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chap_12_lesa_benefits.pptxIntroduction
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legislation, unions, and a changing workforce have expanded benefit offerings
Employee Benefits
have grown in importance and variety
are typically membership-based rewards offered to attract and keep employees
do not directly affect a worker’s performance, but inadequate benefits lead to employee dissatisfaction
Introduction
2
Some of the benefits we enjoy today were established under
Franklin Roosevelt’s New Deal as a response to the Great Depression--
most notably unemployment insurance and social security.
To get a taste of this extraordinary time, watch
http://www.youtube.com/watch?v=4F4yT0KAMyo
benefit and service offerings add about 30% to an organization’s payroll cost
benefits become the focus of negotiations with employees when large wage and salary increases are not feasible
Introduction
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Contemporary Benefits Offerings
benefits today reflect a diverse workforce
challenge -- designing a benefits package that is lawful and attractive
social security
unemployment compensation
workers’ compensation
FMLA
meets legal
requirements
health insurance
retirement plans
time off
disability
life insurance
attracts applicants
and current workers
Legally Required Benefits
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Social Security
financed by equal employee and employer contributions, based on a percentage of earnings
provides income for retirees, disabled workers and surviving dependents
provides some health insurance coverage through Medicare
SS was never intended to be sole source of retirement income.
Legally Required Benefits
5
Unemployment Compensation
funded by employers who pay combined federal and state tax imposed on taxable wage base
tax varies based on organization’s unemployment experience: the more layoffs, the higher the rate
provides employees with some income continuation during periods of involuntary unemployment
typical coverage is for 26 weeks
Requirements to Receiving Unemployment Benefits:
involuntary loss of job (but not having been fired)
must have worked a minimum number of weeks
have applied to a state agency for unemployment
have registered for available work
are willing to accept any suitable job offered through the state agency
Legally Required Benefits
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Workers’ Compensation
paid for by the organization
rates based on likelihood of accidents, past history, and the type of industry
benefits pay expenses and/or compensate for losses resulting from work-related accidents or illness, regardless of fault
Legally Required Benefits
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Family and Medical Leave Act
requires employers with 50 or more employees to allow up to 12 weeks of unpaid leave for family or medical reasons
specifies record-keeping and communication requirements
employer must maintain health benefits.
Voluntary Benefits
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Health Insurance
increases in healthcare costs have made health insurance a critical benefit
healthcare costs are growing faster than wages
purpose is to protect employee from catastrophic loss should a serious illness occur
The current debate over a public option for health insurance is heated. For the pros and cons, see: http://www.balancedpolitics.org/universal_health_care.htm
Voluntary Benefits
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Traditional Health Insurance
typically has the fewest coverage limitations for the employee
usually the most expensive
provides coverage in three areas:
Some major traditional health insurers are:
1. hospitalizations
3. major medical
2. medical/surgical
Voluntary Benefits
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Health Maintenance Organizations (HMOs)
alternative benefit required by Health Maintenance Act of 1973
broad comprehensive care provided by physicians who are “in network”
employee incurs small copay
health care choices significantly limited
Major HMOs…
Voluntary Benefits
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Preferred Provider Organizations (PPOs)
member health care providers agree to provide services at a fixed fee
employees are encouraged by lower rates to use member or “preferred” providers
combine best of HMOs and traditional insurance
Point-of-Service Plans (POS)
require primary care physicians
employee can go out of network, but pays up front and seeks reimbursement herself
Voluntary Benefits
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Consumer-driven Health Plans
high deductible
health savings account
support services help employees make decisions
Employer-operated Coverage
employers self-fund insurance programs
operated under a Voluntary Employees Beneficiary Association (VEBA) to reduce costs
often hire third party to administer
Voluntary Benefits
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Health Insurance Continuation
The Consolidated Omnibus Budget Reconciliation Act (COBRA)
provides for continuation of benefits for up to three years after an employee leaves a job
cost is paid by the employee
The HIPAA Requirement
The Health Insurance Portability and Accountability Act of 1996
imposed on employers and health providers regulations regarding the confidentiality of employee health information
Retirement Benefits
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Employee Retirement Income Security Act (ERISA) of 1974
vesting rights – right to pension benefits even if one leaves the company
enables pension rights to be portable
sets up Pension Benefit Guaranty Corporation (PBGC)
claims corporate assets to cover inadequately funded pension plans
requires Summary Plan Description (SPD)
Retirement Benefits
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Defined Benefit Plans
plan specifies the dollar benefit workers receive at retirement
usually based on some formula of years of service and average final compensation
used more in government and unionized industries
Retirement Benefits
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Defined Contribution Plans
employee and employer may contribute to account based on rules established for contributions
amount of benefits depends on success of account investments
money purchase
pension plans
profit-sharing
plans
IRAs
401Ks
Retirement Benefits
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Money Purchase Pension Plan
type of defined contribution plan
organization commits to depositing fixed amount of money or percentage of employee’s pay annually
Profit-Sharing Plans
variation of defined contribution plan
company amount contributed depends on profit level in the organization
contribution is optional, not required
Retirement Benefits
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Individual Retirement Accounts (IRAs)
employer makes contributions
can defer taxes on amount deposited and interest earned in retirement account
two types exist for small businesses and self-employed
401(k)s:
permit workers to set aside specified amount of income on tax-deferred basis
employers may match employee contribution
Paid Time Off
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Vacation and Holiday Leave
vacation time is usually related to the length of time on the job
some companies also allow personal days that can be used for any reason
Paid Time Off
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Disability Insurance Programs
provides salary continuation for:
short-term disabilities (sick leave)
long-term disabilities (coverage usually effective after 6 months)
some companies provide financial incentives to employees to not use their sick leave
long-term disability plans usually replace a portion of the employee’s salary, often 60%
Survivor Benefits
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Group Term Life Insurance
benefit is usually based on one’s annual rate of pay
supplemental insurance increases coverage to two to five-times the employee’s salary
Travel Insurance
life insurance for business travel-related deaths (not including normal commuting)
Survivor Benefits
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The Service Side of Benefits
employee assistance programs
credit unions
housing
tuition reimbursement
uniforms
company-paid transportation
social and recreational events
parking
employers often can provide services at no cost or at a significant reduction from the usual cost
An Integrative Perspective on Employee Benefits
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These programs allow employees to choose which benefits they want and help to keep costs down.
Flexible Benefits
An Integrative Perspective on Employee Benefits
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Flexible Spending Accounts
under Section I25 of the Internal Revenue Code employees can set aside a designated dollar amount before taxes for specified services such as
health-care premiums
medical expenses
dependent child or elder care
group legal services
IRS requires that accounts for different purposes be separate and that all money be spent during the year or forfeited
not subject to federal, state, and social security taxes
An Integrative Perspective on Employee Benefits
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Modular Plans
employees choose a pre-designed package of benefits from several options
Core-Plus Options Plans
employees given core coverage (e.g. medical, life, disability) with option to select other benefits
Let’s Play Jeopardy-style!
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1. Social Security, unemployment compensation, workers’ compensation, FMLA.
What are legally required benefits?
2. Benefits that pay expenses and/or compensate for losses resulting from work-related accidents or illness, regardless of fault.
What is workers’ compensation?
3. Health insurance, retirement plans, time off, disability, life insurance.
What are voluntary benefits?
4. Requires employers with 50 or more employees to allow up to 12 weeks of unpaid leave for family or medical reasons.
What is the Family Medical Leave Act?
5. Money purchase pension plans, profit-sharing plans, IRAs, 401Ks.
What are defined contribution plans?
6. Flexible spending accounts, modular plans, core-plus plans.
What are flexible benefits?
