reporting and Disclosure Guide (December 2022) says the employer must give it annually to all employees, regardless of enrollment or eligibility status, and the department publishes a model notice.
- Related:Notice of coverage options (Marketplace notice)Medicare Part D creditable coverage noticeGroup health plan
- CHOICE Arrangement (formerly ICHRA)
- A health reimbursement arrangement, formerly called an individual coverage HRA (ICHRA), that lets an employer reimburse employees tax-free, up to a set annual amount, for individual health insurance premiums and other qualified medical expenses instead of offering a traditional group plan. HealthCare.gov says employers of any size can generally offer one, there is no minimum or maximum contribution, and employees must have their own individual coverage to use the funds. Whether the offer is affordable affects whether an employee can get a Marketplace premium tax credit. The new name appears on HealthCare.gov; federal regulations, as published in the eCFR in October 2026, and IRS form instructions still call it an individual coverage HRA.
- Related:Health reimbursement arrangement (HRA)Qualified small employer HRA (QSEHRA)Affordability (employer coverage)
- COBRA continuation coverage
- A federal law that lets employees and their families keep group health coverage for a limited time after certain events, such as job loss or a cut in hours, would otherwise end it. As of 2026, the Department of Labor says COBRA generally applies to private-sector group health plans of employers that had at least 20 employees on more than half of their typical business days in the prior year, coverage generally lasts 18 or 36 months depending on the event, and the person can be charged up to 102% of the plan's cost.
- Related:Qualifying eventState continuation coverage (mini-COBRA)Group health plan
- Coinsurance
- Your share of the cost of a covered health care service, figured as a percentage of the allowed amount, that you pay after meeting your deductible. HealthCare.gov's glossary example (2026): with an allowed amount of $100 for an office visit and 20% coinsurance, you would pay $20 once your deductible is met.
- Related:DeductibleOut-of-pocket maximumPremium
- Deductible
- The amount you pay for covered health care services before your plan starts to pay. After that, you usually pay only a copayment or coinsurance, and many plans pay for certain services, like checkups, before the deductible is met.
- Related:CoinsuranceOut-of-pocket maximumHigh deductible health plan (HDHP)
- Dental and vision coverage
- Coverage for dental or eye care, often offered as separate, stand-alone plans next to medical coverage. Limited-scope dental and vision plans can qualify as excepted benefits, which the Department of Labor says are not subject to many federal group health rules. Through SHOP, a small business can offer medical coverage, dental coverage or both.
- Related:Excepted benefitsSHOP (Small Business Health Options Program)Essential health benefits
- Dependent care assistance program (DCAP)
- A written employer program that pays for or provides care for an employee's qualifying dependents so the employee can work, often run through a cafeteria plan as a dependent care FSA. IRS Publication 15-B (2026) says an employee can generally exclude up to $7,500 a year of DCAP benefits from income ($3,750 if married filing separately), limited by earned income.
- Related:Section 125 cafeteria planHealth flexible spending account (FSA)
- Employee assistance program (EAP)
- A voluntary, work-based program that, as the U.S. Office of Personnel Management describes it, offers free and confidential assessments, short-term counseling, referrals and follow-up services to employees with personal or work-related problems. An EAP is not a substitute for professional care; in a mental health crisis in the U.S., call or text 988.
- Related:Mental health parity (MHPAEA)Group health plan
- ERISA
- The Employee Retirement Income Security Act of 1974, a federal law that, in the Department of Labor's words, "sets minimum standards for most voluntarily established retirement and health plans in private industry." It requires plans to give participants plan information, sets fiduciary duties for those who manage plan assets, and requires a grievance and appeals process for benefit claims. It generally does not cover plans of government entities or churches.
- Related:FiduciarySummary plan description (SPD)Form 5500
- Essential health benefits
- A set of 10 categories of services, such as doctors' services, hospital care, prescription drugs, pregnancy and childbirth, and mental health services, that health insurance plans must cover under the Affordable Care Act. Non-grandfathered insured plans in the small group market must include them; dental coverage for children is an essential health benefit, while adult dental is optional.
