Assignment 10

Question 1

Employee benefits can be broadly categorized as follows:

Answer 1

1) Legally Required Payments
2) Retirement and Savings Plan Payments
3) Life Insurance and Death Benefits
4) Medical and Medical-Related Benefit Payments
5) Paid Rest Periods, coffee breaks, lunch peiods, washup time, travel time, clothes change time, get-ready time
6) Payments for Time not worked
7) Miscellaneous benefit payments

Question 2

Legally Required Payments

Answer 2

1) Old-age survivors, disabilty, and health insurance ( employer FICA taxes) and railraod retirement tax
2) Unemployment compensation
3) Workers’ compensation
4) State sickness benefits insurance

Question 3

Retirement and Savings Plan Payments

Answer 3

1) Defined benefit pension plan contributions
2) Defined contribution plan payments (401K type)
3) Profit sharing
4) Stock bonus and employee stock ownership plans (ESOPS)
5) Pension plan premiums (net) under insurance and annuity contracts (insured and trusteed)

Question 4

Medical and Medical-Related Benefit Payments

Answer 4

1) Hospital, surgical, medical and major medical insurance premiums
2) Retiree hospital, surgical, medical and major medical insurance premiums
3) Short term disability, sickness or accident insurance
4) Long-term disability or wage continuation
5) Dental insurance premiums
6) Other (vision, physical and mental fitness benefits for former employees)

Question 5

Payments for Time Not worked

Answer 5

1) Payments for on in lieu of vacations
2) Payments for or in lieu of holidays
3) Sick leave pay
4) Parental leave
5) Other

Question 6

Miscellaneous benefit payments

Answer 6

1) Discounts on goods and services purchased from company by employees
2) Employee meals furnished by company
3) Employee education expenditures
4) Child care
5) Other

Question 7

Workers’ Compensation

Answer 7

A form of no-fault insurance. 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.

Question 8

Workers’ compensation benefits are given for:

Answer 8

1) Medical care for work-related injuries, beginning right after the accident
2) Temporary disability benefits after a 3-7 day waiting period
3) Permanent partial and permanent total disability benefits for lasting consequences of disabilties on the job
4) Survivor benefits
5) Rehabilitation and training in most states, for those unable to return to their prior career

Question 9

Second Injury Funds

Answer 9

Provided by some states. These funds relieve an employer’s liability when a preemployment injury combines with a work-related injury to produce a disability greater than the cause by the latter alone.

Question 10

How is Social Security Funded?

Answer 10

The money to pay SS 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 current beneficiaries.

Question 11

What is the maximum taxable earnings for Social Security tax?

Answer 11

106,800 in 2010. for medicare there is no earning cap.

Question 12

What benefits does someone receive under Social Security?

Answer 12

1) Old Age or disability benefits
2) Benefits for dependents of retired or disabled worker
3) Benefits for surving family members of a deceased worker
4) Lump-sum death benefits

Question 13

Unemployment Insurance

Answer 13

Umemployment compensation paid out to eligible workers is financed exclusively by employers who pay federal and state unemployment insurance tax.

Question 14

Unemployment insurance tax is:

Answer 14

6.2% of the first $7,000 earned by each worker.

Question 15

To be eligible for unemployment benefits an unemployer worker must:

Answer 15

1) Be able, available, and actively seeking employment
2) Not have refused suitable employment
3) Not be unemployed because of a labor dispute
4) Not have left a job volunatarily
5) Not have been terminated for gross misconduct
6) Have been previsouly employed in a covered industry or occupation, earning a designated mimimum amount for a designated period of time

Question 16

Maximum number of weeks any claimant could collect unemployment:

Answer 16

was 26 until 1958, now up to 1.5 years of coverage depending on the state

Question 17

COBRA

Answer 17

Consolidated Omnibus Budget Reconciliation Act. to provide current and former employees and their spouses and dependents with a temporary extension of group health insurance hwne coverage is lost due to qualifying events such as a layoff. Employers with 20 or more employees must comply with this act.

Question 18

Defined Benefit Plan

Answer 18

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 seniority in the company.

