Topic 10

what benefits are there for retirement?

"pension plan" Defined benefit Defined contribution 401(k) 403(B) Social security reitrement benefits

Who taxes the employee's salary?

- Federal in come tax (IRS) - wage tax - State income tax - Social Security

what are the benefits for a loss of income due to death?

- Life insurance. Like group term life insurance - social security survival benefits. Your spouse and kids can recieve social security benefits - workers compensation for if you get killed on the job. - survival benefits under your retirement plan

Are health insurance cost on you W-2?

- No they're not which is why most people don't know how much their health insurance cost

who pays the costs of the benefit in a non contributory benefit plan?

- The employer - the employee does not have to contribute any money?

what measurement characteristics of group insurance are used to find a premium?

- age - gender - occupation - location - past level of losses in a year

who pays the costs of the benefit in a contributory benefit plan?

- both employee and employer contribute

What is a dependent care flexible saving account

- child care expenses - elder care expenses

Eligibility vs participation of an employee benefit plan

- every benefit that a firm offers has certain eligibility standards. Like employees must be a full time employee. You become a full time employee after the waiting period. So here the eligibility standards are, Full time employee and the waiting period. - Participation is only for employees who are fully elgible.

what are the benefits for loss of income due to disability?

- occupational disability. Like you can get hurt on the job and you will get occupational workers compensation. - Sick leave insurance - short term disability insurance - long term disability insurance -social security disability insurance.

what are examples of employee pay all/voluntary benefits?

- pet insurance - dental insurance - vision insurance

What are the benefits for a loss of income due to unemployement?

- severance package. Employer might lay you off but still give you 6 months of your salary - unemployement insurance: employer will pay a percentage of your loss wages until your empoyed again.

who pays the costs of the benefit in a employee-pay-all?

- the employee

Unemployement insurance moral hazard (59:00) 4/6/2015

...workers can get their boss to fire them on purpose just so they can get workers compensation. I think my uncle does this cause he's a dick, but I could be wrong.

What are the types of health/medical benefits provided by an employer for their employee's?

1. Traditional indemnity plans 2. managed care plans like HMOs, PPOs, and POS--type of HMO 3. Consumer Driven Health Plans with either an HRA or HSA 4. Specialty insurance for narrowly defined perils like dentil, vision, and drug prescriptions. Low severity exposures

Types of loss exposure

1. medical expenses. health insurance 2. economic loss expenses to an employee or employee's dependent. Any peril like injury, illness or sickness, death, unemployeement, retirement 3. Loss of productivity to an employer

If the IRS taxed health insurance how much money could they get?

180 billion

How many hours a week is a full time employee?

30.

maximum waiting period of health insurance is...

90 days

In a convergence option in which a person has the option to convert from a group insurance program to an individual insurance program without evidence of underwriting, what kind of individual would choose individual insurance from their employer over individual insurance on their own? and is this a moral hazard?

A high risk individual would do this because finding individual insurance from someone other than their employer would cost more money.

How is there moral hazard in disability insurance?

A person can pretend to be hurt to make money

advantages of group insurance over individual insurance

Advantage of group insurance over individual insurance is that with group insurance you have a fixed uniform price that allow employees to get insurance at a lower or significantly lower price than individual insurance from their employer or insurance company. Employer also receives tax benefits from providing group insurance. - no individual underwriting in group insurance. So you can be a high risk individual but they don't have to know that. - group insurance is generally less expensive than individual insurance. - employer takes care of administrative costs - group insurance has no search costs

social insurance programs

After the great depression and industrialization the government put in place social insurance programs like workers compensation, social security, and unemployment insurance. Employers must offer social security, workers compensation, and unemployment insurance

Suppose an employer wants increase your compensation by $5,000 dollars. You have three choices Choice A: Increase slaray by $5,000 Choice B: give health insurance worth $5,000 Choice C: give employee a vacation worth $5,000 From an employers perspective, which is the best option?

All choices are the same for the employer because the cost of the benefit is the same.

tax advantages of flexible spending accounts, numerical examples

All the money you put into your FSA is tax-free

Suppose an employer wants increase your compensation by $5,000. You have three choices Choice A: Increase slaray by $5,000 Choice B: give health insurance worth $5,000 Choice C: give employee a vacation worth $5,000 What are the tax implications of these choices?

Choice A; Salary. This choice is taxable Choice B: health insurance. This choice is not taxable Choice C: vacation. Even though its non cash it is still taxable.

