chapter 12

Is an administrative expense an advantage of flexible benefits?

no

The first issue in setting up a benefits package is

who should be protected or benefited

What is the "bandwagon" effect in benefits administration?

An issue while determining benefits is the perceived fairness in comparison to other organizations. Occasionally this comparison process leads to a "bandwagon" effect, in which new benefits offered by a competitor are adopted without careful consideration, simply because the employer wants to avoid hard feelings. This phenomenon is particularly apparent for employers with strong commitments to maintaining a totally or partially nonunion work force. While the effectiveness of this strategy in thwarting unionization efforts has not been demonstrated, many nonunion firms would prefer to provide the benefit as a safety measure

What are some of the common cost containment practices regarding benefits administration

Employers are auditing their benefit options for cost containment opportunities. The most prevalent practices include: Probationary periods—excluding new employees from benefit coverage until some term of employment (e.g., 3 months) is completed. Benefit limitations—limit disability income payments to some maximum percentage of income and to limit medical/dental coverage for specific procedures to a certain fixed amount. Copay—requiring that employees pay a fixed or percentage amount for coverage. Administrative cost containment—controlling costs through policies such as seeking competitive bids for program delivery.

What is the role of the government impetus in the development of employee benefits?

Three employee benefits are mandated by either the state or federal government: workers' compensation (state), unemployment insurance (federal), and social security (federal). In addition, most other employee benefits are affected by such laws as the Employee Retirement Income Security Act (ERISA affects pension administration) and various sections of the Internal Revenue Code.

illistrate the issue of communication of benefits to the employees

The most frequent method for communicating employee benefits today is still the employee benefit handbook. To be most effective, the benefit manual should be accompanied by group meetings and videotapes. While some organizations may supplement this initial benefit discussion with periodic refreshers, a more typical approach involves one-on-one discussions between the benefit administrator and an employee seeking information on a particular benefit. In recent years, personalized benefit statements generated by computer software programs are also becoming popular

Which if the most popular empirical method of identifying individual preferences in benefits packages?

The most popular method of identifying individual employee preferences is commonly known as a flexible benefit plan (also called a cafeteria-style plan or a supermarket plan). Employees are allotted a fixed amount of money and permitted to spend that amount in the purchase of benefit options. From a theoretical perspective, this approach to benefit packaging is ideal. Employees directly identify the benefits of greatest value to them, and by constraining the dollars' employees must spend, benefit managers can control benefit costs.

In 1959, benefits were approximately ___ of payroll and in 2010, the percent was ___

25%,30%

The total cost of employee benefits in the U.S. is ___

4-5 trillion dollars

a recent survey shows that the majority of employers are responding to increased benefit cost by

requiring employees to pay higher deductibles and copays

A type of benefit plan that allocates a set $ amount to employees and allows them to select benefits is called

Flexible benefit plan

across 5 studies ranking preference for benefits _____ had the lowest average rating

Long term disability

What is not a disadvantage of flexible benefit program?

New benefits are more difficult to introduce

in the ____ benefit package.a package is designed with the average employee in mind

Standard

List some examples of customer driven healthcare benefits packages

There are many variants on consumer-driven health care. Some of the basic choices are: Full-defined Contribution, Tiered Networks, Menu-driven, Managed Competition, Health Savings Accounts

A major approach to increasing employee awareness of health care choices and cost is

cafeteria plans

The typical employee can recall ____ % of the benefits they receive

less than 15

Surveys show that the most highly valued benefits is

medical insurance

_____ are the primary reason why businesses adopt flexible benefit programs

Cost savings

Tiered networks, managed competition and health savings accounts are all examples of choices for

Customer driven health care

What is not a major benefit planning and design issue?

Diversity compliance

A study of the factors affecting MBA students' job choice showed ______ was ranked as least important

Employee benefits

What can administrators do to control the increasing benefits costs?

To control spiraling benefit costs, administrators should adopt a broader, cost-centered approach. As a first step, this approach would require policy decisions on the level of benefit expenditures acceptable both in the short and the long runs. Factors affecting this decision include an evaluation of benefits offered by other firms and the competitiveness of the existing package. Also important is compliance with various legal requirements as they change over time. Finally, the actual benefit of a new option must be explored in relation to employee preferences.

What is not a benefit administration issue?

benefit adequacy

Advantages of employer sponsored life and health insurance means employee have options to choose coverage levels.

?

Identify the factors as reasons for the growth of benefits

?

What benefits are not mandated by state or federal legislation?

?

Which are the 4 major administration issues regarding in setting up a benefit package?

Four major administration issues arise in setting up a benefit package: (1) Who should be protected or benefited? (2) How much choice should employees have among an array of benefits? (3) How should benefits be financed? and (4) Are your benefits legally defensible?

What is the importance of the demographic approach in determining employee preferences?

The demographic approach assumes that demographic groups (e.g., young versus old, married versus unmarried) can be identified for which benefit preferences are consistent across members of the group. Furthermore, it assumes that meaningful differences exist between groups in terms of benefit preferences. It must be noted that evidence says that these assumptions are only partially correct.

What are the major disadvantages of a flexible benefits package?

The major disadvantages of a flexible benefits package are: • Employees make bad choices and find themselves not covered for predictable emergencies. • Administrative burdens and expenses increase. • Adverse selection: Employees pick only benefits they will use; the subsequent high benefit utilization increases its cost. • Subject to nondiscrimination requirements in Section 125 of the Internal Revenue Code.

Employees directly identify the benefits of greatest value to them

and, by constraining the dollars' employees have to spend, benefits managers are able to control benefits costs. Elaborate: New Brunswick Power saved millions of dollars in healthcare benefits by implementing a flexible benefit plan and working together with their union on disability management