Farm Credit Foundations

Terms to Know

Balance Billing When you go to an out-of-network provider for medical and dental services, you may be responsible for the difference between the full cost (amount billed) and Reasonable and Customary charge (maximum amount paid) in addition to any coinsurance amounts.

Basic Dental Services Routine dental procedures such as root canals and cavity fillings.

Cafeteria Plan An employee benefit arrangement allowed by IRS Code Section 125, under which employees are allowed to pay for certain employee benefits on a pre-tax rather than an after-tax basis.

Coinsurance A percentage of the cost of eligible medical expenses you are responsible for paying, after the deductible is met.

Copayment A fixed dollar or percentage you pay each time you receive certain medical services – (i.e. office visits, prescription drugs).

Defined Benefit Pension Plan An employer sponsored retirement plan in which the benefit is based on a "defined" formula. Defined Benefit Plan Formulas Ninth District: 1.5% of your total Final Average Pay, multiplied by your Years of Benefit Service, plus 0.25% of the amount by which Final Average Pay exceeds Covered Compensation multiplied by Years of Benefit Service. Northwest: 1.45% of your total Final Average Pay, multiplied by your Years of Benefit Service (35 year maximum); plus 0.35% of the amount by which Final Average Pay exceeds one half of the average of the last 5 years of Social Security Taxable Wage Bases ($50,730 in 2011), multiplied by Years of Benefit Service. 7th District (Final Average Pay formula): 1.5% of your total Final Average Pay, multiplied by your Years of Benefit Service; plus 0.25% of the amount by which Final Average Pay exceeds covered compensation* multiplied by years of benefit service. (Different percentage applies for service prior to 1/1/94 for former 4th District retirement plan participants.) 7th District (Cash Balance formula): Annual Pay Credit added to account equal to 5 – 10%, depending on Years of Benefit Service, of eligible compensation. Additional Pay Credit equal to 5% of compensation in excess of Social Security Taxable Wage Base, if applicable ($106,800 in 2011) 11th District: 1.95% of total Final Average Pay, multiplied by years of benefit service. *Covered compensation is the 35-year average, ending at age 65 of the taxable Social Security Wage bases. Covered compensation tables are published by the Internal Revenue Service.

Defined Benefits Pension Restoration Plan A nonqualified Pension Restoration Plan (varies by District) that restores benefits payable from the qualified retirement plans listed above that are reduced by: Internal Revenue Code (“Code”) limits on compensation and/or benefits, and Exclusion of employee deferrals to the Farm Credit Foundations Non-qualified Deferred Compensation (NQDC) plan from the definition of “Compensation” in the qualified retirement plan. For example, the Code limits annual compensation used to determine benefits under the qualified retirement plans to $360,000 in 2011 ($245,000 if hired after 1995). Similar annual limits on compensation apply to prior years. Also, the Code limits annual benefits payable from the qualified plans to $195,000 in 2011 for those commencing payments at normal retirement age. So, the Pension Restoration Plan restores pension benefits attributable to compensation or benefits payable in excess of the Code limits.

Defined Contribution / 401(k) An employer sponsored retirement plan in which an employee and employer elect to defer some amount of money into the employee's account. Employer contribution amounts vary by date of hire. Hired on or after 1/1/07: Fixed 3% Employer Contribution; plus Dollar-for-dollar Employer Match on first 6% of combined employee pre-tax, post-tax, Roth after-tax contributions Possible total Employer Contribution/Match = 9% of your compensation Hired before 1/1/07 and a participant in Defined Benefit plan: Dollar-for-dollar Employer Match on first 2% of combined employee pre-tax, post-tax, Roth after-tax contributions plus fifty cents on the dollar match for the next 4% of employee contributions Possible total Employer Match of 4% of your compensation Hired before 1/1/07 within former Consolidated group and not a participant in Defined Benefit plan: Fixed 3% Employer Contribution; plus Dollar-for-dollar Employer Match on first 6% of combined employee pre-tax, post-tax, Roth after-tax contributions; plus 5% Integrated Employer Contribution for eligible compensation in excess of the annual Social Security Taxable Wage Base ($106,800 in 2011) Possible total Employer Contribution/Match = 9% plus 5% integrated employer contribution Hired before 1/1/07 within U.S. AgBank group and transferred Account Balance benefit from 9th District DB plan to 401(k) plan: Fixed 3% Employer Contribution; plus Dollar-for-dollar Employer Match on first 6% of combined employee pre-tax, post-tax, Roth after-tax contributions; plus Up to 3.50% Transition Credit depending on age and service on 9/30/07 1% Integrated Employer Contribution for eligible compensation in excess of the annual Social Security Taxable Wage Base ($106,800 in 2011)

Deductible The amount of money you pay each plan year before the medical and/or dental plan pay a benefit.