Cost of favorable tax treatment to federal government

Cost of favorable tax to federal government: Federal government gives these tax deductions to help employees have security. These benefits are protected from being taxed by IRS (international revenue service). However these benefits are changing in cost and not always economically possible to offer them with the cost of these benefits.

employee benefits

Employee benefits are the perks you get from your employer for working for them. It is any compensation other than direct wages paid to the employee.

examples of employee benefits

Examples of of employee benefits are health insurance, retirement benefits, death benefits, disability benefits, and unemployment benefits.

Favorable tax treatment of employee benefits - what does this mean?

Favorable tax treatment of employee benefits is given to employee and employers who have these plans. Employers can lower their taxes significantly by offering benefits like health and retirement insurance. ACA also extends a tax credit for employers who offer health insurance. This obviously is an incentive for employers to get them to offer health insurance, however since health insurance has such a weak mandate people don't always offer it, the employer just eats up the small fee.

Group insurance definition

Group insurance is insurance given to the employees at a uniform price. No evidence is needed to participate because everyone is eligible. Employer based group, all employees, all employee's dependents, and former employees. - single rate - family rate

HMO stands for

Health Maitenance Organization

what is typically the most expensive benefit?

Health insurance

eligible expenses for reimbursement

If the plan says you're qualified for the expense and a full employment at your firm, then you're eligible for reimbursement.

what is the "use it or lose it rule"?

If you don't use the money in the FSA account the employer gets all of it. Some FSA accounts let you carry over the money to next year up to 500 dollars.

Flexible spending accounts

If you expect to incur medical expenses that won't be reimbursed by your regular health insurance plan, you should be taking advantage of your employer's FSA if one is offered. How Does a Flexible Spending Account Benefit Me? An FSA saves you money by reducing your income taxes. The contributions you make to a Flexible Spending Account are deducted from your pay BEFORE your Federal, State, or Social Security Taxes are calculated and are never reported to the IRS. The end result is that you decrease your taxable income and increase your spendable income. You can save hundreds or even thousands of dollars a year. How Do Flexible Spending Accounts Work? At the beginning of the plan year (which usually starts January 1st), your employer asks you how much money you want to contribute for the year (there are limits). You have only one opportunity a year to enroll, unless you have a qualified "family status change," such as marriage, birth, divorce, or loss of a spouse's insurance coverage. The amount you designate for the year is taken out of your paycheck in equal installments each pay period and placed in a special account by your employer. As you incur medical expenses that are not fully covered by your insurance, you submit a copy of the Explanation of Benefits or the provider's invoice and proof of payment to the plan administrator, who will then issue you a reimbursement check. What Is a Flexible Spending Account? A Flexible Spending Account (FSA), also called a flex plan or reimbursement account, is an employer-sponsored benefit that allows you to pay for eligible medical expenses on a pre-tax basis (there are also similar accounts for dependent and child-care expenses). If you expect to incur medical expenses that won't be reimbursed by your regular health insurance plan, you should be taking advantage of your employer's FSA if one is offered

Is a contributory benefit plan optional?

It is. Once all elgibility requirements are met, it is up to the employee to contribute a percentage of the money, or not have the plan at all.

GM provides health insurance to his retirees, what are these retirees covered called?

Legacy cost

Are employees taxed on disability insurance? What if they become disabled?

No, but once they receive income because they become disabled they're

What does OASDI stand for

Old age social disability insurance

why did Us airways and united airlines merge

Pension Plan problems. All these retirees are underfunded.

POS stands for

Point of service, and its a type of HMO

PPO stands for

Profered Provider Organization

differences between group and individual insurance

The difference between group and individual insurance: Evidence is checked for individual insurance while for group is not. Group has more adverse selection because high-risk individuals will be in the group with low risk individuals. Group plans can cost less because a lot of people are participating but that is just in some cases. A group plan can be really expensive because group plans are measured in risk by a broad category of characteristics such as (age, industry, gender, location, and past claims. While individual insurance will be measured on the individual's risk. - group insurance may be temporar -

disadvantages of group insurance

The disadvantage of group over individual is that it can be a price that is higher than a low risk individuals liking. This will make them look else where for insurance and that will start an adverse selection spiral. Another disadvantage is the inflexibility of the group insurance plan. Some group insurance plans do not offer everything an individual needs in a group insurance plan. Lastly if the plan doesn't seem that great it can decrease morale and productivity.

Typically who pays more in a contributory benefit plan?

The employer

say an employee has a term life insurance of one year, what will happen to the money if he dies? If the employee survives how much is paid?

