Chapter 13: Providing Employee Benefits

how to vest

1) contribute yourself. 2) the employer may vest employees after 5 years and may provide zero vesting until that time. (cliff) 3) employer may vest 3-7 year period with at least 20% vesting in the third year and additional 20% vesting each following year. (step)

categories of worker's compensation

1) disability income. 2) medical care. 3) death benefits. 4) rehabilitative services.

age issues of benefits

1) no discrimination. 2) early retirement incentives need policy.

consumer driven health plans

CDHP. provide health coverage in a way that engages employees as consumers making decisions to lower costs.

employee wellness program

EWP. set of communications, activities, facilities to change health-related traits in a way that reduce health risks. usually quite specific. focuses on preventative measures

health maintenance organization

HMO. health care plan that requires patients to receive medical care from HMO professionals who are paid at a flat salary and provide all services on a prepaid basis. premiums paid to HMO cover all patients without additional payments.

hiring adults

HR strategy. netflix. experts who have a history of success, love movies and manage their time. fits with culture.

active EWP

assume that behavior changes need support or motivation to use the program. reinforcement and awareness and opportunity. tailor programs. follow ups.

individual benefit statement

available on request. describes the employee's vested and invested benefit. helps understand the value of retirement benefits.

sharedwork arrangements

companies reduce wages and hours and employees get partial unemployment rather than full layoffs.

long-term care insurance

cost of long term care like nursing homes. usually help meet these costs

defined-benefit plans

define what is paid out not what the employer pays in. years of service, age and earnings level. 20-35% of final salary. incentive employees to stay longer to reduce turnover.

underfunded plans

employer does not contribute enough to the plan each year to meet future obligations must pay more to the PBGC.

money purchase

fact that when employees retire they often buy an annuity with the money not a lump sum.

benefits required by law

federal and state levels have social insurance to protect workers from being out of work.

unemployment insurance

federally mandated program to minimize the hardships of unemployment. done through payment to unemployed workers, help in finding new jobs, incentives to stabilize employment.

personal days

for a workforce that values flexibility. days off for own use. with supervisors approval.

top-heavy pension plan

pension benefits for key employees. exceed a government specified share of total pension benefits. requires faster vesting for nonkey employees.

passive EWP

provide information and services but no formal support or motivation. like having the facility. less expensive.

exceptions to social security

railroad. government employees. they all have unique plans.

social security benefit amount

rises with person's past earnings history. not a big jump. maximum rate varies by CPI.

summary of benefits required by law

see tables in drive. note that since they are required they have no advantage by offering them. emphasis is strictly on compliance.

typical unemployment level

set by state. usually. 1/2 of previous earnings. 26 weeks. all states have minimum and maximum benefit levels.

benefits and competition

so common they are expected. hard to get qualified workers without medical and retirement.

retirement plans

social security doesn't cut it. no obligation to offer pension or anything other than social security. non-government jobs need something to attract employees. more common for high earners.

medicare part b

supplementary medical insurance.

contribution plans: continued

the amount to pay out at the end is not determined.

OASDH

the federal old age, survivors, disability, health insurance program. covers 90% of U.S. employees. informally known as social security.

retirement age

this rises with birth year. born later then a later retirement age.

purpose of exempt amount

to stop them from working. want more of the benefits as they are tax free.

other benefits

traditional: subsidized cafe. on-site first aid. moving expenses.

disability insurance

unable to work. 50-70% of salary. short term are more common as more affordable. coordinate with social security to control costs.

paid leave

vacations, holidays, sick leave. policies. jury duty etc. have policies to communicate values, clarifies what employees can expect, prevents situations of unequal treatment claims.

paying worker's comp

while the actual amount varies from state to state. usually 2/3 income. not taxed.

technicality of unemployment

while the federal government left it to the states for unemployment the social security act made it tax incentive to have them.

obamacare: over 200 employees

will require automatic enrollment in health insurance. or a penalty. have more than 50 without insurance a penalty.

losing lawsuit protection

you lose your protection from harm lawsuits if you intentionally contribute to a dangerous workplace.