Elements of Compensation Base Salary – Current annual salary excluding any variable pay. Compensation – This definition is used to determine retirement benefits, in the 401(k) and defined benefit plan(s). It is defined as your current base salary plus current variable pay. Total Compensation – This definition is used to determine pay based welfare benefits, such as life and disability insurance. It is defined as your current year’s base pay plus the prior year’s variable pay. Total Compensation Variable Pay - Is defined as incentive pay, commissions, overtime, intermittent pay, shift differential, retroactive pay adjustments, lump-sum merit pay, business or performance-based bonuses and salary continuation plans – e.g. sick pay. Variable Pay - Includes any type of incentive or bonus tied to performance throughout the rolling 12 month calendar. This includes long term incentive payments, annual incentive awards, commissions, and special bonus plan payments.
Evidence of Insurability Any statement of proof of a person’s physical condition affecting his/her acceptance for insurance.

Employer-Paid Benefits A cost incurred by your employer for your health and welfare coverage, income protection, retirement benefit, social security / Medicare and taxes.

Eligible Charges Charges for services that are covered under a benefit plan.

Flexible Spending Account (FSA) – Dependent Care Allows employees to use pre-tax dollars from their paychecks to pay for the cost of care for children or elderly dependents.

Flexible Spending Account (FSA) – Health Care Allows employees to use pre-tax dollarsfrom their paychecks to pay for eligiblemedical expenses.

Flexible Spending Account (FSA) – Limited Purpose Allows employees to use pre-taxdollars from their paychecks to pay for thecost of eligible dental and vision expenses.You are only allowed to participate in thisplan if you are enrolled in a High DeductibleHealth Plan (Consumer Choice PPO Plan).

Generic Drugs Generic drugs have the same chemical make-up of a corresponding non-preferred brand drug whose patent has expired.

Health Coverage Includes medical, dental, and vision.

Health Maintenance Organization (HMO) An organization that provides pre-paid healthbenefits and most medical services throughits network of facilities.

Health Savings Account (HSA) A Health Savings Account is the vehicle that allows employees in a high deductible health plan (HDHP) to set aside tax-exempt contributions for current and future qualified medical expenses in an account made available through your employer or financial institution.

High Deductible Health Plan (HDHP) An HDHP allows you to save money on your insurance premium in exchange for a higher deductible. When you are covered under a traditional medical plan, you pay a substantial monthly premium, whether you use the plan or not.

Income Protection Includes long-term disability insurance. Some employers also offer short-term disability and sick pay.

Major Dental Services Extensive dental procedures such as crowns, bridges and dentures.

Non-Preferred Brand Drugs A medication that has been patented for name and chemical content. Once the patent expires, generic drugs with a different name but the same chemical make-up usually become available. Non-preferred brand drugs are all other prescription drugs that are not generic or on the list of Preferred drugs. The highest copay is charged for these drugs because they are either the most expensive and/or have a comparable drug that is either generic or on the preferred list.

