Module 1: Government Influence On benefits Flashcards
What are the five components of the total rewards model?
Compensation
Well-being
Benefits
Development
Recognition
What are the five major types of employee benefit benefits?
Group insurance plans
Retirement plans
Paid time away from work
Incentive plans/stock options
Perks
What are examples of legally required employee benefits?
Social Security
Workers compensation insurance
Unemployment insurance
Medical insurance plan - ACA standards
Regarding legally required benefits, describe workers compensation
Paid for by the employer, must meet state standards, employer chooses vendor in most states
Benefits to an employee may not be taxable
Covers all employees
Premium cost affected by experience rating
Premium cost lower with return to work program
Inherent risk of employee fraud
List group insurance plans, and describe Describe group insurance plans
Group insurance plans can be legally required or discretionary
- Health and welfare plans can be legally required to discretionary
- Trends and healthcare insurance can affect the other kinds of benefits and employer can afford to offer
Disability plans can be legally required or discretionary
- there are certain states that require disability plans to be provided by the employer
- life insurance plans are discretionary choices for the employer to provide
Are retirement plans legally required?
No retirement plans are discretionary
Unemployment insurance is legally required benefit. What are the five attributes of unemployment insurance?
Paid for by the employer operated by the state
Covers employees who lose a job through no fault of their own (can also include employees who resign due to inappropriate treatment by the employer)
Premium cost affected by experience rating
Premium cost can be lowered with staffing, stability, and the use of contingent workers
Employers are required to respond to all claims
What are the eight things for an employer to consider when evaluating a specific employee benefit?
Who is eligible to participate in receive the benefit?
When is the employee eligible?
What benefit coverage is included
Is it voluntarily chosen by the employee or automatic?
Is it legally required or discretionary for the employer?
Who pays for it employer versus employee?
How was the benefit plan funding determined
How is the benefit valued by the workforce?
In order for an employee benefit law to emerge what are the five key legislative process steps?
Perceived need for regulation
Legislative hearings
Draft legislation
Amendments
Final legislation
What nine government agencies have oversight responsibilities of Key legislation affecting employee benefits
Internal revenue service
Department of labor
Employee benefit, security administration
Equal employment opportunity commission
Department of health and human services
Pension benefit guarantee corporation
Securities and exchange commission
Occupational Safety and Health Administration
National Labor Relations Board
What are the two government benefits programs that are required by the state?
What are the three government benefits programs that apply in some states?
Required state benefits:
Unemployment insurance
Workers comp compensation
Benefits that apply in some states :
Non-occupational disability laws
Mandated health benefits
Mandated paid leave benefits
Concerning government benefits programs, what is the only federal benefits program?
Social Security
Regarding state benefit programs, what are the four key attributes of unemployment compensation?
Federally required in all states
Experience rated tax on employers
Eligibility and benefits very by state
Benefits are fully taxable at the federal and state level
Regarding state benefit programs, what are the seven key attributes of Worker’s Compensation?
Covers occupational injuries, and illnesses
No fault concept (applies regardless of accident cause if it’s work related)
Nine contributory by employee
Types of event benefits include medical bills, and compensation for lost work time training and death
Insurance requirements
Benefits are not taxable
Regarding state benefits programs, how are mandated health benefits administered for fully insured employers versus self insured employers
Fully insured employers are required to cover state mandated benefits on your medical plan
Self insured employers are not required to cover state Man mandated benefits
What are the four distinct types of Social Security benefit?
OA - old age
S - survivor income
D- disability income
HI - health insurance benefits (Medicare was added in 1965)
At what age are people eligible for full Social Security retirement benefits
At age 65 for those born prior to 1938
At age 67 for those born after 1959
Benefits eligibility is on a graduated scale for those born between 1938 and 1959
How are Social Security old age, retirement benefits, reduced, when taken early?
The earliest stage which one can start receiving Social Security retirement benefits is 62
Retirement benefits are reduced 5/9 of one percent for each month up to 36 months that the benefit is paid prior to full retirement age
Retirement benefits are reduced 5/12 of one percent for each month that the benefit is paid earlier than 36 months prior to full retirement age
How are old age, retirement benefits under Social Security impacted by delaying your benefits after full retirement age?
If you delay your benefits until after full retirement age, you could be eligible for delayed retirement credits that increase your monthly benefit between five and 8% per year, depending on your rear of birth.
