More Related Content Similar to © 2014 by McGraw-Hill Education. This is proprietary materi.docx (20) More from susanschei (20) © 2014 by McGraw-Hill Education. This is proprietary materi.docx1. © 2014 by McGraw-Hill Education. This is proprietary material
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Chapter 13
Benefit Options
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Learning ObjectivesLegally required benefitsRetirement and
savings plan paymentsLife insuranceMedical and medically
related paymentsMiscellaneous benefitsBenefits for contingent
workers
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Employee BenefitsLegally required payments (employers’ share
only)Retirement and savings plan payments (employers’ share
only)Life insurance and death benefits (employers’ share
only)Medical and medical-related benefit payments (employers’
share only)
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Employee BenefitsPaid rest periods, coffee breaks, lunch
periods, wash-up time, travel time, clothes-change time, get
ready timePayments for time not workedMiscellaneous benefit
payments
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Legally Required Benefits
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Workers’ Compensation
Social Security
3. Unemployment Compensation
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Workers’ CompensationForm of no-fault
insuranceCoversMedical care for work-related
injuriesTemporary disability benefitsPermanent partial and
permanent total disability benefitsSurvivor benefits
RehabilitationCovered by State, not Federal laws
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Exhibit 13.4- Commonalities in State Workers’ Compensation
Laws
Source: www.ncci.com
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*
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Social SecurityProvides a foundation of basic security for
American workers and their familiesMoney comes from
contributions made by:EmployeesEmployersSelf-employed
people during working years
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Social SecurityProblemNumber of retired workers is risingNo
corresponding increase in number of contributors to offset
costsCurrently, 3.5 workers pay into system for each person
collecting benefitsWithin next 40 years this ratio drops to about
2 to 1
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*
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Social SecurityAdvantagesOld age or disability benefitsBenefits
5. for dependents of retired or disabled workersBenefits for
surviving family members of a deceased workerLump-sum death
payments
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Unemployment InsuranceFinanced by: Employers that pay
federal and state unemployment insurance tax Federal tax- 6.2%
of the first $7,000 earned by each workerStates additionally
impose a tax above the $7,000 figureThe extra amount a
company pays depends on its experience rating
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Unemployment InsuranceCoverage - Eligibility requirements to
receive benefits include:Meeting requirements for wages earned
or time worked during a base periodBeing unemployed through
no fault of the individualMeeting other eligibility requirements
of State law
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Unemployment Insurance DurationEmergency Unemployment
Compensation Program (EUC08)First two tiers - Provide
benefits up to 34 weeksThird and fourth tiers - Provide benefits
up to 47 weeksWeekly benefit amountControlling
unemployment taxes
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Family and Medical Leave Act (FMLA)CoverageEmployers
with 50 or more employees EligibilityMust have worked at least
1,250 hours for the employer in the previous yearQualifying
eventsSpecified family or medical reasonsQualifying event
coverageUnpaid leave up to 12 weeks per year
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Consolidated Omnibus Budget Reconciliation Act
(COBRA)CoverageEmployers with 20 or more
employeesEligibilityCurrent and former employees Their
spouses and dependents Qualifying eventsSpecified events (e.g.
7. layoffs)Qualifying event coverage18 to 36 months, depending
on category of event
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Health Insurance Portability and Accountability Act
(HIPPA)Key provisionsLessens an employer’s ability to deny
coverage for a preexisting conditionProhibits discrimination on
the basis of health-related status
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Retirement and Savings
Plan PaymentsEmployees rank pensions as one of the more
important benefitsGeneric types of pension plansDefined benefit
plansDefined contribution plansIndividual retirement accounts
(IRAs)Employee retirement income security act (ERISA)
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Defined Benefit PlansProvide a specific pension level defined
in terms of:Fixed dollar amount or percentage-of-earnings
amount Financed by:Following an actuarially determined
benefit formulaMaking current payments that will yield the
future pension benefit
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Defined Benefit PlansDetermination of benefit levelsCalculate
average earnings over last 3 – 5 years for a prospective retiree
Offer a pension that is about one-half this amountReasons for
decline of DB plans Need for early investmentDisproportionate
cost increases Unfavorable accounting rules
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Defined Contribution PlansPopular forms of plans 401 (k)
planSavings plan in which employees are allowed to defer
pretax incomeEmployee stock ownership plan (ESOP)Basic
ESOP - Company makes a tax-deductible contribution of stock
sharesESOP as a pension vehicle - Cash at retirement based
9. upon the stock value at that timeProfit sharing planDefined
contribution pension plan
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Defined Contribution PlansQualified deferred compensation
planEmployer receives an income tax deduction for
contributions madeProblematic during recruitment of high-
talent executivesCash balance plansHybrid of defined benefit
and defined contribution plans
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Individual Retirement Accounts (IRAs)Tax-favored retirement
savings plan Can be established by individuals themselvesUsed
to store wealth accumulated in other retirement vehicles
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10. Employee Retirement Income Security Act
(ERISA)EligibilityEmployees at least 21 years oldEmployers
may require 6 months of service Vesting Length of time
employee must work for employer before entitlement to
payments
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Employee Retirement Income Security Act (ERISA)
Components of vestingEmployee contributions to pension fund
are immediately and irrevocably vestedEmployer’s contribution
must vest using one of the two formulas:Full vesting after 3
years (down from 5 years previously) 20 % after 2 years (down
from 3 years) and 20 % each year thereafter, resulting in full
vesting after 6 years
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Employee Retirement Income Security Act (ERISA) Portability:
Benefit issues for employees moving to new companiesERISA
does not require mandatory portability of private pensionsAn
employer may voluntarily agree to permit portability Pension
Benefit Guaranty Corporation (PBGC)Guarantees payment of
11. vested benefits to employees :Formerly covered by terminated
pension plans
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Employee Retirement Income Security Act (ERISA) The
Pension Protection Act of 2006 (PPA)Protects employees’
retirement incomeTransfers some responsibility for retirement
savings to the employee
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How Much Retirement Income
to Provide?What level of retirement income should be set as a
target?Should social security be consideredShould other
postretirement income sources be integrated How should
seniority be factored into the payout formula?What can a
company afford?
