Chapter 13 Benefits Options IrwinMc GrawHill The Mc

Chapter 13 Benefits Options Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 1

Legally Required Benefits Workers’ Compensation Social Security Unemployment Insurance C. O. B. R. A. Irwin/Mc. Graw-Hill Family and Medical Leave Act © The Mc. Graw-Hill Companies, Inc. , 1999 2

Unemployment Insurance • Unemployment insurance benefits are financed by federal and state taxes levied on employers under the Federal Unemployment Tax Act (FUTA) • Employers pay 6. 2% on first $7, 000 earned by each employee ($434) – 5. 4% is disbursed to state unemployment commissions ($378) – 0. 8% for federal admin costs ($56) Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 3

Unemployment Insurance (continued) • Each company pays an actual rate depending on its prior experience with unemployment • Money held in federal trust for each state • Payments generally continue for 26 weeks – Supplemental unemployment benefits for an additional 13 weeks Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 4

Unemployment Insurance (continued) • Eligibility in most states: – Be available and actively seeking work – Not refuse suitable employment – Not have left job voluntarily – Not be unemployed because of labor dispute – Not have been terminated for gross misconduct Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 5

Workers’ Compensation • • • Laws date back to 1911 Based on the principle of liability without fault Employer absolutely liable for providing benefits to employees that result from occupational disabilities or injuries regardless of fault • Employers assume costs of occupational injuries and accidents Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 6

Workers’ Compensation: Objectives • Provide sure, prompt, and reasonable income and medical benefits to work accident victims (or income benefits to their dependents) regardless of fault. • Provide a single remedy and reduce court delays, costs, and workloads arising out of personal injury litigation. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 7

Workers’ Compensation: Objectives (continued) • Relieve public and private charities of financial drains. • Eliminate payment of fees to lawyers and witnesses as well as time-consuming trials and appeals. • Encourage maximum employer interest in safety and rehabilitation through experience-rating Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 8

Workers’ Compensation: Objectives (continued) • Promote frank study of causes of accidents (rather than concealment of fault). – reducing preventable accidents – reducing human suffering Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 9

Workers’ Compensation • Employers pay premium to insurance company or state fund • Disability must be work related • Benefits include: – medical care – disability income – rehabilitation – death benefits Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 10

Social Security • The Social Security program provides a basic foundation of security for American workers and their families. • For tax purposes, the system is split into two programs: – Social Security – Medicare Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 11

SOCIAL SECURITY • Retirement income • Disability benefits • Death benefits • Survivor’s benefits Irwin/Mc. Graw-Hill MEDICARE • Hospital insurance (Medicare, Part A) • Medical Insurance (Medicare, Part B) © The Mc. Graw-Hill Companies, Inc. , 1999 12

Consolidated Omnibus Budget Reconciliation Act (C. O. B. R. A. ) • Coverage: Employers with 20 or more employees • Qualifying event coverage: 18 months to 36 months • Coverage stops: When employee becomes eligible for medical insurance from new employer or gains Medicare coverage • Cost: Cost of insurance plus 2% Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 13

Family and Medical Leave Act (1 of 2) • Coverage: Employers with 50 or more employees • Eligibility: 12 months employment with employer in which employee works 1, 250 hrs • Qualifying events: Under four specific circumstances • Conditions: Employee must be able to return to same job or one with equal status Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 14

Family and Medical Leave Act (2 of 2) • Health benefits: Continue while employee is on leave • Exemption for key employees: Reinstatement to former position may not be required • Notification: 30 days Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 15

Employee Retirement Income Security Act (ERISA) 1 of 2 • Eligibility: Employees at least 21 years old and completed one year of service • Vesting: Cliff vs. graded • Year of service: 12 months of employment with employer in which employee works 1, 000 hours • Fiduciary responsibilities: “Prudent-person” rule Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 16

Employee Retirement Income Security Act (ERISA) 2 of 2 • Funding requirements: Specified in act • Plan documentation: Summary plan description distributed to all participants • Reporting: Annual Report Form 5500 filed with IRS • Pension Benefit Guaranty Corporation (PBGC): Insures payment of certain pension plan benefits Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 17

Characteristics of Qualified Plans To qualify under ERISA, a pension plan must: • Be in writing and be communicated to employees • Be established for the exclusive benefit of employees or their beneficiaries • Satisfy certain rules concerning eligibility, vesting, and funding • Not discriminate in favor of officers, shareholders, or highly compensated employees. Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 18

Qualified Plans (continued) Tax Benefits: • A for-profit employer receives an immediate tax deduction for contributions • The earnings accumulate tax deferred until withdrawn • The employee pays taxes on the funds only when the benefits are received Types: Defined Benefits Plans and Defined Contribution Plans Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 19

Types of Health Care Funding • • Fully Insured Minimum Premium Partially Self-Funded Administrative Only Third-Party Administrator Self-Insured Health Insurance Purchasing Cooperatives Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 20

Controlling Health Care Costs • • • Change the Delivery System Let Employees Choose Redesign the Policies Promote Wellness Conduct Careful Reviews Undertake a Utilization Review Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 21

Income Protection • Disability Protection • Life Insurance • Other Forms of Income Protection: – Severance Package – Supplemental Unemployment Benefits Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 22

Paid Leave • • Irwin/Mc. Graw-Hill vacation holidays sick pay personal holiday funeral leave military leave jury duty © The Mc. Graw-Hill Companies, Inc. , 1999 23

On-the-Job Paid Benefits • rest period • lunch time Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 24

Employee Services Employee Assistance Programs Counseling Services Educational Assistance Child Care Elder Care Irwin/Mc. Graw-Hill © The Mc. Graw-Hill Companies, Inc. , 1999 25

Other Miscellaneous Services Recreational and Social Services Awards Food Services Legal Services Credit Unions Purchasing Assistance Financial Planning Transportation Pooling Irwin/Mc. Graw-Hill On-Site Health Services Housing and Moving © The Mc. Graw-Hill Companies, Inc. , 1999 26