How much is the Social Security survivor benefit worth?
Who is eligible for Social Security survivor benefits
$255 lump sum death benefit payment
Widows and widowers
- Survivors aged 60 and over
- Survivors aged 50 to 59 if disabled
- Survivors of any age of taking care of dependent children under 16 years old
Dependent children up to age 18 (19 if a full-time student)
Dependent parents age 62 and over (they must’ve been receiving, at least half of their support from the beneficiary)
Regarding Social Security disability benefits, what are the key attributes of the program?
Payable, regardless of age
Begins after five full months of continuous disability
Payment is retroactive to date of disability
Benefits are integrated with Worker’s Compensation benefits
Tedious review and appeals process
When Social Security disability benefits are integrated with workers comp benefits what’s the maximum percent of earnings that can be provided
Combine benefits cannot exceed 80% of employee earnings
Regarding Social Security hospital insurance (part a Medicare) who is eligible for Medicare
People age 65 and over and people who are disabled and have been receiving disability benefits from Social Security for two years
When an employee enrolled in an employer, sponsored health plan turns 65. Medicare becomes a secondary plan.
If the organization offers a retiree medical coverage plan, Medicare becomes the primary plan for retired employees age 65 or older
Each year the government government determines the deductible for Medicare part a and part B
After the deductible is Met for Medicare part a how many days does Medicare pay full cost of remaining charges per occurrence?
Medicare pays the full cost of remaining charges for the first 60 days per occurrence of illness
Medicare part a covers hospital care after deductible may cover skilled nursing facilities, home health services, hospice care
Residential care is not typically covered
Just the statement above;-)
What is the cost of Medicare part B supplementary medical insurance
Individuals who choose to participate in part B are required to pay a premium that’s adjusted annually by the government
There could be penalties if you do not enroll on time and the sir charges will remain for as long as you have the part B coverage
After deductible covered individuals pay 20% and Medicare pays 80%
What is the basic list of covered services for Medicare part B supplementary medical insurance
Physician services
Physical and occupational therapy
Diagnostic x-ray laboratory, and other test
What is a Medigap policy?
Social security health insurance part C
Medigap, or Medicare Supplement Insurance, is a health insurance plan that helps cover out-of-pocket medical costs that Original Medicare doesn’t cover
What is Social Security health insurance part C?
Medicare advantage
Is there a cost for members to enroll in Medicare advantage
Participants will pay a monthly premium for the Medicare advantage plan because of the extra benefits it offers
Benefits are often administered via a private ensure
Who is eligible for Medicare part C Medicare advantage
People with Medicare parts a and B can join a Medicare advantage, part C plan and choose to receive all of their healthcare services through one of the provider organizations
What are the five components of Medicare advantage part C plans?
Medicare managed care plans
Medicare preferred provider, organization plans, PPOs
Medicare private fee for service plans
Medicare specialty plans
Prescription drugs
What is Social Security health insurance part D?
Prescription drug coverage
When did Medicare part D prescription drug coverage go into effect and what act drove the change
In 2006 Medicare part D went into effect in response to the Medicare prescription drug improvement and modernization act of 2003
Who administers Medicare part D
The centers for Medicare and Medicaid services CMS
What’s the cost of Medicare part D prescription drug coverage
Participant cost varies, depending on the participants financial situation and chosen drug plan
Low income aid is available to seniors
There are also employer incentives, private employers receive incentives to continue to provide prescription coverage to retirees
What are five major influences on benefits provided to employees
Equal employment opportunity laws
Employee retirement, income, security act of 1974 (ERISA)
Internal Revenue Code
Affordable care act
Employer trends
What are the six equal employment opportunity laws?
Title seven of the civil rights act of 1964
Age discrimination in the employment act of 1967 (older workers benefit protection act)
Americans With Disabilities Act of 1990 (amended in 2008 now ADAAA)
Equal pay act of 1963
Pregnancy discrimination act amendment to title seven in 1978
Genetic information non-discrimination act of 2008 (GINA)
Regarding the dimensions of diversity list the protected classes
National origin
Religion
Race or color
Sex includes gender and expanded definition
Age 40 and over
Physical or mental disability
Veteran status
Pregnancy
What is the PURPOSE of the Employee Retirement Income Security Act of 1974?