elements of CDHP

1) insurance with a high deductible. 2) medical savings account where employer contributes below the deductible. 3) health education.

to receive unemployment benefit

1) meet requirements that they were employed. 52 weeks at minimum wage. 2) available for work. 3) actively seeking work. registering at local unemployment office. 4) not discharged for cause, did not quit voluntarily, not out of work due to labor dispute.

objectives of unemployment

1) payments to offset lost income of involuntary unemployment. 2) help find new jobs. 3) paying unemployment taxes incentivizes stable employment. 4) short term layoff income preserves investments in employee skills so they can afford to wait until needed.

reasons for benefits growth

1) some laws require certain benefits. 2) tax laws make it favorable to employees to not just get cash. 3) buyer power of the employer. (insurance and deals). 4) creative benefits packages can set you apart.

funding worker's comp

1) state fund. 2) purchase coverage from private insurance companies. 3) self-insurance.

what determines unemployment rate

1) where the company is located. 2) type of business (new employees charged average of industry).

medical insurance

3/4 full timers get this. hospital expenses. surgical expenses. visits to doctors. others may be dental or vision. if mental illness covered scope must be comparable to other offerings.

college savings

529 savings plans. lets parents defer taxes on earnings of their deposits into the accounts. paychecks to account. lower management fees. direct deposit. personal and professional growth. tuition reimbursement is related

employee retirement income security act

ERISA. federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights on vesting and portability and made the pension benefit guarantee corp.

accounting requirements

FASB. set aside the funds expected to need for benefits to be paid after retirement no pay as you go. future cost obligations.

family and medical leave act

FMLA. org with 50+ employees give up to 12 weeks unpaid leave after childbirth, adoption, serious illness. also for urgent needs when a national guard member called to duty. or if an active duty member is injured 26 weeks.

pension benefit guarantee corporation

PBGC. federal agency that insures retirement benefits and guarantees retirees a basic benefit if the employer experiences financial difficulties. funded by employers.

preferred provider organization

PPO. health care plan that contracts with health care professionals to provide services at a reduced fee and gives patients financial incentives to use network providers. most common.

summary plan description

SPD. report that describes a pension plan's funding, eligibility needs, risks and other details. must be received by employees 90 days post entering plan.

obamacare: small business

a tax credit equal to half the cost of providing health insurance benefits.

variance of employee expectations

age and sex value different benefits. older want medical. women for childcare or disability. younger more pay and less benefits.

communicating benefits to employees

appreciate the value. combine media.

benefits' cost

average costs of various types. BLS and government data. balance and control costs to employee needs. healthcare for example is leading to more cost on the employee, pay deductibles and copay, lower cost plan.

receiving social security

based on age and earnings history. if you wait to retirement you receive full benefits. start early will forever be at a reduced rate.

no-fault liability

basis of worker's compensation laws. the employee does not need to show that the employer was grossly negligent to get the stuff. and the employer is protected from lawsuits.

portability

being able to move retirement savings when changing employers.

cafeteria style plans

benefits plan that offers employees a set of alternatives from which they can choose the types and amounts of benefits they want. address variance among employees.

the role of employee benefits

benefits serve functions similar to pay. attract, retain and motivate employees. tailor to the employee. do the benefits meet today's needs?

benefits of social media communication

brief. timely. personal and frequent.

benefits of cash balance plans

combo of benefit and contribution. employer only. determined rate. employers can plan the contributions and helps employees predict retirement benefits. can roll forward balance to new jobs.

employee benefits

compensation in forms other than cash. more than just dollars and cents. insurance, vacation time pensions etc.

understanding healthcare reform

complex so continuous education is needed. the gov's website.