- Related:Small group marketMetal levelsMental health parity (MHPAEA)
- Excepted benefit HRA
- A limited health reimbursement arrangement an employer can offer alongside a traditional group health plan to help pay costs such as copays and deductibles, even for employees who decline the group plan. For plan years beginning in 2026, HealthCare.gov lists an annual maximum of $2,200, adjusted each year for inflation.
- Related:Health reimbursement arrangement (HRA)Excepted benefitsGroup health plan
- Excepted benefits
- Types of coverage that are exempt from many federal group health plan rules, including HIPAA and Affordable Care Act requirements in Part 7 of ERISA. The Department of Labor says some, like accidental death and dismemberment coverage, are always excepted, while others, like limited-scope dental and vision plans and certain health FSAs, can be excepted if they meet conditions.
- Related:Dental and vision coverageExcepted benefit HRAERISA
- Family and Medical Leave Act (FMLA)
- A federal law that gives eligible employees of covered employers unpaid, job-protected leave for qualifying family and medical reasons, up to 12 workweeks in a 12-month period, and requires their group health benefits to continue as if they were working. As of 2026, the Department of Labor says it covers private employers with 50 or more employees in 20 or more workweeks of the current or prior year, and an employee generally qualifies after 12 months of work, 1,250 hours in the past 12 months, and working at a site with at least 50 employees within 75 miles.
- Related:Paid family and medical leaveGroup health plan
- Fiduciary
- A person or organization that exercises discretion or control over an ERISA plan or its assets and must act prudently and solely in the interest of participants and their beneficiaries. The Department of Labor says fiduciary status depends on the functions performed, not a title; business decisions such as setting up a plan, choosing the benefit package or amending the plan are not fiduciary acts.
- Related:ERISASelf-insured (self-funded) planFully insured plan
- Form 5500
- The annual return/report that many employee benefit plans file with the federal government, electronically through the EFAST2 system; the Department of Labor says the information is used by the Department, the IRS and other agencies. The Department of Labor's Reporting and Disclosure Guide (December 2022) says unfunded, fully insured, or combination welfare plans with fewer than 100 participants at the start of the plan year that meet the regulation's conditions are exempt from filing.
- Related:ERISASummary plan description (SPD)Fully insured plan
- Forms 1094-C and 1095-C
- IRS forms applicable large employers use to report the health coverage they offered. The IRS says Form 1095-C is filed and furnished for each employee who was full-time for at least one month of the year, covering all 12 months, and Form 1094-C is the transmittal filed with the 1095-Cs.
- Related:Applicable large employer (ALE)Employer shared responsibility payment (ESRP)Full-time employee (ACA)
- Full-time employee (ACA)
- For the Affordable Care Act's employer rules, the IRS defines a full-time employee for a month as one who averages at least 30 hours of service a week, or has at least 130 hours of service in the month. Other laws and your own policies may define full-time differently.
- Related:Applicable large employer (ALE)Full-time equivalent employee (FTE)Employer shared responsibility payment (ESRP)
- Full-time equivalent employee (FTE)
- A way of counting part-time hours as if they were full-time workers, and the method depends on the rule. To test applicable large employer status, the IRS adds up the monthly hours of non-full-time employees (no more than 120 per person) and divides by 120; for the Small Business Health Care Tax Credit, it treats 2,080 hours a year as one FTE.
- Related:Applicable large employer (ALE)Small Business Health Care Tax CreditFull-time employee (ACA)
- Fully insured plan
- A group health plan in which the employer buys a policy from an insurance company, and the insurer takes on the risk of paying covered claims. The NAIC notes that state insurance regulators help oversee the insurance that employers buy, while the Department of Labor generally oversees self-insured plans.
- Related:Self-insured (self-funded) planSmall group marketGroup health plan
- Group health plan
- In general, a health plan offered by an employer or employee organization that provides health coverage to employees and their families. Most private-sector group health plans are also employee benefit plans governed by ERISA.
- Related:ERISAFully insured planSelf-insured (self-funded) plan
- Group-term life insurance
- Life insurance an employer provides to a group of employees for a set term. IRS Publication 15-B (2026) explains that the cost of up to $50,000 of this coverage is generally excluded from the employee's wages, while the cost of coverage above $50,000 is taxable and is figured from an IRS table.
