Financial Wellness Glossary | Comprehensive Financial Terms for HR Leaders

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401(k) Matching

A benefit where employers match a percentage of an employee’s contributions to their 401(k) retirement savings plan up to a certain limit.

Retirement and 401k

A

Additional Paid Time Off

Employers may offer additional paid time off to be used for floating holidays (holidays for you to observe when you need them), volunteer time off to work with your favorite charity, and wellness time off to manage your physical or mental health needs.

Benefits and Compensation

Automatic Enrollment

A process where employees are automatically enrolled in a retirement savings plan, such as a 401(k), unless they opt-out.

Retirement and 401k

B

Behavioral Finance

Is an economic theory that describes why people make the decisions they make about money. Understanding your emotions and how they impact your relationship with money can help you avoid harmful habits and implement healthy ones

Credit and Debt

C

COBRA

A federal law that allows employees and their families to continue health insurance coverage for a limited time after leaving employment or in other qualifying events, such as divorce or death.

Tax and Deductions

Compensation Package

The total combination of salary, benefits, bonuses, stock options, and other financial incentives offered to an employee.

Benefits and Compensation

Compensation Philosophy

A company’s formal statement that outlines how it plans to pay and reward employees, including salary, bonuses, and benefits.

Benefits and Compensation

Contribution Limits

The contribution limit for defined contribution plans (401K) is $23,000 for the year. An additional $23,000 may be saved in non-qualified accounts (457, deferred compensation). Each individual may contribute $7,000 to an IRA or Roth IRA. The contribution can be split however you like, for example, with $3,500 going to traditional and $3,500 going to Roth.

Retirement and 401k

D

Deferred Compensation

A portion of an employee's income that is paid out at a later date, often used in retirement plans or executive compensation packages.

Retirement and 401k

Deferred Retirement Option Plan (DROP)

This program allows employees eligible for retirement to continue working while accumulating retirement benefits in a separate account, which are paid out in a lump sum at retirement.

Retirement and 401k

Defined Benefit Plan

A retirement plan where the employer guarantees a specific payout amount to employees at retirement, typically based on salary and years of service.

Retirement and 401k

Defined Contribution Plan

A retirement plan where the employer, employee, or both make regular contributions, but the payout at retirement depends on the investment's performance, as in 401(k) or 403(b) plans.

Retirement and 401k

Direct Deposit

A system that allows employers to electronically deposit wages directly into an employee’s bank account.

Credit and Debt

Disability Insurance

Insurance that replaces a portion of an employee's income if they are unable to work due to illness or injury, with short-term and long-term disability options.

Benefits and Compensation

E

Emergency Fund

A savings account used to cover unexpected financial events, such as medical emergencies or job loss, typically holding 3–6 months' worth of living expenses.

Investment and Savings

Employee Assistance Program (EAP)

A work-based intervention program designed to assist employees with personal problems, including financial challenges, that might impact their job performance or well-being.

Benefits and Compensation

Employee Contributions

- Employee Contributions: The portion of premiums or other costs that employees are required to pay for their benefits, such as health insurance or retirement plans.

Benefits and Compensation

Employee Retention Credit (ERC)

A refundable tax credit for employers that encourages them to keep employees on their payroll during times of economic hardship.

Tax and Deductions

Employee Stock Purchase Plan (ESPP)

A program that allows employees to purchase company stock at a discounted price, usually through payroll deductions.

Investment and Savings

Employer Match

A company contribution to an employee's retirement plan that matches the employee's contributions, often up to a certain percentage of salary.

Benefits and Compensation

Equity Compensation

A form of non-cash compensation that represents ownership in the company, often through stock options, restricted stock units (RSUs), or ESPPs.

Investment and Savings

Estate Planning Documents

The most common and essential estate planning document is the will. A will, or a last will and testament, is a legal document that describes how you would like your property and other assets to be distributed after your death. A will can also cover other wishes, such as guardianship of dependents and funeral arrangements after death.

Credit and Debt

F

Financial Coaching

A service provided to help individuals manage their money, set financial goals, and create a plan for achieving financial stability.

Credit and Debt

Financial Literacy

The ability to understand and effectively use various financial skills, including budgeting, investing, and managing personal finances.

Credit and Debt

Financial Resilience

The ability of an individual to withstand and recover from financial shocks or setbacks, such as unexpected expenses or loss of income.

Investment and Savings

Financial Stress

The anxiety and strain caused by an individual’s financial situation, often linked to debt, inadequate savings, or unexpected expenses.

Investment and Savings

Financial Wellness Program

A set of services offered by employers to help employees improve their financial health, manage debt, save for retirement, and reduce financial stress.

Credit and Debt

Flexible Spending Account (FSA)

A pre-tax benefit account employees can use to pay for eligible healthcare expenses not covered by insurance.

Benefits and Compensation

Forbearance

A temporary postponement or reduction of loan payments granted under special circumstances like financial hardship.

Education and Loans

G

Gross Income

The total amount of income earned before taxes or other deductions are taken out.

Investment and Savings

H

Health Maintenance Organization (HMO)

is a health insurance plan that limits coverage to a network of providers, and usually doesn't cover out-of-network care except in emergencies. HMOs are a type of managed care plan that offers integrated care and a focus on prevention and wellness

Benefits and Compensation

Health Savings Account (HSA)

A tax-advantaged savings account for individuals enrolled in high-deductible health plans (HDHPs), used to pay for qualified medical expenses.

Benefits and Compensation

High-Deductible Health Plan (HDHP)

A health insurance plan with lower premiums and higher deductibles than traditional plans, often paired with an HSA.

Benefits and Compensation

I

Income Protection Insurance

Insurance that provides employees with a percentage of their income if they are unable to work due to illness, injury, or disability.