COBRA

consolidated omnibus budget reconciliation act. requires employer to permit employees or dependents to extend health insurance coverage at group rates up to 36 months following a qualifying event like layoff, reduction in hours or employee's death

sick leave

days not worked due to illness. vests and accumulates. more service more in the sick leave bank. can save them up if unlimited. if they disappear they will be used.

metrics of medical insurance

deductibles. copayments. coinsurance. number of covered days for hospitalization.

experience rating

determines size of unemployment insurance tax on each employer. number of employees a company has laid off in the past and the cost of providing them with unemployment benefits.

vesting

earning a right to receive the pension

organization's benefit objectives

effective benefits and monitor if they do what they should. controlling costs and retaining employees. get employees involved.

flexible spending account

employee-controlled pretax earnings set aside to pay for certain eligible expenses like health care in the same year. medical savings account. must be low advanced payments. residual funds go to employer.

section 401k plans

employees contribute a percentage of earnings and employers match. not taxed until receipt.

non-eligible injuries

employees don't get benefits from self-inflicted or willful disregard for safety rules.

employee benefit expectation

employees expect benefits will help them maintain economic security

pro of cafe plans

employees more aware of the value of benefits. match employee needs to the benefits. increasing actual value of the plan. avoids some costs.

money purchase plan

employer sets a level of contributions based on percentage of salary. invest the contributions. at retirement may receive the amount of contributions and investment proceeds.

obamacare: new requirements

employers will need to report the value of health care benefits on W-2. summaries of benefits and coverage to employees at the beginning of open enrollment periods.

how experience rating works

employers with a history of laying off a large share of their workforce pay higher taxes than those with few layoffs. some states allow low layoff employers to pay no state unemployment tax.

tuition reimbursement plans

encourage learning and attract employees who want to develop KSAO. covers expenses for courses relevant to the employee's job or future career with the organization.

antidiscrimination laws

equal access to benefits regardless of gender. rationale for pregnancy as a disability. pensions can't be more expensive to women who live longer.

stress benefits

especially for jobs that are demanding. help deal with stress. rec centers. company outings. trips. meals.

social security act of 1935

established OASDHI and unemployment insurance.

family leave

family or parental leave grants employees time off to care for children and other dependents. not required to be paid but growing. maternal leave the most common

average costs of benefits

for every dollar of compensation more than 30 cents goes to benefits. growing.

target date funds

geared towards the needs of employees at different life stages.

employee's expectations and values of benefits

get what is legally needed. value what they are likely to use. look at benchmarks. purchase survey data. medical care high-value. dental and vision a nice perk.

vesting rights

guarantee that when employees become participants in a pension plan and work for a set number of years they will receive a pension even if they leave the employer.

minimize unemployment cost

have good experience ratings. keep workplace safe. making employees and managers conscious of safety issue.

to be a qualified plan

have vesting and nondiscrimination rules. that is not towards the highly compensated employees. provide benefits broadly.

patient protection and affordable care act

health care reform law passed in 2010 that includes incentives and penalties for employers providing health insurance as a benefit.

cons of cafe plans

higher administrative cost. costly design and start up. employees often selected the expensive or more used benefits. difficult to estimate costs.

medicare part A

hospital insurance.

pregnancy discrimination act

if an employee is temporarily unable to perform her job due to pregnancy must treat here as any other disabled worker. modified tasks, alternative assignments, disability leave or leave without pay.

term life insurance policy

if the employee dies during the term of the policy the employee's beneficiaries receive a payment called the death benefit. usually 2x yearly pay.

profit sharing and employee stock ownership plans

incentive pay. set up so that the money goes into retirement plans. more flexibility to contribute less dollar value in lean years and more in good years

obamacare: phase 1

insurance companies. must cover children with pre-existing conditions and dependent children and no lifetime limits on coverage or end coverage if people get sick.

short-term disability insurance

insurance that pays a percentage of a disabled employee's salary as benefits to the employee for six months or less.

long-term disability insurance

insurance that pays a percentage of a disabled person's salary after an initial period and potentially for the rest of their lives.

optional benefits programs

insurance. retirement. paid leave. most common are paid leave for vacation/holidays. insurance and retirement plans.

managed care

insurer plays a role in health care decisions. avoid unneeded procedures. insurer may do claims reviews by studying them to determine if procedures are effective. approval before hospital admission.