- Related:Section 125 cafeteria plan
- Health flexible spending account (FSA)
- An employer arrangement that lets employees set aside pre-tax pay for many out-of-pocket medical costs, such as deductibles, copayments and prescriptions. IRS Publication 15-B (2026) says a cafeteria plan can't let an employee contribute more than $3,400 to a health FSA for plan years beginning in 2026. For leftover money, IRS Publication 969 says a plan can provide either a grace period of up to 2 1/2 months or a carryover; for plan years beginning in 2026, IRS Revenue Procedure 2025-32 caps the carryover at $680.
- Related:Section 125 cafeteria planHealth savings account (HSA)Dependent care assistance program (DCAP)
- Health reimbursement arrangement (HRA)
- An employer-funded group health plan that reimburses employees tax-free for qualified medical expenses up to a fixed dollar amount a year. The employer funds and owns the arrangement, and unused amounts may roll over. Common small-business versions include the QSEHRA, the CHOICE Arrangement and the excepted benefit HRA.
- Related:Qualified small employer HRA (QSEHRA)CHOICE Arrangement (formerly ICHRA)Excepted benefit HRA
- Health savings account (HSA)
- A tax-advantaged account for qualified medical expenses that only people covered by an HSA-eligible high deductible health plan, with no other disqualifying coverage and no Medicare enrollment, can contribute to. Employer contributions, including through a cafeteria plan, may be excluded from income, and the account stays with the employee after a job change.
- Related:High deductible health plan (HDHP)Health flexible spending account (FSA)Section 125 cafeteria plan
- High deductible health plan (HDHP)
- A plan with a higher deductible than a traditional plan, usually in exchange for a lower premium. When it meets IRS requirements it is called an HSA-eligible plan, and enrollees can pair it with a health savings account; the IRS sets the minimum deductible and out-of-pocket limits each year and explains them in IRS Publication 969.
- Related:Health savings account (HSA)DeductiblePremium
- Medicare Part D creditable coverage notice
- A notice telling Medicare-eligible people in an employer's plan whether its prescription drug coverage is "creditable," meaning expected to pay on average as much as standard Medicare drug coverage. CMS says it must go out annually before October 15 and at other set times, and the employer must also report the status to CMS online; people without creditable coverage for 63 days or more after their initial enrollment period can face a Part D late enrollment penalty.
- Related:CHIP premium assistance notice (CHIPRA notice)Notice of coverage options (Marketplace notice)Group health plan
- Mental health parity (MHPAEA)
- The Mental Health Parity and Addiction Equity Act of 2008. CMS explains that when a group health plan covers mental health or substance use disorder benefits, its financial requirements and treatment limitations for those benefits cannot be more restrictive than the predominant ones that apply to substantially all medical and surgical benefits. CMS says the law generally applies to group health plans of private employers with more than 50 employees and does not apply directly to small group health plans, although its requirements apply indirectly through the Affordable Care Act's essential health benefits rules for non-grandfathered small group coverage.
- Related:Essential health benefitsEmployee assistance program (EAP)Group health plan
- Metal levels
- The four categories, Bronze, Silver, Gold and Platinum, that Marketplace and SHOP plans are sorted into based on how the plan and the enrollee split costs, not the quality of care. For SHOP plans, HealthCare.gov (as of October 2026) gives estimated averages for a typical population: the plan pays about 60% of costs at Bronze, 70% at Silver, 80% at Gold and 90% at Platinum.
- Related:SHOP (Small Business Health Options Program)Essential health benefitsPremium
- Minimum participation requirement
- A rule that a certain share of eligible employees must enroll before group coverage can be offered or kept. For SHOP coverage, HealthCare.gov (as of October 2026) says that in most states at least 70% of the employees offered insurance must enroll or have other coverage, with different rates in some states. Outside SHOP, insurers may set participation rules to the extent state law allows, and federal rules (45 CFR 147.104) let a group that can't meet them enroll during a November 15 to December 15 window each year.