4 primary reasons for establishing the act
- Provide rules on federal
income tax effects - Protect interests of
participants and their
beneficiaries - Create federal law for
employers operating in
multiple states - Establish minimum
standards for
retirement plans
What is another name commonly used to refer to ERISA?
Pension Reform Act
What event prompted the 10 year legislative push to establish ERISA?
the 1963 closure of the Studebaker auto plant - thousands of workers lost there pension benefits.
What are the 5 primary PROVISIONS of ERISA?
- Reporting and disclosure — requires plan sponsors to provide plan participants with written communications about the details of the plans which must be written so that the average participant can understand
Them.
* Summary plan descriptions (SPDs)
* Summary of material modifications (SMMs)
* Annual reports (Form 5500)
* Summary annual report (SAR) - Fiduciary standards
* The plan must be operated for the exclusive purpose of providing benefits for plan participants and their beneficiaries.
* “Prudent person standards” requires the plan fiduciary to perform their duties in the same manner as a prudent person who is familiar with such matters.
3.Preemption — ERISA calls for federal oversight and preemption of many (but not all) state laws that apply to benefits plans.
Congress and many courts are considering ways to limit this.
- Claims procedure regulation — establishes procedural, notification and disclosure requirements with respect to claims for employer benefits plans.
- Enforcing agencies — responsibility for the interpretation and enforcement of ERISA is divided among the Department
of Labor, the Department of the Treasury (particularly the Internal Revenue Service), and the Pension Benefit Guaranty
Corporation.
Does ERISA require an employer to establish a benefits plan?
ERISA does not require an employer to establish a plan. It only requires that those who do meet a set
of minimum standards.
What are the 2 types of ERISA qualified benefits plans?
Defined Contribution Plan
Defined Benefit Plan
Define - Defined Contribution Plan and Defined Benefit Plan
■ Defined Contribution Plan — Employer agrees to make specific payments into a retirement fund.
■ Defined Benefit Plan — Employer agrees to give retirees a specific benefit, generally a
percentage of final salary.
What Act Drives your answer?
An employee nearing retirement asks you why a coworker receives a larger monthly Social Security check than him.
Social Security - Old Age Retirement Benefits
What Act Drives your answer?
An employee tells you he will soon turn 65 but intends to continue working. He asks if he can receive his full Social Security benefit while still working.
Social Security - Old Age Retirement Benefits
What Act Drives your answer?
An employee tells you her husband turned 65 and applied for Medicare. He is currently covered under your employers sponsored health-care plan. She wants to know if she should continue to keep him on her insurance.
Medicare Part A: Hospital Insurance
What Act Drives your answer?
A 55-year-old employee found out the company provides lower benefits to her than they do for younger workers. She
asks you why and if it is legal to discriminate in that way.
ADEA - Age Discrimination in employment act
What Act Drives your answer?
A new employee decides to have a minor surgery, believing that her coverage begins on the first day of the month following her hire date. In fact, her coverage does not start until the first day of the following month — after 30 days of employment. Which document could have clarified that for the employee and what regulation was designed for that purpose?
ERISA - this is an employer benefit question…
How is the Internal Revenue Code defined?
In its simplest sense, the IRC refers to the tax laws passed by Congress and administered by the Internal Revenue Service (IRS).
Define the following terms within the Internal Revenue Code (IRC)
Tax Exemption
Tax Deduction
Tax Credit
- Tax exemption — Set amounts by which one reduces taxable income
- Tax deduction — Actual expenses that reduce one’s taxable income
- Tax credit — Directly reduces the amount of income tax paid by offsetting other income tax liability
The IRC provides favorable tax treatment for employer contributions for certain types of employee benefits.
What are the 3 general tax advantages to employee benefits under the IRC?
- Tax-deductible contributions — Employer contributions are tax deductible.
- Tax-free benefits — Benefits received by employees are tax free in most cases.
- Tax-deferred benefits — For some benefits, the tax obligation by the employee is to be paid at a future date.
