Glossary of Terms

A-B   -   C-D   -   E-F   -   G-K   -   L-M   -   N-P   -   Q-S   -   T-Z

Effective date
The date on which a retirement plan or an insurance policy goes into effect and coverage begins.

Eligibility period
The period of time during which potential members of a group life or health insurance plan may enroll without providing evidence of insurability. Also, the period of time under a major medical policy during which reimbursable expenses may be accrued.

Employee pension benefit plan
Any plan, fund or program established and maintained by an employer or an employee organization that provides retirement benefits to employees or provides deferred income until employment is terminated.

Employee Retirement Income Security Act
Known as ERISA, a federal law, passed in 1974, establishing government requirements for private pension and profit-sharing plans, including vesting requirements, funding mechanisms and general plan descriptions. The law also specifically increased the tax deduction limits available to self-employed individuals utilizing Keogh plans, raising the dollar limit from $2,500 to $7,500 and the percentage limit from 10 percent to 15 percent. The Economic Recovery Tax Act increased these deductible limits in 1981; the Tax Reform Acts of 1984 and 1986 raised the limits even further. Currently, the maximum deductible amount is the lesser of 25 percent of compensation or $30,000.

Employee stock ownership plan
A qualified retirement plan that receives favorable tax treatment under the Internal Revenue Code. The plan trustee must invest contributions primarily in securities of the employer. However, a qualified ESOP can provide an incidental death benefit funded by life insurance.

Employee stock ownership trust
A trust formed to borrow money on behalf of the parent company, with repayments made to the trust in the form of annual contributions to an ESOP.

Endorsement
A written modification to an insurance policy, usually written on the printed policy page. An endorsement may also be in the form of a rider. No endorsement is valid unless signed by an executive officer of the company and attached to and made a part of the policy.

Endowment
In life insurance, a contract that provides for the payment of the face amount at the end of a fixed period, or at a specified age of the insured, or at the death of the insured before the end of the stated period.

Fair Credit Reporting Act
Federal law that requires written notification to an individual whose credit is to be investigated by an inspection company, sets guidelines to be followed by the inspection company and grants the individual access to the information reported.

Fair market value
A legal term variously interpreted by the courts, but generally meaning the price at which a willing buyer will buy and a willing seller will sell an asset.

Fannie Mae
A nickname for the Federal National Mortgage Association.

Federal Deposit Insurance Corporation
An agency of the federal government that insures bank deposits up to a stated maximum.

Federal estate tax
A federal tax levied upon the property of an individual at death. Ownership of a life insurance policy constitutes property and is therefore subject to federal tax. The value of life insurance policies owned by the deceased on the lives of others is also taxable.

Federal Insurance Contributions Act (FICA)
A federal law imposing a payroll tax to assist in funding Social Security benefits.

Federal Welfare and Pension Plans Disclosure Act
A pre-ERISA (1974) federal law governing reports on financial status of pension plans. For plans covering more than 25 persons, a description of the plan must be filed with the U.S. Department of Labor. If the plan covers more than 100 persons, an annual financial report is required.

A-B   -   C-D   -   E-F   -   G-K   -   L-M   -   N-P   -   Q-S   -   T-Z