Designing and Administering Benefits Chapter 12 MGT 3513

Designing and Administering Benefits Chapter 12 MGT 3513 Please turn off and put away electronic devices. Chance favors the prepared mind. Louis Pasteur

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Unique Benefits & Services ¢ Many companies voluntarily provide benefits beyond what is legally mandated ¢ Reasons to Offer Unique Benefits & Services Generate Interest from Prospective Employees l Reward Current Employees l Reduce Stress l

Benefits at Zappos http: //www. youtube. com/watch? v=A 0 u. GSIuq-LU 1. Write down as many of the Zappos benefits mentioned in the clip as possible. 2. After watching the clip, circle the most surprising benefits on your list.

Benefits at Zappos l http: //www. youtube. com/watch? v=XEp A 2 Hrx. N 2 Q l What does Zappos employee Chris find motivating about his company & his job?

An Overview Another name for employee benefits? ¢ Cost of employee benefits? ¢ Percentage breakdown of how each benefit dollar is spent ¢

Questions on Basic Benefits Terminology What are contributions? ¢ What is coinsurance? ¢ What is a copayment? ¢ What is a deductible? ¢ What is a flexible benefits program? ¢

Examples - - basic terminology ¢ ¢ ¢ Louis receives health insurance from his organization. However, he must also pay $18 each month to receive this benefit. His payment is a ____. In January, Louis gets sick and must go to the doctor. He pays $100 because it is the beginning of a new year, and he must meet his ____ before insurance will pay for any medical expenses. Louis pays only $15 for the $50 medication he has been prescribed. The amount he pays is his _______.

Cost of Benefits ¢ Changes in cost of benefits for U. S. employers ¢ Influences on the cost of benefits: Federal tax policy l Federal legislation l Union influence l Cost savings of group plans l

Types of Benefits Legally required ¢ Health insurance ¢ Retirement ¢ Other forms of insurance ¢ Paid time off ¢ Employee services ¢

Percentage of Employers Providing Different Voluntary Benefits ¢ Most common in private sector: health insurance, life insurance, paid vacation, paid holidays. ¢ Most common in public sector: health insurance, defined benefit retirement, life insurance, paid vacation, paid holidays.

Questions on the Benefits Strategy ¢ What is the benefits mix? ¢ What influences the benefits mix of a particular company?

4 Legally Required Benefits _______________________ ¢

Questions on Legally Required Benefits ¢ What four things does Social Security provide? ¢ What is the social security tax? Who pays it? How much goes to fund Medicare? ¢ How long must a person work to be eligible for Social Security benefits?

More on Social Security What is the minimum retirement age for those born after 1960? ¢ What is a COLA? ¢ What is the minimum age to receive Medicare? What are parts A, B, C, and D of Medicare? ¢

Questions on Legally Required Benefits ¢ What is the basic concept of workers’ compensation? ¢ What is the basic concept of unemployment insurance? ¢ Who is not eligible for unemployment insurance?

Questions on Legally Required Benefits ¢ For what reasons can a person take leave? ¢ How much leave may a person take in one year? ¢ Which employers must follow this law? ¢ Which employees are eligible for FMLA leave? Which employees are not?

Questions on Health Insurance ¢ Explain the basics about COBRA ¢ Explain the basics about HIPAA

Questions on Health Insurance ¢ Describe each of the following types of health insurance plans: l l Traditional health insurance Health maintenance organization (HMO) Preferred provider organizations Health Savings Accounts

Questions on Retirement Benefits ¢ What does protection does ERISA provide? ¢ What is vesting? ¢ What does it mean if benefits are portable?

Questions on Retirement Benefits ¢ Defined benefit plan (pension) ¢ Defined contribution plan What is always portable? l What is portable after vesting? l

Retirement Plans Amount of retirement benefit known? Defined Benefit Plan (pension) Defined Contribution Who bears the risk? Funding

Example - - Retirement Benefits – Defined Contribution Employee contributions Company contributions Year 1 2, 000 1, 500 Year 2 2, 000 1, 500 Year 3 2, 000 1, 500 Year 4 2, 000 1, 500 Year 5* 2, 000 1, 500 10, 000 7, 500 * Assume vesting occurs at the end of year 5 What amount is portable?

Example - - retirement benefits ¢ Josh’s company informs him that they will contribute 8% of his salary to a retirement fund and that he must also match that contribution. l ¢ Defined benefit or defined contribution Ellen’s company informs her that she will receive $3, 000 every month after she retires. l Defined benefit or defined contribution

Example - - retirement benefits ¢ Hunter has worked for LTD for 20 years. His retirement fund totals $40, 000. His company contributed $20, 000, and he also contributed $20, 000. Is Hunter vested? l How much of Hunter’s retirement funds are portable? l Do you think this is this an example of defined benefit or defined contribution? l

Example - - retirement benefits ¢ Hunter has worked for LTD for 2 years. His retirement fund totals $40, 000. His company contributed $20, 000, and he also contributed $20, 000. Is Hunter vested? l How much of Hunter’s retirement funds are portable? l

Retirement ¢ What should I know about retirement plans? l ¢ http: //www. dol. gov/ebsa/Publications/ wyskapr. html What happens to my retirement if my company goes bankrupt? l http: //www. dol. gov/ebsa/pdf/bankruptc y. pdf