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Life InsuranceMost companies offer term policiesValue 1-2
times an employee’s salaryMost plan premiums are paid
completely by employerCompanies make retiree coverage
forfeitable at the time of departureIs heavily affected when
shifting to flexible benefit program
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General Health CareEmployer’s share of health care costs are
contributed into:Community-based systemInsurance rates are
based on the medical experience of the entire
communityCommercial insurance planGuarantees fixed payment
to the insured for hospital serviceThe insured in turn reimburses
the hospital
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General Health CareSelf-insuranceCost of medical coverage is
directly related to usage levelEmployer payments go directly to
medical care providersHealth maintenance organization
13. (HMO)Comprehensive benefits for a fixed feePreferred provider
organization (PPO) Direct contractual relationship between
and among: Employers, health-care providers, and third-party
payers
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General Health Care Point-of-service plan (POS)Hybrid plan
combining HMO and PPO benefitsPermits an individual to
choose which plan to seek treatment fromHealth reimbursement
arrangements (HRAs)Employer sets up an account for a
specified amountQualified medical costs, are submitted for
reimbursement until the account is depleted
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General Health Care Customized plansEmployee chooses among
a menu of health-care products Employer subsidizes part of the
premium Design your own productsEmployees select their own
providers and benefitEmployer subsidizes up to a set
levelHealth savings accounts (HSAs)Tax-exempt account built
up by contributions of the employee, employer, or both
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Exhibit 13.9 - How Health Insurance Options Differ on Key
Dimensions*
*Overview of the four most common health-care options.
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Health Care: Cost Control StrategiesMotivate employees to
change their demand for health care via: Changes in design or
administration of policiesChange structure of health care
delivery systems Participate in business
coalitionsHMOsPPOsPromote preventive health programs
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Short- and Long-Term DisabilityWorkers’ compensation covers
disabilities that are work-relatedSocial security has provisions
for disability income to those who qualifyPrivate sources of
15. disability incomeEmployee salary continuation plansLong-term
disability plans
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Short- and Long-Term DisabilityShort - term disabilityPays a
percentage of salary for temporary disability because of
sickness or injuryLong - term disabilityApplicable after the
short-term plan expiresProvides 60 to 70 percent of pre-
disability payDental insuranceVision care
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Miscellaneous Benefits
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Paid Time Off During Working Hours
Payment for Time Not Worked
Child Care
Elder Care
16. Domestic Partner Benefits
Legal Insurance
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Benefits for Contingent WorkersContingent work relationships
include:Working through a temporary help agencyWorking for a
contract companyWorking on callWorking as an independent
contractorContracting offers a viable way to meet rapidly
changing environmental conditions by:Reducing costs
Permitting easier expansion and contraction of
production/services
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You can think about this assignment as a “term paper,”
however, you will present the project in a Microsoft PowerPoint
format with Talking Points displayed in the note section of each
PowerPoint slide.
The final PowerPoint project should be approximately 10-15
slides in length, excluding a cover page.
A reference section should be included at the end of the
presentation.
A minimum of 5 credible references should support your
presentation.
Address the following questions:
1. Describe how employee benefits fit into the total
17. compensation function
2. Identify the varieties of internal and external information that
organizations consider when planning a benefits program.
Which pieces of information do you believe are most important
to this planning process? Least important? Explain your
answers.
3. Organizations possess limited budgets to fund employee
benefits. Identify ways that employers can control the costs of
employee benefits.
4. From an employee's perspective, which employee benefits
practices should be funded? Which employee benefits are
dispensable? Now respond to these questions as a organizational
representative. Explain your answers
5. Provide suggestions to lessen the entitlement mentality
among employees toward employee benefits.
Helpful Material - Right-Click and Watch:
- How to Create a PowerPoint Presentation
- How to Write Talking Points
Use the online library and other research resources to deepen
your understanding of the topic and the relevant research that
has been done. Use your textbook and online course material to
support your work plus at least 5 credible references. All textual
and digital material must be properly referenced according
to APA’s (6th Edition) Style and Formatting guidelines. Check
for spelling, grammar, word usage and punctuation. (Review to
the following Grading Criteria before preparing/submitting your
Presentation.)
Criteria
Requirements
Total Points
Student Submission
• Student’s Post follows the provided instructions, and
o is substantive
o addresses each part of the Assignment
18. o posted by the deadline
o has a structure this is clear, logical and easy to follow
(including an introduction and conclusion)
o transitions well between sections
o is directed to the appropriate audience
o has a tone that is appropriate to the content and assignment
o is free of errors related to word usage, punctuation, grammar
and spelling
o meets the PPT-length requirement with detailed Talking
Points
o is supported by references (5+ references) with APA
formatting
Up to 25 points