FMLA not covered

less than one year of work. less than 25 hours a week. not of the 10% highest paid.

child care

low level: supply and help employees get info on the cost and quality of available child care. mid level: vouchers or discounts for care facilities. high level: employer provides child care.

family-friendly benefits

manage conflicts between work and family roles. usually leave policies and child care. loyalty effects

life insurance

may be provided by employer or offer the opportunity to buy coverage at lower group rates.

social security

more officially known as OASDH. combines old age insurance, survivor's insurance, disability insurance, hospital insurance and supplementary medical insurance for the elderly.

paid time off bank

most flexible time off approach. pools personal days, sick days and vacation days to use as need arises. good for young workers and work/life balance.

pros of defined contributions

mostly to the employer. easy to administer. risk on employee. no payments to PBGC.

early retirement

no coercion. accurate info on options available. must give employees enough time to make a decision. the waiver must be clear and understandable and offer a compensation.

paid leave economics

not much sense at first. they get nothing back. many nations have minimums. U.S. is discretionary. typically varies by length of service.

pros and cons of flexible spending account

not taxed so more take home pay. but if they don't use they lose. most useful if we have predictable healthcare expenses like insurance premiums.

financial planning benefit

offer an option to have a professional invest 401k. default investments called target date funds

extension of health insurance

often also cover dependents and domestic partners. a permanent or financially interdependent relationship. not quite same as taxes as wages.

age and types of plans

older: defined benefits better. younger: cash balance plans better.

floating holidays

paid holidays that vary from year to year. long weekend.

HMO purpose

paying in a salary to reduce "salesman doctors." cost less than traditional. may be too cost-control effective.

defined-benefit plan

pension plan that guarantees a specified level of retirement income.

multiemployer pension plans

plans need not provide vesting until after 10 years of employment

unpaid leave

policies needed for this. typically nonwork goals. benefit as you don't lose seniority or benefits during leave.

intent of vesting

protect employees by preventing employers from terminating them before they meet retirement age. illegal to lay off to avoid paying pensions. cliff vesting has a bigger impact on retention.

pros of defined benefits

protect employees from risk that pension fund will not earn as much as expected. employer makes up the difference. the difficulty to fully fund pensions has been increasing.

elder care

providing assistance, paying for professional caregivers, locating services. start with offering info and referrals. referrals to decisions support. flextime and paid off.

tax treatment of benefits

qualified plans. favorable tax. immediate tax deductions. no immediate tax on contributions. tax free earnings on the money in the fund.

group insurance

rates tend to be lower. insurance benefits usually not taxed. employees get more for money. medical, life and disability. soon to be required

noncontributory plan

retirement plan funded by the employer

contributory plan

retirement plan funded by the employer and the employee.

cash balance plans

retirement plan in which the employer sets up an individual account for each employee and contributes a percentage of the employee's salary. the account earns interest at a predefined rate.

defined-contributions plan

retirement plan where the employer sets up an individual account for each employee and specifies the size of the investment into said account.

benefits for retirement

social security. pensions. contributions. retirement savings.

general benefits by law

social security: retired workers. unemployment: assists laid-off workers. worker's comp: injured on the job. unpaid leave: certain family and medical needs.

paid holiday

specified days in addition to vacation time. Christmas thanksgiving etc. not based on years of service.

pearson social media

spirit of teamwork. wellness programs. neo. motivation to walk. peer pressure to be fit. charity entry fees. reminders and praise. track progress. share ideas.

pro tips for retirement

start saving early. diversify your investments.

worker's compensation

state programs that provide benefits to workers who suffer work-related injuries or illnesses or to their survivors.

basics of benefits regulation

the importance of this type of pay is why they are regulated. social security is required. sometimes regulations to achieve favorable tax needs.

exempt amount

the reduction in social security benefits if worker is still earnings above a maximum. reduced by $1 for every $2 earned above the exempt amount. stops at retirement age.

selecting employee benefits

the total package is diverse. consider the org goals, budget and the expectations of current and desired employees. need to make employee feel committed.

benefits and recruitment

the types of benefits offered clearly draws in different people.

spouses of social security

they also receive some benefits of own earnings or 1/2 of covered earner. whichever is greater.