10 - Employee Benefits: Key Feature of Total Rewards Flashcards
Employee benefits can be broadly categorized as follows:
- _______ required payments
- _____and savings plan payments
- ____ insurance and ____ benefits
- ______and medical-related benefit payments
- Paid ____ periods
- Payments for time ______
- _______ benefit payments
- Legally
- Retirement
- Life / death
- Medical
- rest
- not worked
- Miscellaneous
The cost of workers’ compensation is substantial. The cost of workplace injuries and illnesses, including medical treatment, wage replacement bene ts and lost productivity, exceeds $___ billion a year. Workers’ compensation is a form of _____ insurance; that is, employees are eligible even if their actions caused the accident. This covers injuries and diseases that arise out of and, while in, the course of employment. Benefits are given for:
- (a) Medical care for work-related injuries, beginning right after the ______
- (b) Temporary ______ benefits after a three- to seven-day waiting period
- (c) Permanent partial and permanent total disability benefits for lasting consequences of disabilities on the job
- (d) _____ benefits
- (e) _______ and training in most states for those unable to return to their prior career.
Some states provide “_______ funds.” These funds relieve an employer’s liability when a preemployment injury combines with a work-related injury to produce a disability greater than that caused by the latter alone. State, not federal, laws cover workers’ compensation. The primary difference across states is in bene ts levels and costs.
- $58
- no-fault
- accident
- disability
- Survivor
- Rehabilitation
- “second-injury”
explain how social security is funded.
The money to pay Social Security benefits comes from the Social Security contributions made by employees, their employers and self-employed people during working years. As contributions are paid in each year, they are immediately used to pay for the benefits to _____ beneficiaries. Here lies a major problem with Social Security. While the number of retired workers continues to rise because of earlier retirement and longer life spans, no corresponding increase in the number of ______ to Social Security has offset these costs. To maintain solvency, there has been a dramatic increase in both the maximum ________ and the rate at which that base is taxed.
Several points need to be made.
- First, with the rapid rise in taxable earnings, most individuals will pay some amount of Social Security tax on every dollar they earn. This wasn’t always true. In 1980 the maximum taxable earnings were $_______. Every dollar earned over that amount was free of Social Security tax. Now the maximum is $______ (in 2014), and for one part of Social Security, which is Medicare, there is no earnings maximum.
- Second, remember that for every dollar deducted as an employee’s share of Social Security, there is a matching amount paid by ______.
Current funding levels produced a massive surplus throughout the 1990s. In 2000, the Social Security surplus was $_____ billion. Current “baby boomers” have reached their peak earnings potential. And their Social Security payments now subsidize a much smaller generation born during the 1930s. There are now almost 3.0 workers paying into the system for every one collecting benefits (2010 ratio from Social Security; www.ssa.gov/history/ratios.html). Within the next ___ years this ratio will drop to about two to one.
- current
- contributors
- earnings base
- $25,900
- $117,000
- employers
- $167 B
- 40
The majority of benefits under Social Security fall into four categories. These are:
- (1) _______ benefits
- (2) Benefits for ______ of retired or disabled workers
- (3) Benefits for ________ of a deceased worker
- (4) Lump-sum ______ benefits.
To qualify for these benefits, a worker must work in a covered employment and earn a specified amount of money, which is $_____ in 2014 for each quarter-year of coverage. _____ quarters of coverage will insure any worker for life. The amount received under the four benefits categories varies but in general is tied to the amount contributed during the eligibility quarters.
- Old age or disability
- dependents
- surviving family members
- death
$1,200
Forty
Unemployment compensation paid out to eligible workers is financed exclusively by _______ who pay federal and state unemploy- ment insurance tax. The federal tax amounts to ___% of the first $7,000 earned by each worker. In addition, states impose a tax above the $7,000 figure. All states allow for experience rating, charging lower percentages to employers who have terminated fewer employees. The tax rate may fall to almost zero in some states for employers who have had no recent experience with ______ and rise to 10% for organizations with large numbers of layoffs.
Unemployment insurance laws currently cover all workers except a few ________ and _______ workers. These covered employees must still meet eligibility requirements to receive benefits.
To be eligible for benefits, generally, an unemployed worker must:
- (a) Be able, available and _____ seeking work
- (b) Not have ______ suitable employment
- (c) Not be unemployed because of a labor _____
- (d) Not have left a job _____
- (e) Not have been terminated for gross misconduct
- (f) Have been previously employed in a _____ industry or occupation, earning a designated minimum amount for a designated period of time.