Nonqualified Deferred Compensation (NQDC) NQDC Plans allow for additional retirement savings for highly compensated eligible employees due to IRS limitations on employee and employer contributions to the qualified 401(k) plan. Employee Deferrals. Allow eligible employees to make elective pre-tax deferrals. NQDC deferrals can be in addition to deferrals into the qualified Farm Credit Foundations Defined Contribution / 401(k) Plan (the “Foundations 401(k) Plan”). Restore Benefits. Allow employers to restore benefits under the Foundations 401(k) Plan that are subject to the following limitations: Code Sections. The imposition of Sections 401, 402, and 415 of the Internal Revenue Code (the “Code”) as described in the next section below; and Exclusion of Contributions. The exclusion of contributions to any deferred compensation plan from the definition of “Compensation” under the Foundations 401(k) Plan. Discretionary Contributions. To allow employers to provide discretionary contributions of deferred compensation. Internal Revenue Code Limits. The Code can significantly limit and reduce the retirement benefits under the Foundations 401(k) Plan for highly compensated employees. 401(k) benefits impacted by the following Code limits are intended to be restored under the NQDC Plan: Code § 402(g) Limit on Elective Deferrals. For 2011, the maximum amount of combined employee pre-tax and after-tax Roth 401(k) contributions to the Foundations 401(k) Plan is limited to $16,500. An employee who is age 50 or more may contribute an additional $5,500 of “catch up” contributions (pre-tax and/or Roth after-tax), for a total of $22,000; Code § 415 Cap on Contributions. For 2011, the maximum annual contributions that can be made to a Participant’s Foundations 401(k) Plan account by or on behalf of a Participant is capped at $49,000. An Employee who is age 50 or more may contribute an extra $5,500 for “catch up” contributions (pre-tax and Roth after-tax combined). All employee and employer contributions – whether pre-tax, after-tax Roth, traditional after-tax, and fixed employer/match – count against this cap, except for rollovers from other qualified plans; and Code § 401(a) (17) Limit on Annual Compensation. For 2011, Compensation over $360,000 is excluded from the calculation of employer match/contributions to the Foundations 401(k) Plan if the employee became a Participant in the Foundations 401(k) Plan or any predecessor plan prior to 1996. Compensation over $245,000 is excluded if the employee became a Participant in the Foundations 401(k) Plan or any predecessor plan after 1995. If a Participant in the Foundations 401(k) Plan has Compensation excluded from his/her 401(k) calculations, then the employer Matching Contributions and/or fixed employer contributions would be limited.

Preferred Provider Organization (PPO) An organization in which networks arecreated with Preferred Providers (Medical/Dental professionals who have contractswith the organization to provide servicesat a discounted rate). Generally benefitswill be greater and costs will be lower if theparticipant uses an in-network provider.

Pre-Existing Condition A medical condition that could exclude you from receiving benefits associated with that condition for a defined period of time.

Preferred Drugs These are prescription drugs that have been placed on a list of preferred drugs for a medical plan with a prescription copay. The copay for preferred drugs is generally less than non-preferred brand drugs but higher than a generic drug copay.

Pre-Tax / Tax Advantage Reimbursement Accounts Consists of Flexible Spending Health Care Account, Flexible Spending Dependent Care Account, Flexible Spending Limited Purpose Account and Healthcare Savings Account. These accounts allow you to contribute money on a pre-tax basis for a specific purpose. This allows you to lower your taxable income by using tax-free money for allowable expenses. For a list of allowable expenses reference the IRS website, www.irs.gov, publication 502.

Preventive Dental Services Routine services such as cleanings and checkups.

Qualified Status Change An event that allows you to make coverage changes you could not otherwise make under a pre-tax plan as long as you make those changes within 31 days of the event – (i.e. marriage, divorce, etc.) Note: birth of child is 60 days of the event.

Reasonable & Customary (R&C) The average fee charged by a particular type of provider within a geographic area. Medical and Dental plans use this amount to determine the maximum amount they will pay for a service.

Routine Care Includes doctor visits, exams and other services for the purpose of monitoring a diagnosed condition.

Social Security / Medicare An estimate of the employee cost for Social Security/Medicare is calculated by multiplying your base pay up to $106,800 times 5.65% plus any eligible earnings above $106,800 times 1.45%. The estimate of the Employer cost for Social Security/Medicare is calculated by multiplying your base pay up to $106,800 times 7.65% plus any eligible earnings above $106,800 times 1.45%. If you would like to know more about Social Security benefits go to the Social Security Administration’s website at www.socialsecurity.gov.

Total Rewards The total value of your benefits and pay, including total compensation, and employer-paid benefits (health and welfare & retirement benefits).

Welfare Coverage Includes life / Accidental Death & Dismemberment (AD&D) insurance.

Wellness Benefits Certain services whose priority is the prevention and early detection of conditions. It does not include care or monitoring of an existing condition.

Terms to Know