Benefits and Compensation

Income Tax Withholding

The portion of an employee’s wages that an employer is required to withhold for federal and state income taxes.

Tax and Deductions

Income-Driven Repayment Plans

Loan repayment plans that cap monthly payments based on the borrower’s income and family size.

Education and Loans

J

K

L

Lifestyle Inflation

The tendency to increase spending as income rises, leading to difficulty saving or building wealth.

Investment and Savings

Living Wage

The minimum income necessary for an employee to meet their basic needs, including food, housing, and other essentials.

Investment and Savings

Loan Servicer

A company that handles the billing and other services on a federal student loan on behalf of the government.

Education and Loans

M

N

Net Income

The amount of money an individual takes home after taxes and other deductions, often referred to as “take-home pay.”

Investment and Savings

O

Overtime Pay

Compensation paid to employees who work more than a specified number of hours per week, usually at a higher rate than regular pay.

Credit and Debt

P

Parent PLUS Loan

The Direct PLUS loan is a federal student loan program. One type of Direct PLUS loan is the Parent PLUS loan, made to the biological parent or adoptive parent of a dependent undergraduate student to help cover the cost of the student's education.

Education and Loans

Pay Period

Describes how often you receive your paycheck. Pay may be received weekly, equalling 52 checks a year; bi-weekly, equaling 26 checks a year; semi monthly, equaling 24 checks a year; or monthly, equaling 12 checks a year.

Credit and Debt

Payroll Deduction

The automatic withdrawal of funds from an employee's paycheck for taxes, benefits, or other contributions, such as retirement savings or insurance premiums.

Credit and Debt

Payroll Taxes

Taxes an employer must withhold from an employee’s salary, including income tax, Social Security, and Medicare contributions.

Tax and Deductions

Pension Plan

A retirement plan in which an employer provides a fixed monthly payment to employees after they retire, based on their salary and years of service.

Retirement and 401k

Performance Bonus

A financial reward given to employees based on their job performance, company performance, or achievement of specific goals.

Benefits and Compensation

Preferred Provider Organization (PPO)

is a type of health insurance plan that offers a network of healthcare providers to its members. PPOs offer more choices for providers and services than other types of insurance, but they usually have higher premiums, copays, and deductibles.

Benefits and Compensation

Private Student Loans

Education loans that are provided by private lenders. These loans tend to have the highest interest rates and are the least flexible with options for repayment.

Education and Loans

Profit-Sharing Plan

A plan where companies share profits with employees, often through contributions to retirement plans or direct cash bonuses, based on company performance.

Retirement and 401k

Public Service Loan Forgiveness (PSLF)

A program that forgives the remaining balance on federal student loans for borrowers who make qualifying payments while working for a qualifying employer.

Education and Loans

Q

R

Required Minimum Distributions (RMD)

Amount of money you have to take out of your retirement account each year after you reach a certain age, 73 currently, based on calculations from the IRS's Uniform Lifetime Table or Joint Life and Last Survivor Expectancy Table.

Retirement and 401k

Retirement Plan Vesting

The process by which employees earn the right to employer contributions to their retirement plan over time.

Retirement and 401k

Retirement Readiness

The degree to which an individual is financially prepared for retirement, often measured by savings, income sources, and projected expenses.

Retirement and 401k

S

Self-Funded Health Plan

A health insurance plan where the employer assumes the financial risk for providing healthcare benefits to employees, rather than paying premiums to an insurance company.

Benefits and Compensation

Severance Pay

A financial package offered to employees who are laid off or leave the company, often based on tenure and salary.

Benefits and Compensation

Social Security

A federal program that provides retirement income, disability benefits, and survivor benefits to eligible workers and their families, funded through payroll taxes.

Tax and Deductions

Stock Options

A benefit that gives employees the right to purchase company stock at a set price after a certain period, often used as a long-term incentive.

Investment and Savings

Subsidized vs. Unsubsidized Loans

Federal student loans where the government pays the interest on subsidized loans while the borrower is in school, whereas unsubsidized loans accrue interest.

Education and Loans

T

Tax-Deferred

status where income is not taxed until it is withdrawn, often referring to retirement accounts like 401(k)s and IRAs.

Tax and Deductions

Total Compensation

The total value of all forms of compensation an employee receives, including salary, bonuses, benefits, and any additional perks or rewards.

Benefits and Compensation

Traditional vs. Roth

With traditional, you contribute pre-tax dollars, which reduces your taxable income for the year. However, you'll pay income taxes on withdrawals in retirement. With Roth, you contribute after-tax dollars, so your contributions don't reduce your taxable income. In exchange, your money grows tax-free and you'll be able to withdraw it tax-free in retirement.

Retirement and 401k

Tuition Reimbursement

A benefit where employers cover the costs of education or training for employees, helping them improve their skills or qualifications.

Benefits and Compensation

U

Unemployment Insurance

A government-provided benefit that offers temporary financial assistance to employees who lose their job through no fault of their own.

Tax and Deductions

V

Variable Pay

Compensation that varies based on performance, such as bonuses or commissions, often used to incentivize employees to meet specific goals.

Benefits and Compensation

Voluntary Benefits

Optional benefits that employees can choose to purchase, such as life insurance, critical illness insurance, or accident coverage.

Benefits and Compensation

W

Wage Garnishment

A legal procedure where a portion of an employee’s paycheck is withheld by their employer to pay off a debt or fulfill a financial obligation.

Tax and Deductions

Wellbeing Benefits

Non-salary benefits offered by employers to support employees' physical, mental, and financial health, such as wellness programs, gym memberships, or financial coaching.

Benefits and Compensation

Workplace Financial Education

Employer-provided programs designed to help employees improve their financial knowledge and decision-making skills.

Credit and Debt