Comp Test 3 Vocab
health insurance
Affordable Care Act • Covered Employers o Large Employers-those employing 50 or more full-time employees or equivalents o Defines a full-time employee as one working an average of at least 30 hours per week, or at least 130 hours in a month FTEs are calculated An employer w/ 40 fulltime employees and 15 part-time employees (who worked 20 hours per week) would be classed as a large employer • Large Employer Mandates o Large employers who don't offer health coverage , the employer will be assessed a $2,000 per employee per year tax penalty (called a Shared Responsibility Payment) The monthly penalty is calculated by subtracting 30 from the total number of actual full-time employees and multiplying the difference by 1/12th of $2,000 o A $3,000 penalty is imposed if the employer offers insurance, but said insurance is not deemed affordable and providing minimum value by the Department of Health and Human Services
FMLA
Covered-Public agencies, including state, local, and federal employers, local education agencies (schools) Private employers with 50 or more employees for each working day in 20 or more calendar weeks of the current or preceding calendar year Employees Eligibility • Work for a covered employer • Have worked for the employer for a total of 12 months • Have worked at least 1,250 hours over the previous 12 months • Work at a location in the USA or in any territory under the possession of the USA where at least 50 employees are employed by the employer within 75 miles of the facility Qualifying Events • Birth of a son or daughter to the employee and in order to care for such son or daughter • Placement of a son or daughter with the employee for adoption or foster care • Family leave in order to care for a spouse, son, daughter, or parent of the employee if such spouse, son, daughter, or parent has a serious health condition • Serious health condition that makes the employee unable to perform their job Employee Benefits • Provides for 12 weeks of UNPAID leave • Employee must be allowed to return to his/her previous (or equivalent) job • Employee is entitled to health insurance coverage during their leave
worker's compensation
Form of no-fault insurance- designed to clean up the court system Some states (ex: IL)- run through 3rd party 2015 Average- $.47/hour or $980/year. Range: $.23/hour - $1.08/hour Covers • Medical care for work related injuries • Temporary disability benefits • Permanent partial and permanent total disability benefits- put a PI on it • Survivor benefits • Rehabilitation Covered by State law, not Federal law
social security (OASDI)
Old Age, Survivor, and Disability Insurance (OASDI) Enacted in 1935 for retirement Survivors' insurance added in 1939 Disability insurance added in 1965 Retirement Requirements • Earn 40 quarters of credit or be employed for 10 years • Be age 62 for partial benefits • Be age 65 for full benefits Survivor Benefits • Based on eligibility status & relationship o Deceased was fully insured o Dependent, unmarried children o Widows age 60 and older o Dependent parent age 62 and older Disability Benefits • Worker was fully insured • Meets Social Security work requirements • Varies according to age and disability • Disability must last one year or be terminal • Six-month waiting period Problem • Number of retired workers is quickly rising • No corresponding increase in number of contributors to offset costs
unemployment
Unemployment Insurance • Financed by employers that pay federal and state unemployment insurance tax o Federal tax-6.25% for the first $7,000 earned by each worker o States additionally impose a tax above the $7,000 figure o The extra amount a company pays depends on its experience rating • Generally, employers must pay both state and federal unemployment taxes if: o They pay wages to employees totaling $1,500 or more in any quarter of a calendar year o They had at least one employee during any day a week during 20 weeks in a calendar year, regardless of whether the weeks were consecutive • Eligibility o Did not leave job voluntarily o Able and available for work o Actively seeking work o Has not refused suitable work o Not off due to labor dispute o Not fired for gross work violations o Must be employed for the last four or five quarters (base period) prior to becoming unemployed Federal Unemployment Trust Fund • Administered by the Treasury Department • An employer's actual tax burden varies according to an experience rating system • A company that lays off a large percentage of employees will have a higher tax rate than a company that lays off relatively few or none of its employees
safe harbor rule
-the leased employee must be covered by the leasing company's pension plan, which must be a money purchase plan with a nonintegrated employer contribution rate for each participant of atleast 10% of compensation, provide for full and immediate vesting, and allow each employee of the leasing organization to immediately participate in such a plan -leased employees can't constitute more than 20% of the recipient's nonhighly compensated workforce. Nonhighly compensated workforce means the total number of nonhighly compenasted indivduals who are employees of th recipient and who have performed services for the recipient for atleast 1 year or 2 indivudals who are leased meployees of the recipient
legally required benefits
-workers compensation -unemployment -social security -health insurance -FMLA
4 possible exceptions to immunity from legal action for torts for employers (the employer can get in trouble for doing these)
1. an employer's intentional acts 2. lawsuits alleging employer retaliation for filing a workers comp claim 3. lawsuits against noncomplying employers 4. lawsuits relating to dual capacity relationships
experience rating system
An employer's actual tax burden varies according to an experience rating system. Every state applies different tax rates to companies, subject to statutory minimum & maximum rates. Each company's tax rate depends on its prior experience with unemployment. Accordingly, a company that lays off a large percentage of employees will have a higher tax rate than a company that lays off relatively few or none of its employees. This experience rating system implies that a company can manage its unemployment tax burden