Under a law that was published by the Department of Labor in June 2000, states have the option to use state unemployment compensation resources to make partial wage replacement available to parents who leave employment after the birth or adoption of a child. This rule establishes a new exemption to the requirement that unemployment fund recipients be available and able to work.
Until _____ the maximum number of weeks any claimant could collect unemployment insurance was 26 weeks. Since 1970, federal law has provided for the extension of the duration of benefits in periods of high and rising unemployment.
Those unemployed workers who do meet eligibility requirements are entitled to a weekly benedit amount based on a percentage of an individual’s earnings over a recent 52-week period—up to the state maximum amount.
- employers
- 6.2%
- downsizing
- agricultural / domestic
- actively
- refused
- dispute
- voluntarily
- covered
- 1958
the 1993 family and medical leave Act (fmlA) applies to all employers having ____ or more employees and entitles all eligible employees to receive unpaid leave up to ___ weeks per year for specified family or medical reasons. to be eligible, an employee must have worked at least ____ hours for the employer during the previous 12-month period. Common reasons for leave under fmlA include caring for an ill family member or _______.
- 50
- 12
- 1,250
- adopting a child
in _____ Congress enacted the Consolidated omnibus Budget reconciliation Act (CoBrA) to provide current and former employees and their spouses and dependents with a temporary extension of group health insurance when coverage is lost due to qualifying events such as a layoff. All employers with ____ or more employees must comply with this act.
1985
20
In a defined benefit plan, an employer agrees to provide a specific level of retirement pension, which is expressed as either a fixed dollar or percentage of earnings amount that may vary or increase with years of _________ in the company. The firm finances this obligation by following an actuarially determined benefits formula and making current payments that will yield the future pension benefit for a retiring employee.
Defined benefit plans generally follow one of three different formulas.
- The most common approach is to calculate average earnings over the last three to five years of service for a prospective retiree and offer a pension of about ______ of this amount adjusted for years of service.
- The second formula for a defined benedit plan uses average ________ rather than earnings from the last few years of employment. Other things being equal, this would reduce the level of bene t for pensioners.
- The final formula commits an employer to a _____ amount that is not dependent on any earnings data. This figure generally rises with seniority level.
The level of pension a company chooses to offer depends on the answers to several questions.
- First, what level of retirement compensation would a company like to set as a target, expressed in relation to ________ earnings?
- Second, should _______ payments be factored in when considering the level of income an employee should have during retirement?
- Third, should other postretirement _______ be considered with the pension payment? Fourth, how should a company factor seniority into the payout formula? The larger the role played by ______, the more important pensions will be in retaining employees. Most companies believe that the maximum pension payout for a particular level of earnings should be achieved only by employees who have spent an entire career with the company.
seniority
one-half
career earnings
fixed dollar
- preretirement
- Social Security
- income sources
- seniority
The advantages of a defined benefit plan are that it provides an explicit benefit that is easily _______ to employees. Defined benefit plans are more favorable to ______ employees and have the additional advantage to employees of having the employer assuming the risk associated with changes in inflation and interest rates that affect costs
The advantages of a defined contribution plan to employers are that the employee assumes the ______ risk and the employer cost is known up front; a disadvantage to employers is that the plan is more difficult to _______. Defined contribution plans are more favorable to short-term employees.
communicated
long-service
investment
communicate
ERISA does not require that employers offer a ______ plan. But if a company decides to have one, ERISA provisions rigidly control it. These provisions were designed to achieve two goals— first, to protect the interest of 100 million active participants who are covered today by private retirement plans and second, to stimulate the _______ of such plans.
ERISA generally requires that employees be eligible for pension plans beginning at the age of ____. Employers may require one year of service as a precondition for participation. The service requirement may be extended to two years if the pension plan offers full and immediate vesting. (Candidate Note: Text erroneously says three years.)
The two concepts of ______ and _______ under ERISA are sometimes confused but have very different meanings in practice.
pension
growth
2l
vesting / portability
one of the most common employee benefits offered by organizations is some form of ________.
typical coverage would be a group term insurance policy with a face value of one to two times the employee’s annual salary. most plan premiums are paid completely by the employer. slightly over ____% include retiree coverage. Almost all companies make this benefit forfeitable at the time of departure from the company although the option to convert the coverage to individual insurance is available.
life insurance
30
An employer’s share of health care costs is contributed into one of six systems. These six systems are:
- (1) A ______-based system
- (2) A commercial ______ plan
- (3) _____-insurance
- (4) A _____
- (5) A _____
- (6) A _____
Of these six, plans one through three operate in a similar fashion. However, two major distinctions exist. The first distinction is in the manner payments are made. The second distinction is in the way costs of medical bene ts are determined.