Compensation Nondiscrimination Terms - define the following:
HCE
Highly compensated employee (HCE)
* Owns more than 5% of the company in the current or prior year, OR
* Earned more than the annually indexed HCE limit in the preceding year, OR
* At the employer’s election is in the top 20% of the organization’s employees in terms of pay
Compensation Nondiscrimination Terms - define the following:
NHCE
Does not meet the definition of HCE
Compensation Nondiscrimination Terms - define the following:
HCI
- Five highest paid officers, OR
- Shareholders who hold more than 10% of stock in the company, OR
- Highest paid 25% of employees,
disregarding nonparticipating excludable employees
Compensation Nondiscrimination Terms - define the following:
Key Employee
- Determination is based on the prior years annual compensation
- The term also covers some former employees.
- An officer with compensation that exceeds annual indexed limits
- A 5% owner, OR
- A 1% owner with compensation that exceeds annual indexed limits
Compensation Nondiscrimination Terms - define the following:
Control Group
- To be a member of the controlled group, a company must be owned at least 80% by a
corporation. - A separate test is applied where individuals or other noncorporate entities are owners.
- For purposes of nondiscrimination testing, employers of affiliated companies must
aggregate data if the companies are considered a controlled group of employers.
What is the purpose of compensation nondiscrimination testing under the IRC?
Ensure that plans do not discriminate in favor of Highly compensated employees or individuals, or key employees.
What are the 4 types of compensation nondiscrimination tests?
- Eligibility — covered by the plan
- Benefits — level of benefits provided
- Concentration — maximum 25% of total benefits to key employees (flex)
- Shareholder/owner — maximum of 25% of employer’s costs for 5% owners (dependent care)
What is the purpose of ACA - Affordable Care Act?
- Expand access for medical insurance coverage to uninsured Americans
- Reform delivery system to improve quality
- Lower overall costs of providing healthcare
what are the consequences of noncompliance with compensation nondiscrimination testing?
can include loss of favorable tax status, fines and personal liability
Depending on the benefit program in question and the violation.
What is the name of the enforcing agency responsible for monitoring the ACA?
Department of Health and Human Services (HHS), Department of the Treasury, and the IRS.
Which federal governing agency is responsible for ensuring that investors receive financial information concerning stocks or bonds being offered for sale?
A. Securities and Exchange Commission
B. Department of Labor
C. Pension Benefit Guaranty Corporation
D. Equal Employment Opportunity Commission
A. Securities and Exchange Commission
Why is it important for benefits practitioners to understand government benefits programs?
A. When state and federal regulations overlap, federal programs offering lower benefits to employees typically take precedent.
B. Social Security survivor benefits are considered in the design of employer-sponsored group life insurance plans.
C. Social Security programs must often be considered in the design of employer-sponsored benefits plans.
D. Medicare becomes the primary insurance for employees who turn 65, even if they are enrolled in employer-sponsored
medical plans.
C. Social Security programs must often be considered in the design of employer-sponsored benefits plans.
- How does Title VII of the Civil Rights Act of 1964 influence benefits administration?
A. Employers can never legally base benefits decisions on race, color, sex, national origin or religion.
B. Employers can give lower benefits to older employees if the benefits become more expensive because of age.
C. Employers can distinguish the benefits provided to employees with disabilities based on anticipated experiences.
A. Employers can never legally base benefits decisions on race, color, sex, national origin or religion.
What is the purpose of the Employee Retirement Income Security Act (ERISA)?
A. To create a federal agency responsible for enforcement of federal statutes
B. To protect the interests of participants and beneficiaries in employee benefits plans
C. To overhaul and reform private sector employer pension and retirement plans
D. To create funding to cover under-funded company pension plans
B. To protect the interests of participants and beneficiaries in employee benefits plans
How has the Internal Revenue Code (IRC) encouraged the development of employer-sponsored benefits plans?
A. Decreased the number of reporting requirements for benefits plans
B. Provided favorable tax treatment for employer contributions
C. Established minimum standards for pension plans in private industry
B. Provided favorable tax treatment for employer contributions
What is the purpose of
nondiscrimination rules?
A. To require employers to offer benefits to all employees
B. To ensure that plans do not favor highly compensated or key employees
C. To guarantee that each employee has the option to enroll in a cafeteria plan
B. To ensure that plans do not favor highly compensated or key employees
What is one purpose of the Affordable Care Act?
A. Improve the medical benefits of Medicare beneficiaries
B. Provide medical coverage to children over the age of 26
C. Expand access to medical coverage to uninsured Americans
D. Increase the pay of health-care providers
C. Expand access to medical coverage to uninsured Americans