- Related:SHOP (Small Business Health Options Program)Small group marketGroup health plan
- Minimum value
- A standard for job-based coverage. The IRS says a plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits expected under the plan and substantially covers inpatient hospitalization and physician services; HealthCare.gov's glossary (October 2026) describes the same standard. A plan that provides minimum value and is affordable keeps the employee from getting a Marketplace premium tax credit.
- Related:Affordability (employer coverage)Employer shared responsibility payment (ESRP)Premium tax credit
- Multiple employer welfare arrangement (MEWA)
- An arrangement that offers health or other welfare benefits to the employees of two or more employers, as defined in ERISA. The Department of Labor warns that some MEWAs have been unable to pay claims because of insufficient funding and inadequate reserves, and some were drained by excessive fees and embezzlement. Before joining one, check with your state insurance department.
- Related:ERISASelf-insured (self-funded) planFully insured plan
- Notice of coverage options (Marketplace notice)
- A written notice, required by section 18B of the Fair Labor Standards Act, that tells employees about the Health Insurance Marketplace, possible premium tax credit eligibility, and how to contact the Marketplace for help. The Department of Labor says the rule applies to employers covered by the FLSA, the notice goes to each new employee at hiring, and model notices exist for employers that do and don't offer a health plan.
- Related:Premium tax creditCHIP premium assistance notice (CHIPRA notice)Medicare Part D creditable coverage notice
- Out-of-pocket maximum
- The most you have to pay for covered in-network services in a plan year, counting deductibles, copayments and coinsurance. After you reach it, the plan pays 100% of covered benefits; premiums, uncovered services and out-of-network care don't count toward it.
- Related:DeductibleCoinsurancePremium
- Paid family and medical leave
- Policies that replace wages while a worker takes extended time off to bond with a new child, recover from a serious health condition, or care for a loved one. As of October 2026, the Department of Labor says no federal law guarantees it for private-sector workers, though some states run their own programs. Section 70304 of Public Law 119-21 (2025) removed the end date of the federal employer tax credit for providing it (Internal Revenue Code section 45S) for taxable years beginning after December 31, 2025.
- Related:Family and Medical Leave Act (FMLA)
- Qualified small employer HRA (QSEHRA)
- An HRA for employers with fewer than 50 full-time employees that don't offer a group health plan, used to reimburse employees tax-free for premiums and other medical costs if they have qualifying health coverage. For 2026, HealthCare.gov and IRS Revenue Procedure 2025-32 put the maximum at $6,450 for employee-only and $13,100 for family reimbursement. Employers must give current employees written notice 90 days before each plan year.
- Related:Health reimbursement arrangement (HRA)CHOICE Arrangement (formerly ICHRA)Premium tax credit
- Qualifying event
- An event that would make someone lose group health coverage and triggers COBRA rights, such as the covered employee's job loss (other than for gross misconduct) or reduced hours, death, divorce or legal separation, or Medicare entitlement, or a child losing dependent status. The type of event decides who can elect COBRA and for how long.
- Related:COBRA continuation coverageState continuation coverage (mini-COBRA)Special enrollment period
- Retirement plans startup costs tax credit
- A federal tax credit for the ordinary and necessary costs of starting a SEP, SIMPLE IRA or qualified plan such as a 401(k). As of 2026, the IRS says eligible employers, generally those with 100 or fewer employees who earned at least $5,000 and at least one non-highly compensated participant, may claim a credit of up to $5,000, for three years, on Form 8881.
- Related:SIMPLE IRASEP (Simplified Employee Pension)401(k) plan
- Section 125 cafeteria plan
- A written plan under section 125 of the Internal Revenue Code that lets employees choose between taxable pay and certain qualified benefits, such as health coverage, dependent care assistance and HSA contributions, on a pre-tax basis. The IRS says it is the only way an employer can offer that choice without making the benefits taxable.
- Related:Health flexible spending account (FSA)Dependent care assistance program (DCAP)Health savings account (HSA)
- Self-insured (self-funded) plan
- A group health plan in which the employer pays employees' medical claims itself instead of buying an insurance policy, often hiring a third-party administrator for enrollment, claims and networks. The NAIC notes that the Department of Labor generally oversees self-insured employer plans rather than state insurance regulators.