The face amount is paid if the employee dies If the employee lives $0 is paid

reasons for firms offering employee benefits

The reason employers offer employee benefits has many reasons. The first reason is that some of them are forced by the federal government to offer such as health, workers compensation, and unemployment insurance. Another eason employers offer it is because it makes working for their firm a more attractive place. If a firm offers tons of great benefits a person will work for you over a similar firm who offers less benefits. This is because benefits help the employee feel secure. Another reason is that when they feel secure they will be more productive because they will worry less. - tax advantage of group insurance - attract employees - enhance productivity

required employee benefits

The required benefits are: - health insurance, - workers compensation for disability - social security disability benefits - unemployment insurance. - Social security retirement benefit - Social Security Survival Insurance - Workers compensation death benefits All of these in general - OASDI - Workers compensation - Unemployment insurance

types of FSAs

There are health FSAs which helps you pay medical, dental, or vision expenses like office visits, prescription medication and lab tests. A dependent care FSA helps you pay the cost of caring for others while you work such as daycare for children or homecare for seniors. At the beginning of the year you decide on how much you want deducted from each paycheck and deposited into your FSA based on your expected expenses. As a bonus this does not count towards your income in most states. So you don't pay taxes as long as it goes to pay qualified expenses. Every dollar goes a little further than if you paid out of pocket. With a Health FSA you have immediate access to the whole amount you plan to contribute for the year starting the day your plan begins. With dependent FSA you can only use the money that has been deposited up to that point and time. To pay for FSA expenses you need to submit claims online

Starting in 2013 the employer had to start showing employer provided health insurance on w-2 forms IRS claims that this is for employer information purposes, but what do taxpayers fear?

They fear that health care will start being taxed just like wages

In an employee leaves a firm with coverage does he loss the benefits?

This is called a portability issue. Every group insurance plan has convergance option. So the employee has the option to "convert" group insurance to individual insurance without evidence of underwriting.

W-2 form changes

W-2s tell you how much money you made and how much was withheld from your paycheck. Without it you cannot file your federal and state taxes! Currently the cost of your healthcare plan is not incorporated in the W-s. Tax payers fear that having healthcare benefits on your w-2 is important information for employees to know. They should already know but it would help to see it on their w-2. What is to take from this however isn't to inform people of their benefits but taxpayers fear that it really is for the irs to get that information so that they can tax these companies who are giving to generous health care benefits that are driving up health care costs.

lets say you have 401(k) and you die, who will get that money?

When you get your 401(k) you write provisions on who will get it if you die.

Cadillac Tax

With healthcare already rising in cost, it looks like with the cadilac tax being implemented in 2018 will raise deductibles. If you offer a cadilac plan over a certain point the federal government will tax you 40% more. It's a one size fits all plan and that could be a reason for it failing as not everyone likes that. People simply just prefer flexibility. if you are an individual and have individual coverage that is great than 10,200 dollars or family greater that 27,500. ER pays 40% excise tax on the premium, exceeding the amount

Pension Plan is

a type of defined benefit

What insurance company that specializes in voluntary benefits?

afwac

Flexible Spending Accounts is when

an employee agrees to take a pretax salary reduction. Those funds go to a FSA account which are used to reimburse qualified expenses.

why employee benefits are so important to employers

because on average 40% of firms money goes to employee benefits. Second largest expense (first is payroll)

Why are taxpayers afraid of ahving health insurance plans on their W-2?

because the IRS will see which employers are offering too generous health insurance benefits and tax them once the cadilac tax is passed in 2018.

What is a health care flexible saving account?

can be used to pay for medical expenses that are not fully covered by the healthcare? Like deductibles, copayments, and coinsurance.

CDHP stands for

consumer driven health Plan

You become a participant in a 401(k) once you....

contribute money in

who benefits from favorable taxes treatment?

employees because the cost is always the same for employers but for employees there are pretax benefits that save them money.

What does GTLI stand for

group term life insurance

HRA stands for

health reimbursement account

HSA stands for

health savings account

moral hazard problems in FSA

people use all their money in the FSA account so they don't waste money. They all the money for things they don't need which is a moral hazard.

Lots of employers will keep their employee under 30 hours a week so they don't have to (what)?

provide health insurance

what are the advantages of FSAs

tax savings

employee pay all benefit plans are also known as what?

voluntary benefits

What is the pretax salary equivalent of a tax-free benefit of $5,000? Do the math x= taxable salary T= Combined tax rate. Lets say rate equals 35%

x-(x)(T) = $5,000 x- (.35)(T) = $5,000 x = $5,000/.65= $7692.30 A tax free benefit is equivalent to an increase in salary of $7682.30

is there a maximum contribution for dependent care?

yes

If you're a high risk individual in a firm, do you still get group insurance?

yes any employee is insurable

2 ½ month extension

you can get this sometimes from your employer with an FSA plan. They give you a 2 and a half extension to use up all of your money in the FSA account. You have a whole year to use the FSA account after you signed up, but sometimes people don't always use the full deposit in one year so employee can get an extension.