Long Term Disability Lab Review Flashcards
Qualifying period
elimination period, waiting period
Work in a position that’s at least half-time. Have 6 months of active service. Have completed 6 months of Short Term Illness and Injury Plan (STIIP) benefits
Own Occupation
Will typically cover up to 24 months after incident. The insurance company worries they will not ever return to own occupation so turns to any occupation.
Any Occupation
after 24 months
All Source Maximum Income
they don’t want you to be better off after claiming disability. It’s never allowed to have more money on disability than your original paycheck.
Waiver of Premium
once people go off long term disability, they don’t have to pay the premium
Benefit Schedule
% of pre-disability earnings 65% - 75% might be common
Benefit Volume
the amount of money that is covered, not necessarily the original paycheck. It could be 70% of pre-disability earning
How are premiums calculated?
Premiums are calculated based on a rate per $100 of benefit.
Example:
EE’s salary = $40,000
70% of earnings
Benefit schedule: 70% of earnings, to a maximum benefit of $5000/ month.
Premium rate: $1.20 per $100 of benefit volume.
What is benefit volume?
40,000 * .70 = $28,000 per year
Monthly premium?
28,000 / 100 = 280
280*1.20 = $336 per year $336/12 = $28 per month
value investing
Warren Buffet
when stock sells at a discount compared to their intrinsic worth
world’s greatest value investor.
indexed pension
An “indexed pension” is one that is increased periodically to reflect increases in the consumer price index (CPI).
Employee Benefits
that part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments
Non-contributory
Contributory
employer pays total costs
costs shared between employer and employee
Coinsurance
% of eligible expense above deductible that is paid by benefits insurance plan (eg: 80% coinsurance for drug costs)
Pros & Cons of one size fits all
Pros
- simpler to manage
- equitable (sort of)
Cons
- potentially more costly to maintain as time goes by
- inequitable (sort of)
Flex Benefits
Pros & Cons
Pros
- EEs have different needs
- easier to change/allow for change
- EEs need to be involved
- helps with cost containment
Cons
- EEs make bad choices and not covered
- admin burdens increase
- adverse selection/anti-selection (EEs only pick benefits they wil use so the subsequent high benefit utilization increases its cost)
Pros & Cons of HSCA
Pros
- allows EEs to save up for larger expenses
- turns a personal health-related expense into a tax deduction for ER & tax free benefit for EE
Cons
- complex since CRA maintains a list of tax-exempt expenses
WSA
&
FSA
wellness spending account
- not tax exempt
(gym, bike)
- ER decides what is covered
FSA
- flexible spending account
- combo of HCSA & WSA
Flex plans design process (5)
- establish objectives
- status quo/new plan
- test focus groups
- adjust
- implement
- communicate
- administer
- election periods / triggers
EAP definition
A employer-sponsored benefit program designed to assist employees with the identification and resolution of personal issues which may be impacting productivity.
Examples- Substance abuse Mental health Grief counselling Stress reduction Anger management Legal problems Credit counselling Health maintenance consultations
Corporate Governance
What
Why
Who
What is it:
- Rules and procedures for decision making
- Tools for monitoring what companies do
- Determination of rights and responsibilities among stakeholders
WHY Fraud Incompetence Experiences from 2001, 2008, etc. Fiduciary Duty vs Agency Theory/ Problem
WHO Exec comp legislation also applies to: Most publicly funded entities Covers CEOs and next 4 highest paid executives with annual base pay of $125,000 or more. (NEOs: Named Executive Officers)
4 Corporate Governance Bodies
Canadian Securities Administrators (CSA)
Securities Exchange Commission (SEC - US)
Canadian Coalition for Good Governance (CCGG)
Institutional Shareholders Service (ISS)
Canadian Securities Administrators (CSA):
Sets the minimum rules for Provincial Regulators – Ont. Securities Comm – TSX
Requires public co.s to have a board level Comp Committee
Linking at-risk pay to performance
Disclosure rules: Must list and price/ value every item
Must report total comp as “One big number”
1 CSA Requirement
Compensation Discussion and Analysis
section in Management Proxy Circulars which must include:
Plan design Plan objectives Every element of exec comp Why each element is included Performance levels and metrics
Shareholder Activism
a way that shareholders can influence a corporation’s behavior by exercising their rights as partial owners. Classes of shares allow for distinct voting privileges, in addition to dividend entitlements
Launching an average of 240 campaigns in each of the past three years—more than double the number a decade ago.
Analysis of 400 activist campaigns finds that the median activist campaign reverses downward co. performance and generates excess shareholder returns that persist for at least 36 months
Canadian Coalition for Good Governance Executive Compensation Principles (source: CCGG website)
6 principles
PRINCIPLE 1: A significant component of executive compensation should be “at risk” and based on performance
PRINCIPLE 2: “Performance” should be based on key business metrics that are aligned with corporate strategy and the period during which risks are being assumed
PRINCIPLE 3: Executives should build equity in the company to align their interests with those of shareholders
PRINCIPLE 4 : A company may choose to offer pensions, benefits and severance and change-of-control entitlements. When such perquisites are offered, the company should ensure that the benefit entitlements are not excessive.
PRINCIPLE 5: Compensation structure should be simple and easily understood by management, the board and shareholders
PRINCIPLE 6 : Boards and shareholders should actively engage with each other and consider each other’s perspective on executive compensation matters
