Discuss why employers offer benefits to their employees.
Employers offer benefits to employees to attract and retain them. Benefits are expected by today’s workers, and must provide meaning and value to employees
Contrast Social Security, unemployment compensation, workers’ compensation benefits, and the Family and Medical Leave Act (legally required benefits).
SOCIAL SECURITY- an insurance program funded by current employees to provide: minimum level of retirement income, disability income, and survivor benefits.
- financed by employee and employer contributions, based on a percentage of earnings.
- provide some health insurance coverage through Medicare
UNEMPLOYMENT COMPENSATION- provides income continuation to employees who lose a job through no fault of their own. (layoff, plant closing, etc)
- lasts abt 26 weeks.
- funded by employers who pay combines federal and state tax imposed on taxable wage base.
WORKER’S COMPENSATION- provides income continuation for employees who are hurt or disabled on the job.
- covers work-related deaths or permanent disability
- paid by the organization
- rates based on the likelihood of accidents, past history, and the type of industry
FAMILY AND MEDICAL LEAVE ACT
- 1993 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
*ALL 4 ARE LEGALLY REQUIRED BENEFITS
Identify and describe the three major types of health insurance options.
TRADITIONAL PLANS- allow employees to use any healthcare provider and the insurance will reimburse the expense.
HEALTH MAINTENANCE ORGANIZATION (HMO)
- alternative benefit required by Health Maintenance Act of 1973
- broad comprehensive care provided by designated service centers for fixed fees.
- promotes preventive care
- health care choice are limited
- very strict on where you can go
- employee has to pay a co-pay
PREFERRED PROVIDER ORGANIZATIONS (PPO)
- member health care providers agree to provide services at a fixed rate
- employers are encouraged by lower rates to use member or preferred providers
- utilization review procedures generate data on plan use
- offer services like HMO but for a cheaper price
- they offer cheaper price because they want the number (require certain # of people)
*HMO and PPO designed to provide a fixed out-of-pocket alternative to health care and negotiate for reduced rates for plan members.
POINT OF SERVICE PLAN- similar to PPO and HMO , but allow plan members more flexibility for health care outside the network
CONSUMER DRIVEN HEALTH PLAN
-include insurance with a high deductible and a savings account that the insured uses for deductibles and out-of-pocket expenses
EMPLOYER-OPERATED COVERAGE
- employer’s self-fund insurance programs
- operated under Voluntary Employees Beneficiary Association (VEBA) to reduce costs
- often hire 3rd party to administer
Define Consolidated Omnibus Budget Reconciliation Act (COBRA) and Health Insurance Portability and Accountability Act (HIPAA).
CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT (COBRA)
- provides for continuation of benefits for up to 3 years after an employee leaves a job
- cost is paid by employee
HEALTH INSURANCE PROBABILITY AND ACCOUNTABILITY ACT OF 1996
- imposed on employers and health providers, regulations regarding the confidentiality of employee health information
- requires employers to not disclose any information regarding the employee unless the employee signed an agreement the employer can disclose information regarding employee
Discuss the important implications of the Employee Retirement Income Security Act (ERISA).
EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) of 1974-
- has significant effect of retirement programs.
- to ensure that employees have a vested right to their retirement monies, that appropriate guidelines are followed in the event of a retirement plan termination, and that employees understand their benefits through the summary plan description
- requires Summary Plan Description (SPD)
- explain to employees their pension program and rights
Vesting rights- right to pension benefits even if one leaves the company. Enable one to be portable
Understand the difference between defined benefit and defined contribution retirement plans.
DEFINED BENEFIT PLAN
-plan specifies the dollar benefit workers receive at retirement
-entitled to a specific amt when you retire
types:
money purchase pension plans- organization commits to depositing fixed amt of money or % of employee’s pay annually into plan ,
profit-sharing plans-amt contributed depends on the profit level in organization
individual retirement (IRA)- currently designed for workers who dont have pension programs at work -can defer taxes on amt deposited and interest earned in retirement account
401k - permits worker to set aside specified amt of income on tax deferred basis
-employers may match employee contribution
DEFINED CONTRIBUTION PLAN
-A retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of the employee.
Explain the reasons companies offer vacation/holiday benefits and disability insurance programs to their employees.
The primary reason for a company to provide a vacation benefit is to allow employees a break from work in which they can refresh and re-energize themselves
Define the term flexible (“cafeteria”) benefits, and list the three types of flexible benefit options
It allow employees to choose the benefits they want or need from a package of programs offered by an employer. Flexible benefit plans may include health insurance, retirement benefits such as 401(k) plans, and reimbursement accounts that employees can use to pay for out-of-pocket health or dependent care expenses. In a flexible benefit plan, employees contribute to the cost of these benefits through a payroll deduction of their before-tax income, reducing the employer’s contribution.
FLEXIBLE SPENDING ACCOUNTS
- a tax-deferred savings account established by an employer to help employees meet certain medical and dependent-care expenses that are not covered under the employer’s insurance plan. FSAs allow employees to contribute pre-tax dollars to an account set up by their employer. They can later withdraw these funds tax-free to pay for qualified health insurance premiums, out-of-pocket medical costs, day care provider fees, or private pre-school and kindergarten expenses.
CORE-PLUS PLANS