sarbanes-oxley act of 2002
Bush strengthened the oversight of the SEC when he signed the Sarbanes-oxley act of 2002. The act mandated a number of reforms to enhance corporate responsibility, enhance financials disclosures, and combat corporate and accounting fraud in response to corporate accounting scandals in Enron, Tyco, and other large U.S. corporations. This act established the PCAOB
platinum parachutes
Many companies reach agreements with CEO's to terminate employment, awarding a platinum parachute as an incentive. These are lucrative awards that compensate departing executives with severance pay, continuation of company benefits, and even stock options. Companeis use these to avoid long legal battles
highly compensated employee
The IRS defines a highly compensated employee as one of the following during the current year or preceding year: -a 5% owner at any time during the year or the preceding year -for the preceding year had compensation from the employer in excess of $115,000 in 2013 -if the employer elects the application of this clause for a plan year, was in the top-paid group of employees for the preceding year
phantom stock
a phantom stock plan is a compensation arrangement whereby boards of directors promise to pay a bonus in teh form of the equivalent of either the value of company shares or the increase in that value over aperiod of time. 2 conditions: executives must remain employed for a specified period, anywhere between 5-20 years. Second, executives must retire from teh company
key employee
any employee who at any time during the year is: -a 5% owner of the employer -a 1% owner of the employer having an annual compensation from the employer of more than $165,000 -an officer of the employer having an annual compensation greater than $165,000 in 2013
troubled assets relief program (TARP)
authorized teh secretary of the Treasury to establish the troubled assets relief program (TARP) to purchase, and to make and fund commitments to purchase troubled assets from any financial institution, on terms and conditions as are determined by the Secretary. In other words, banks with financial assistance from the federal government could deduct only the first $500,000 annually for an exectutive's pay as a business expense
clawback provisions
clawback provisions in CEO employment contracts allow boards of directors to take back performance-based compensation if they were to subsequently learn that performance goals were not actually achieved, regardless of whether the CEO was responsible for performance falling short of target levels. These are becoming more common
pay & benefits for part time employees
companies are legal employers. part time employees earn lesss than core employees. companies generally do not provide discretionary benefits to part time employees, but it varies. not required to offer protective insurance (medical, dental, vision, life insurance), but part time employees that receive health insurance cover are protected under COBRA. may be required to provide qualified retirement programs, if part time employees are atleast 21 & completion of atleast 1,000 hours of work in a 12 months period
headquarters-based method
compensates all employees according to the pay scales used at the headquarters. Neithe the location of the itnernational work assignment nor home country influences base pay. This method makes the most sense for expatriates who move from one foriegn assignment to another and rarely work in their home countries
host country-based method
compensates expatriates baed on teh host countries' pay scales. can use market pricing, job eavlatuions, or jobholders' past relevant work experience to determine this
home country-based pay method
compensates expatriates teh amount they would receive if they were performing similar work in the U.S., job evaluations are used to determine this
inventive stock options
entitle executives to purchase their companies' stock in the future at a predetermined price. Executives are purchasing the stocks at a discounted price
federal employees' compensation act
federal civilian employees receive workers compensation protection by this
Federal Insurance Contributions Act (FICA)
funding for OASDI & medicare programs requires equal employer & employee contributions under FICA. It requires tht employers pay a tax based on their payroll; employees contribute a tax based on earnings, which is withheld from each paycheck; tax rate is about 7.65%
nonstatutory stock options
in contrast to incentive stock options, nonstatuttory stock options do not qualify for faovrable tax treatment. Executives pay income taxes on the difference between the discounted price and the stock's fair market value at the time of the stock grant. But they do provide executives an advantage: the tax liability is ultimately lower over the long term
fully insured
individuals become fully insured when they earn credit for 40 quarters of coverage, or 10 years of employment, and remai fully insured during their lifetime
Medigap-coinsurance, copaymeents, and deductibles
insurance supplements part a and part b coverage and is available to medicare receipeints in most stages from private insurance companies for an extra fee. Most medigap plans help cover the costs of coinsurance, copayments, and deductibles. It is voluntary supplemental insurance to pay for services not covered in parts a & b
securities exchange act of 1934
it applies to the disclosure of executive compensation. The SEC rulings have 2 objectives: t he first is to clarify the presentation of the compensation paid to the CEO & the four most highly paid executives. The second is to increase teh accountability of company boards of directors for executive compensation policies and decisions. -pg. 278 table 12-4
pay for leased workers
leasing companies are the legal employers for wage issues & legally required benefits, but leasing companies & client companies are the legal employers regarding discretionary benefits. Both pension eligibility and discretionary benefits are key issues. Leased employees are generally entitled to participation in the client companies qualified retirement programs; however, the leasing company becomes responsible for leased employees retirement benefits when the safe harbor rule requirements are met. Overtime & minimum is required
