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Chapter 13
Benefit Options
McGrawMcGraw-Hill/Irwin
Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-
Chapter Topics
Legally
Retirement
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Social Security
Unemployment Insurance
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nono-fault insurance
Employer liable for providing benefits to employees that result from occupational disabilities or injuries, regardless of fault Disability must be work-related work Covered
Employers pay premium to insurance company or state fund For every dollar insurers take in to cover workplace injuries and illnesses, they pay out $1.21 to cover claims
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benefits: Permanent total disability and temporary total disability Permanent partial disability - loss of use of a body member Survivor benefits for fatal injuries Medical expenses Rehabilitation
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Workers Compensation
Social
Unemployment Family
Consolidated Health
Omnibus Budget Reconciliation Act (COBRA) Insurance Portability and Accountability Act (HIPAA)
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Benefit Plans Contribution Plans Accounts (IRAs) Retirement Income Security Act
(ERISA)
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Social Security
Provides a For tax
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of retired workers is rising without a corresponding increase in number of contributors to offset costs
Currently, 3.5 workers pay into system for each person collecting benefits Within next 40 years this ratio drops to about 2 to 1
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Increase payroll taxes Decrease benefits Use general revenues Have social security go to an employees own account to be earmarked of his/her personal retirement
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Benefits
workers
Benefits Lump
for surviving family members of a deceased worker, and sum death payments
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Unemployment Insurance
Financing:
Majority of states, unemployment compensation is financed exclusively by employers that pay federal and state unemployment insurance tax Federal tax amounts to 6.2 percent of the first $7,000 earned by each worker States additionally impose a tax above the $7,000 figure The extra amount a company pays depends on its experience rating
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Benefit duration involves a complex formula that ensures extended benefits in times of high unemployment
When number of insured unemployed in a State reaches 6 percent When unemployment rate is greater than 5 percent and at least 20 percent higher than in the same period of the two preceding calendar years and remains that way for 13 weeks
Weekly
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Employee must have worked at least 1,250 hours for the employer in the previous year
Common
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Provides current and former employees and their spouses and dependents with temporary extension of health care benefits
Qualifying events:
coverage:
provisions
Lessens an employers ability to deny coverage for a preexisting condition Prohibits discrimination on the basis of healthhealthrelated status Provides stringent privacy provisions
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Employees rank pensions in the top three of all benefits in terms of importance Defined benefit plans Defined contribution plans Individual Retirement Accounts (IRAs) Employee Retirement Income Security Act (ERISA)
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Employer
Following an actuarially determined benefits formula and Making current payments that will yield the future pension benefit for a retiring employee
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of benefit levels
Average earnings at end of tenure (last 3 5 years) or Average career earnings or Fixed dollar amount not dependent on earnings
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Cash
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of time employee must work for employer before entitled to employer payments to plan
Any contributions made by an employee to a pension fund are immediately and irrevocably vested Employers contribution must vest according to two formulas
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companies
Law does not require mandatory portability of private pensions An employer may voluntarily agree to permit portability (pension rights must be vested)
Pension
Benefit Guaranty Corporation (PBGC): Insures payment of certain pension plan benefits
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level of retirement income should be set as a target? Should social security benefits be factored in when considering level of retirement income? Should other post-retirement income sources be postintegrated with pension? How large a role should seniority play in determining pension level? What can a company afford?
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Life Insurance
One of the most common employee benefits 87% of medium and large companies offer life insurance Most companies offer term policies
Value of one to two times an employees salary Most plan premiums paid completely by employer Varying amounts of additional coverage often an option
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employers share of health care costs is contributed into one of six health care systems:
Community-based system Community Commercial insurance plan Self-insurance Self Health maintenance organization (HMO) Preferred provider organization (PPO) Point-of-service plan (POS) Point-of1313-36
employees to change their demand for health care via changes in either design or administration of policies structure of health care delivery systems and participate in business coalitions
HMOs PPOs
Change
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compensation covers disabilities that are work-related worksecurity has provisions for disability income to those who qualify of disability income:
Employee salary continuation plans Long-term disability plans Long-
Private sources
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Miscellaneous Benefits
Paid Time Off During Working Hours Payment for Time Not Worked
Child Care
Elder Care
Legal Insurance
Rest periods Lunch periods WashWash-up time Travel ClothesClothes-change time GetGet-ready time
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Paid vacations and payments in lieu of vacation Payments for holidays not worked Paid sick leave Other
National guard Army, or other reserve duty Jury duty Voting pay allowances Personal reasons
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