- Related:Fully insured planFiduciaryERISA
- SEP (Simplified Employee Pension)
- A retirement plan in which only the employer contributes, to traditional IRAs (SEP-IRAs) set up for each eligible employee. The IRS says a business of any size, even a self-employed person, can set one up; contributions can vary year to year but must be made equally for all eligible employees, and employees are always 100% vested.
- Related:SIMPLE IRA401(k) planRetirement plans startup costs tax credit
- SHOP (Small Business Health Options Program)
- The Marketplace program that helps small employers offer medical and/or dental coverage to employees. As of 2026, HealthCare.gov says an employer generally needs 1 to 50 full-time equivalent employees (at least one who isn't an owner, partner or family member) and must offer coverage to all full-time employees; enrollment is open any time of year. Enrolling through SHOP is generally the only way to claim the Small Business Health Care Tax Credit.
- Related:Small Business Health Care Tax CreditMinimum participation requirementSmall group market
- SIMPLE IRA
- A retirement plan for businesses generally with 100 or fewer employees that can't have another retirement plan, with no annual filing requirement for the employer. Employees can defer part of their pay, and the employer must contribute each year, either a match or a fixed contribution for every eligible employee; for 2026, IRS news release IR-2025-111 sets the employee deferral limit at $17,000, with a $4,000 catch-up for those 50 and over in most SIMPLE plans.
- Related:SEP (Simplified Employee Pension)401(k) planRetirement plans startup costs tax credit
- Small Business Health Care Tax Credit
- A federal credit for small employers that pay for employees' health coverage, generally only through SHOP. As of 2026, the IRS says employers need fewer than 25 full-time equivalent employees and average wages under an inflation-adjusted limit, the maximum credit is 50% of premiums paid (35% for tax-exempt employers), and it is available for two consecutive tax years. It is claimed on IRS Form 8941.
- Related:SHOP (Small Business Health Options Program)Full-time equivalent employee (FTE)Small group market
- Small group market
- The part of the health insurance market where insurers sell coverage to small employers. Under 45 CFR 144.103, a small employer generally has 1 to 50 employees, and a state may raise the cutoff to 100. CMS says insurers in this market may vary premiums only by age, tobacco use, family size and geography, and states can add stronger protections.
- Related:SHOP (Small Business Health Options Program)Fully insured planEssential health benefits
- Special enrollment period
- A chance to join a health plan outside the regular enrollment window after certain events, such as losing other coverage, getting married, or having or adopting a child. Under HIPAA, an employee who declined the employer's plan gets special enrollment rights, and the Department of Labor's Reporting and Disclosure Guide (December 2022) describes the right to enroll within 30 days after losing other coverage, marriage, birth, adoption or placement for adoption. HealthCare.gov's glossary (October 2026) also says job-based plans must provide a special enrollment period of at least 30 days.
- Related:Qualifying eventWaiting periodGroup health plan
- State continuation coverage (mini-COBRA)
- State laws, often called mini-COBRA, that let people keep insured group coverage after leaving a job and may apply to employers with fewer than 20 employees that federal COBRA doesn't cover. Rules vary by state; the Department of Labor suggests checking with your state insurance commissioner's office.
- Related:COBRA continuation coverageQualifying eventFully insured plan
- Summary of Benefits and Coverage (SBC)
- A short, standard-format summary of a health plan's benefits, cost-sharing and limits that lets people compare plans side by side. Plans and insurers must provide it at set times, including with enrollment materials, at renewal and on request.
- Related:Summary plan description (SPD)Group health plan
- Summary plan description (SPD)
- The main ERISA document that tells participants, free of charge, what their plan provides and how it works, including who can join and how to file a claim. The Department of Labor's Reporting and Disclosure Guide (December 2022) says it must be given within 90 days of becoming covered, and plan changes must be shared through a revised SPD or a summary of material modifications.
- Related:ERISASummary of Benefits and Coverage (SBC)Form 5500
- Waiting period
- The time that must pass before coverage for an otherwise eligible employee or dependent can begin. As of October 2026, HealthCare.gov says waiting periods for employer coverage, including SHOP coverage, can't exceed 90 days.
- Related:Special enrollment periodGroup health plan