Providing Employee Benefits Flashcards
What are benefits typically provided and how many times the basic salary are they?
Life insurance, health coverage, long-term disability, dental, dependent care, tuition reimbursement retirement plans. 1.25-1.4x.
What 2 types of benefits are there?
Pre-tax - Benefit cost is taken out before other taxes are charged, lowers gross/taxable income.
Post-tax - Benefit cost deducted from total income.
What are the 5 employee benefits required by law?
Social Security, unemployment insurance, workers comp, family and medical leave, cobra.
What does social security combine? Who shares costs? What is the total contribution? How do self-employed individuals contribute? What happens if you hit the FICA cap? How does the government ensure that SS is available for future generations?
Retirement program payments (SS) and Medicare (hospitalization, supplemental, advantage, prescription drugs, B & D have premiums). Employees and employers share through payroll tax, 6.2% from your paycheck under FICA and 6.2% from your company. 2.9% of earnings go to medicare. self-employed pay 12.4% by themselves. If you hit the cap you pocket the rest of the 6.2% (or 3.3%) as take home pay until Jan 1st, bonuses early in year to hit cap earlier. Gov’t must eliminate cap.
How does unemployment insurance work and where do payments come from? What is an experience rating? What conditions must be met to be “unemployed?”
Payments made to unemployed workers as they are finding new jobs. Federal and state taxes on employers, not from paycheck. Company gets an experience rating based on how many employees lays off in a year and this determines tax imposed on employer, careful planning can keep your experience rating low. To be unemployed must demonstrate prior employment, be available for work, be seeking work, and not be discharged for cause, leave voluntarily or be out of work for union strike (labor dispute).
What are the 4 major categories of benefits? How many workers are covered and how much are payments in respect to earnings and how are they taxed? What does it operate under?
Disability income, medical care, death and rehabilitative benefits. About 9/10 workers covered by state workers comp laws, payments usually 2/3 of earnings. WC benefits are tax free, most people only taxed at 20-25% on their regular earnings. State run programs, no federal funding. No-fault liability, does not need to show gross negligence, protected from lawsuits, not eligible in injuries are self-inflicted, result from intoxication, or a willful disregard for safety.
What does cost of workers comp depend on?
Kind of occupations, involved, state where company is located, employer’s experience rating. Might have unemployment insurance (employer) or self insured for workers comp. Stop Loss insurance is very costly, kicks in only at highest level of medical liability.
What are some optional benefits programs?
Paid leave, group insurance, retirement plans, family-friendly benefits, other quality of work-life benefits.
What are some examples of PTO?
Paid vacation, holidays, sick leave, personal days, floating days. Some companies group them into banks, personal and sick time and vacation are lumped as a sum and are taken as undesignated time off. Additional PTO maybe for jury duty, military, funerals, vote, bday.
What policies and additional coverage does medical insurance usually cover?
2015 - about 70% of full-time employees received med benefits. Hospital, surgical expenses, visits to physicians and pharmaceuticals. Additional coverage might include dental or vision care, birthing centers or prescription drug programs.
What is the difference between term life and permanent life insurance?
Term - If employee dies during term of policy, beneficiaries receive a death benefit payment usually twice their salary, coverage ends when employees job ends or they stop paying into it.
Permanent - Accrues “actual value” that can be cashed out later in lieu of keeping insurance that will then pay out to heirs when you die.
What is the difference between short-term disability (STD) and long-term disability (LTD)?
STD - Pays percentage of disabled employee’s salary as benefit to employee for 6 months or less. Payments start once employee becomes disabled and continue until they return to work or are out for 6 months.
LTD - Insurance that pays percentage of disabled employee’s salary after an initial period (usually covered by STD payments) and could pay for balance of working life, or until person applies for and gets SSD payments.
About how many employees in private sectors have employer-sponsored Retirement Plans? What two kinds are there?
About half. Contributory plan is funded by contributions from both employee and employer. Noncontributory only by employee contributions.
What kind of defined plans are there?
Defined Benefits plan (DB) - Employer sets up pension fund managed by pension committee overseen by board of directors. Employer has to contribute enough money for retirement plan to cover all benefits for future eligible retirees. (ERISA 1974)
Defined Contribution plan (DC) - employer sets up individual account for each employee and specifies amount company may match. Profit-sharing and ESOP might work like this, 503B and 401K most common DC.
What is ERISA? What did it create?
Federal law increased responsibility of pension plans to protect retirees. Established vesting and portability rights and created Pension Benefit Guarantee Corp.
PBGC is a fed agency that issues retirement benefits and guarantees to retirees that a basic benefit will be paid if employer experiences financial difficulties.
