Chapter 19: Employee Benefits Flashcards
General Feature/ Group Insurance
Insurer provides coverage for many people under one master contract
Insurance that requires contract between employer and insurer and what do employees receive
group life, disability, health
employees receive certification of participation and explanation of benefits
Experience rated premiums
large groups request insurance. If employer data has credibility, insurer has confidence in tailoring premium to particular group’s outcome
Credibility
few deaths, disability and hospitalization in a year
Good credibility means
lower premium in future or current year
Group Life Insurance
death benefit for specific period based on average age of employees or set as flat amount
settlement options
lump sum payments, lifetime income, limited periods
Individuals should not solely rely on group benefits
- may be inadequate to meet financial goals/needs
- benefits unavailable
- no savings involved
Group Disability Income
short or long term, workers compensation not enough. Disabled by work accident or illness
Short term disability
continue employees salary for 6 or fewer months, sick leave plans
Long Term Disability
worker is permanently disabled for 5-10 or 65 years. Compensation based on tier basis
Integrated LTD plans
social security benefits considered when determining disability insurance (offset, CPP or QPP)
Exclusions LTD (3)
self inflicted injuries, commission of felony, loss arising from war
Pension Plan
provides employee with retirement income, ends active employment
Replacement ratio
retirement income divided by pre-retirement income, ideally 60-100%
Contribution Plans
require covered employees to make payments toward their own retirement plan
non-contribution plans
employer assumes full financial responsibilty
qualified
requirements of section from IRC and employer each receive tax advantage
not qualified
employee reports income as soon as employer makes payment in plan
Defined Benefit Plan
Calculate pension benefits based on formula. etc employees financial contribution in years immediate prior to retirement. plan takes on risk and longevity
Cash balanced plan
hybrid defined benefit plan. Inputs are percentage of employers annual salary while working,
Defined Contribution Plan
requires employer to make specified input payments, no promise regarding output, you take on risk and longevity
money purchase plan
employer deposit 6% of employees annual salary into the plan, contributions are invested and bear financial risk
Qualifying a employee benefit plan (3)
Plan in writing
For exclusive benefit of employees
Expected to last indefinitely
Common exclusion in group health
Intentional losses
Custodial care
Cosmetic surgery