restricted stock
means that executives do not have any ownership control over the disposition of the stock for a predetermined period, often 5-10 years. Executives must sell the stock back to the company for exactly the same discounted price they had at the time of purchase if they terminate their employment before the end of the designated restriction period
real hourly compensation
measures the purchasing power of a dollar
medicare part d-prescription drugs
medicare prescription drug benefit. Look at chart on pg. 245
golden parachutes
most executives' employment agreemtns contain a golden parachute clause which is golden parachutes provide pay and benefits to executives after a termination that results from a change in ownerrship or corporate takeover, that is, the merger or combinging of two separate companies
executive compensation theories
o Agency Theory-Shareholders give control to executives o Tournament Theory-Managers compete for promotions o Social Comparison Theory-Compensation compared to others o Class Hegemony Theory-Execs share a common bond o Efficiency Wage Theory-Paid a premium to exert effort and avoid firing o Figurehead Theory-CEO is symbol and representative o Human Capital Theory-Value based on KSAOs o Managerialism Theory-CEOs have power yielded to them by owners o Marginal Productivity Theory-CEO compensation is based on his/her value to the firm o Prospect Theory-Focuses on Exec's loss aversion
wall street reform and consumer protection act of 2010 (dodd-frank act)
obama signed it to further enhance the transparency of executive compensation practices. Also commonly referred to as the Dodd-Frank Act, the act requires the companies that rade stock on public exchanged to comply with 3 major provisions: the first provision requires say on pay; the second provision details independence requirements for compensation committee members & their advisors such as compensation consultants and legal counsel; the third provision requires that companies disclose the circumstances under which an executive would benefit from a golden parachute arrangement
stock appreciation rights
provide executives income at the end of a designated period, much like restricted sotck options; however, executives never have to exercise their stock rights to receive income
Medicare Advantage-part c-choices in health care providers
provides beneficiaries the opportunity to receive health care from a variety of options, including private fee for service plans, managed care plans, or medical savings accounts. Was established thorugh the balanced budget act of 1997 & is known as part c to medicare. Choices in health care providers, such as through HMOs & PPOs
walling v. A.H. Belo Corp
requires employers to guarantee fixed weekly pay for employees wose work hours vary from week to week (flexible workers): the employer typically cannot determine the number of hours employees will work each week; the workweek period fluctuates both greater and less than 40 hours per week
Self Employment Contributions Act (SECA)
requires that self-employed individuals contribute to the OASDI & medicare programs, but at a different tax rate; tax rate is about 15.3%
discount stock option plans
similar to nonstatutory stock options plans with one exception. Companies grant stock options at rates far below the stock's fair market value on the date the option is granted. This means that the participating executive immediately receives a benefit equal to the difference between the exercise pricea and the fair market value of the employer's stock
medicare tax (hospital insurance tax-HI)
supports medicare part a program
pay & benefits for temporary employees
temporary employment agencies are legal employers. Pay varies. it is important to distinguish between temporary employees & seasonal employees for determining eligibility under FLSA minimum wage & overtime. FLSA extends coverage to temporary employees for minimum wage & overtime. Some seasonal employees are exempt from the FLSA's minimum wage & overtime pay. Not required to provide benefits, but can qualify for pension benefit if they meet ERISA's minimum service requirement
nominal hourly compensation
the face value of a dollar
pay & benefits for flexible employees
the key pay issue for flexible work schedules is overtime pay. The main employee benefits issues are paid time off benefits and working condition fringe benefits
Medicare Select Plan
these are medigap policies ethat offer lower premiums in exchange for limiting hte choice of health care providers. 3 states don't subscribe to this (massachusetts, minnesota, & wisconsin)
Medicare Part A-required hospitalization insurance
this compulsory hospitalization insurance covers both inpatient and outpatient hospital care and services. Social Security beneficiaries, retirees, voluntary enrollees, and disabled individuals are all entitled. Both employers & employees finance Medicare Part A benefits through payroll taxes of 1.45% on all earnings. Part a coverage automatically qualifies and individual to enroll in part b coverage for a monthly premium
Medicare Part B-medical insurance/services & supplies after deductible
this voluntary supplementary medical insurance covers 80% of medical services and supplies after the enrolled individual pays an annual deductible for services furnished under this plan. Part b helps pay for physicians services and for some medical services and supplies not covered under part a. medicare part b pay for medical care such as doctors' services, outpatient care, clinical laboratory services, and some preventive health services. It also provides ambulance services to a hospital or skilled nursing facility when transportation in any other vehicle would endanger a person's health
workers compensation laws cover virtually all employees in the U.S., except for domestic workers, some agricultural workers, & small businesses with fewer than a dozen regular employees
true
Federal Unemployment Tax Act (FUTA)
unemployment insurance benefits are financed by federal & state taxes levied on employers under the FUTA. State & local governments, as well as not-for profit companies, are gnerally exempt from FUTA. Alaska is currently the only state that requires employee contributions. Employer contributions amount to 6.2% of the first $7,000 earned by each employee