Employee Benefits

Question 1

Define Employee Benefits.

Answer 1

• that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments

Question 2

What are 4 reasons for growth in employee benefits?

Answer 2

• cost effectiveness of benefits
• employer impetus
• unions
• government impetus

Question 3

What are the key issues in benefits planning, design, and administration?

Answer 3

• establish plan objectives
• integrate benefits with other compensation components
• ensure external competitiveness
• ensure adequacy of benefits
• benefits admin (who?, how much choice?, how financed?)

Question 4

How can we finance benefits plans?

Answer 4

• non-contributory ( er pays total costs)
• contributory (costs shared b/w er and ee)
• employee-financed (ee pays total costs for some benefits)

Question 5

What are some employer factors influencing choice of benefits packages?

Answer 5

• relationship to total compensation costs
• costs relative to benefits
• competitor offerings
• role of benefits in attraction, retention, motivation
• legal requirements
• absolute and relative compensation costs

Question 6

What are some employee factors influencing choice of benefits packages?

Answer 6

• fairness in relationship to what others receive

- personal needs as linked to demographic characteristics such as age

Question 7

What are the advantages of Flexible Benefits?

Answer 7

• ees choose packages that best satisfy their unique needs
• help firms with the changing needs of a changing workforce
• increased involvement of ees and families improves understanding of benefits
• make introduction of new benefits less costly
• cost containment- org sets dollar max; ee chooses withing the constraint

Question 8

What are the disadvantages of Flexible Benefits?

Answer 8

• ees make bad choices and find themselves not covered for predictable emergencies
• admin burdens and expenses
• adverse selection- ee pick only the benefits they will use=the subsequent high benefit utilization increases its cost

Question 9

What is included in administering the benefits program?

Answer 9

• communicating the benefits program
• claims processing
• cost containment

Question 10

T/F: HR acts as a middleman when ees process claims to insurance.

Answer 10

False: EEs directly deal with claims to insurance

Question 11

List some examples of cost containment.

Answer 11

• probationary periods
• benefits max
• coinsurance
• deductibles
• coordination of spousal benefits
• administrative cost containment

Question 12

Categorize employee benefits.

Answer 12

• legally required payments
• retirement and savings plans
• life insurance benefits
• medical insurance
• income security benefits
• pay for time not worked
• misc. benefits

Question 13

What is workers’ compensation?

Answer 13

• mandatory gov’t-sponsored, employer-paid no-fault insurance plan
• provides compensation for injuries and diseases that arise out of, and while in the course of, employment

Question 14

What is the CPP?

Answer 14

• Canadian Pension Plan
• mandatory, gov’t-sponsored pension plan for all employed Canadians
• funded equally by employers and employees
• provide benefits upon: retirement, disability, and/or death

Question 15

What is Employment Insurance (EI)?

Answer 15

• a mandatory gov’t-sponsored plan for all employed Canadians that provides workers with temporary income replacement as a result of employment interruptions due to circumstances beyond their control
• funded by employer and employee contributions
• basic benefit is 55% of avg. insurance earnings

Question 16

Describe employer-sponsored pension plans and list two types.

Answer 16

• plans that provide income to an employee at retirement as compensation for work performed now
• defined benefit plans
• defined contribution plans

Question 17

What is a defined benefit plan?

Answer 17

• employer agrees to provide a specific level of retirement pension, the exact cost of which is unknown

Question 18

What are the advantages of a defined benefit plan?

Answer 18

• provides an explicit benefit which is easily communicated
• company absorbs risk associated with changes in inflation and interest rates which affect cost
• more favourable to long service employees
• employer cost unknown

Question 19

What is a defined contribution plan?

Answer 19

• employer agrees to provide specific contributions but the final benefit is unknown

Question 20

What are the advantages of a defined contribution plan?

Answer 20

• unknown benefit level is difficult to communicate
• employees assume these risks
• more favourable to short-term employees
• employer costs known up front

Question 21

List some types of life insurance.

Answer 21

• group life insurance
• accidental death and dismemberment insurance (AD&D)
• dependant life insurance
• optional, employee-paid insurance
• retiree life insurance

Question 22

Discuss employer-sponsored medical plans.

Answer 22

• cover expenses not payable under prov/territorial plans
• prescription drug coverage considered most important benefits by employees
• medical cost control is biggest issue facing benefits managers today
• cost control through- deductibles, coinsurance, preventive health care…etc

Question 23

Define STD plans.

Answer 23

• short-term disability plans

- provide continuation of part or all of earnings during absence due to non-work related illness or injury

Question 24

Define LTD plans.

Answer 24

• long-term disability plans
• provide continuation of part of earnings during long-term absence due to non-work related illness or injury
• claims and costs rising sharply

Question 25

Define sick leave plans.

Answer 25

• provide specified number of paid sick days per month or per year

Question 26

What are examples of pay for time not worked?

Answer 26

• rest periods
• coffee breaks
• travel time
• vacations
• holidays
• leaves