Question 19

3 Formulas for Defined Benefit Plans

Answer 19

1) Calculate earnings over the last 3-5 years of service for a prospective retiree and offer a pension of about 1/2 of this amount
2) Use average career earnings rather than earnings from the last few years of employment.
3) An employer committs to a fixed dollar amount that is not dependent on any earnings data and generally rises with seniority level

Question 20

The larger the role seniority plays in pensions:

Answer 20

the more importnat they become for retaining employees.

Question 21

Defined Contribution Plan

Answer 21

Require specific contributions by an employer, but the final benefit by employees is unknown, depending on the investment success of those charged with administering the pension fund.

Question 22

401K Savings plan

Answer 22

Defined Contribution Plan

employees are allowed to deger pretax income and employers typically match savings at a rate of 50 cents on the dollar

Question 23

ESOP- Employee Stock Ownership Plan

Answer 23

Defined Contribution PLan
company makes a tax-deductible contribution of stock shares or cash to a trust. the trust then allocates company stock or stock bought with cash contributions to participating employee accounts. The amount allocated is based on employee earnings.

Question 24

When an ESOP is used as a pension vehicle

Answer 24

the employees receive cash at retirement based upon the stock value at that time.

Question 25

Disadvantage to ESOP

Answer 25

Limits their utility for pension accumulations. if the company’s stock takes a downturn, results can be catestrophic

Question 26

Profit Sharing

Answer 26

Defined Contribution Plan if the distribution of profits is delayed until retirement

Question 27

Advantages of a defined benefit plan:

Answer 27

Provides an explicit benefit that is easity communicated to employees. The are more favorable to long-service employees and have the additional advantage to employees of having the employer assuming the risk associated with changes in inflation and interset rates which effect cost. Commit the employer to a specific level of benefit

Question 28

Advantages of a defined contribution plan:

Answer 28

To Employers: Employee assumes the investment risk and the employer cost is known up front. More favorable to short term employees. Have known costs from year one.

Question 29

Disadvantage of defined contribution plan:

Answer 29

The plan is more difficult to communicate

Question 30

Qualifications for deffered compensation to be exempt from current taxation:

Answer 30

1) An employer cannot freely choose who will participate in the plan

Question 31

Employee Retirement Income Security Act (ERISA)

Answer 31

Does not required that employers offer a pension plan, but rigidly controls it if it does.

Question 32

Goals of ERISA

Answer 32

1) Protect the interest of 100 million active participants who are covered by private retirement plans
2) Stimulate the growth of such plans

Question 33

ERISA generally requires the employees be eligible for pension plans beginning at the age of

Answer 33

21

Question 34

How many years of service requirement as a precondition for participation?

Answer 34

May require one year, but it may be extended to two years if pension plans offers full and immediate vesting

Question 35

Vesting

Answer 35

refers to the length of time an employee must work for an employer before he or she is entitled to employer payments made into the pension plans.

Question 36

Vesting Concept has 2 components

Answer 36

Any contributions made by the employee to a penison fund are immediately and irrevovably vested.

Question 37

What does the Economic Growth and Tax Relief Reconciliation Act of 2001 say about the employer’s contribution

Answer 37

it must vest at least as quickly as one of the following formulas:

1) Full Vesting after 3 years
2) 20% after 2 years and 20% each year thereafter until fully bested in six years.

Question 38

Portability of pensions

Answer 38

becomes and issue for employees moving to new organizations. The employer may agree to let the employee’s pension benefits transfer to the new employer. The pension rights must be vested.

Question 39

EGTRRA instituted many changes expanding

Answer 39

portability between various types of retirement plans

Question 40

Pension Benefit Guaranty Corporation

Answer 40

established by ERISA. Employers are required to pay insurance premiums to it if they sponsor a defined benefit-type of retirement plan. One applies to defined benefit plans.

Question 41

PBGC guarantees payments of vested benefits to

Answer 41

employees fromerly convered by terminated defined benefit pension plans.

Question 42

Life insurance

Answer 42

Most common type is group term life insurance with a face value of one to two times the employee’s annual salary. Most plan premiums are paid by the employer. Almost all companies make this benefit forfetable a tthe time of departure from the company.