As a fourth delivery system, health maintenance organizations offer comprehensive benefits for a ______. Health maintenance organizations offer routine medical services at a specific site. Employees make prepayments in exchange for guaranteed health care services on demand. Preferred provider organizations represent a variation on health care delivery in which there is a direct contractual relationship between and among employers, health care providers and third-party payers. An employer is able to select certain providers who agree to provide price discounts and submit to strict utilization controls. In turn, the employer in uences employees to use the preferred providers through nancial incentives.
Finally, a point-of-service plan is a hybrid plan combining HMO and PPO bene ts. The point-of-service plan permits an individual to choose which plan to seek treatment from at the time that services are needed. The HMO component of the POS plan requires office visits to an assigned primary care physician, with the alternative to receive treatment through the PPO component. The PPO component does not require the individual to first contact the primary care physician but requires that in-network physicians are used. When POS plan participants receive all of their care from physicians in the network, they are fully covered, as they would be under a traditional HMO.
- community
- insurance
- Self
- HMO
- PPO
- POSA
fixed fee
The first cost-control strategy is that organizations can motivate employees to change their demand for health care through changes in either the ______ or the _______ of health insurance policies. Included in this cost-control strategy are:
- (a) Deductibles, or the first X dollars of health care cost are paid by the employees
- (b) Coinsurance rates, or premium payments are shared by the company and employee (Candidate Note: Typically “coinsurance” is used to describe cost sharing between the plan and the employee on certain health care services rather than the cost sharing on insurance premiums.)
- (c) Maximum benefits, or de ning a maximum payout schedule for speci ed health problems (Candidate Note: The Affordable Care Act has prohibitions and restrictions on lifetime and annual limits for bene ts deemed “essential.”)
- (d) _______ of benefits to ensure no double payments when coverage exists under the employee’s plan and a spouse’s plan
- (e) Auditing of ______ charges for accuracy
- (f) Requiring _______ for selected visits to health care facilities
- (g) Mandatory second opinion whenever ______ is recommended. (More often, utilization review occurs and fewer plans require a mandatory second opinion.)
- (h) Using _____ technology to allow employees access to online benefit information, saving some of the cost of benefit specialists.
The second general cost-control strategy involves changing the structure of health care _______ systems and participating in business coalitions.
The final cost strategy involves linking _______ to healthy behaviors.
- design
- administration
- Coordination
- hospital
- preauthorization
- surgery
- intranet
delivery
incentives
A number of benefit options provide some form of protection for worker disability. For example, workers’ compensation covers disabilities that are work-related. Also, Social Security has provisions for disability income to those who qualify. Beyond these two legally required sources, though, there are two private sources of disability income. These are __________ plans and _________ plans.
Many companies have some form of salary continuation plan that pays out varying levels of income depending on duration of illness. At one extreme is short-term illness covered by employer sick leave policy and typically reimbursed at a level equal to 100% of salary. The most prevalent practice is to provide _______ rather than sick days. This reduces the need for companies to “police” whether employees are indeed sick and allows employees more exibility in life planning.
After such benefits run out, short-term disability benefits become operative. The benefit level typically is about ____% of salary and covers temporary disability. Generally, long-term disability is underwritten by insurance rms and provides 60-70% of predisability pay for a period varying between two years and life.
employee salary continuation
long-term disability
paid time off (PTO)
60%
(a) Dental insurance is a standard inclusion for 90% of employers with more than 500 employees. In many respects, dental care coverage follows the model originated in health care plans. The dental equivalent of HMOs and PPOs is the standard delivery system. Dental insurance costs have not spiraled like other heath care costs. In part, these relatively modest costs can be attributed to stringent _______ strategies. The excess supply of dentists in the United States also has helped keep costs competitive.
(b) Employer-provided vision care dates back only to _____ in a contract between the United States Auto Workers Union and the Big Three automakers. Since then, this benefit has spread to other auto-related industries, parts of the public sector and to other private employers. Most plans are noncontributory and usually cover partial costs of eye examination, lenses and frames.
cost-control
1976
