Topic 10 Risk Flashcards
What is Part A Medicare?
Hospital Benefits
- Inpatient (person who stays in hospital while under treatment)
- Post-hospital home care
- Hospice care
- Coverage is free, so pay a deductible (approx. $2,000)
What are the parts of Medicare?
Parts A, B, and D
*Part C as well, but part C is just a bundled plan sold by insurance companies that include parts A , B, and C
What is Part B Medicare?
Medical Benefits
- Monthly premium (approx. $105 a month)
- Covers most non-hospital expenses except:
- Routine physicals
- Routine eye, foot, and ear care
- Immunizations
- RX (medical prescription)
- Hospital
What is Part D Medicare?
- Effective in 2006
- Participants must enroll and pay a monthly premium and a portion of each prescription. Also must have a part A and part B to be eligible.
When was Social Security enacted?
1935
When was Medicare enacted?
1965
What are the parts of the Social Security program?
Old age (OA), Survivors (S), Disability (D)
What are the aspects of old age (OA) with social security?
- Retirement benefits
- Amount based on earnings
- The normal retirement age is 67 (anyone born after 1960)
What are the aspects of survivors (S) with social security?
- Coverage for the survivor of a fully insured worker
- Widows/Widowers or surviving divorced spouse’s benefits
- Child’s benefits
- Lump-sum death payment
What are the aspects of disability (D) with social security?
- If an insured worker is disabled/becomes disabled
- Or dependent of worker (spouse/child)
- Definition is strict - not as liberal as regular insurance/ee benefit display policies
What is a rollover?
When the owner takes funds out of one account and places them in another qualified retirement account
What is allowed with a rollover?
- Transfer from one IRA to another IRA
- 401k to IRA
- Transfer from one 401k to another 401k
**Can not transfer IRA into 401k
What is a defined benefit plan?
Aka Pension Plans
- Known formula that determines benefit at retirement
What are the unknown aspects of the defined benefit plan?
- How much it will cost an employer in any given year
- Plan termination insurance sold by the PBGC - Is required for private companies with DB Plans under ERISA
What is a Defined contribution plan?
- EE defers a portion of their gross salary via a pre-tax payroll deduction to the plan
- Employers can match the contributions up to a certain amount if they choose (they usually do)
- Salary reduction - use pre-tax dollars
- 401(k) in for-profit company
- 403 (b) for non-profits
When can funds be withdrawn from a 401k or an IRA?
Funds cannot be withdrawn before age 59.5 except in the case of death or disability
*There is a 10% penalty for early distribution
*Amount withdrawn after 59.5 is only taxed as ordinary income
What is vesting?
An incentive program for EE that gives stock options, when they have contractually fulfilled a specified term of employment
What is cliff vesting?
Gives the employee ownership of 100% of the employer’s contributions all at once after a certain number of years
Ex) After three years, the employee gets to keep all of the ER’s contributions
What is graded vesting?
Gives the employee ownership of a percentage of the employer’s contribution each year
Ex) 20% vested after 2 years
40% vested after 3 years
60% vested after 4 years
80% vested after 5 years
100% vested after 6 years
Ex) EE has been working with the company for four years
- She has contributed $60,000 to her 401k
- The ER has made contributions of $40,000
- EE can keep $24,000 under graded vesting
What’s the maximum you can put into an IRA annually?
$7,000 annually in 2024 max
What’s the maximum that you can put into a 401k plan manually?
$23,000 in 2024 annually
What is known and unknown with a defined contribution plan?
Known: Annual ER contribution
Unknown: Annual retirement benefit received at retirement
What is NRA?
Normal retirement age
- The earliest age at which EE’s can retire and receive full benefits
*If you were born in 1960 or later this age is 67
What is early retirement age?
- Earliest age at which an EE may retire and receive some benefit
*Typically paid a reduced benefit
What is late retirement age?
Retirement after the normal age
*ER should increase benefits but is not legally required to do so
What is the main aspect of a defined benefit plan?
ER funds and guarantees a specific retirement benefit amount for each participant of a defined-benefit pension plan.
What is the main aspect of a defined contribution plan?
Defined-contribution plans are funded primarily by the EE, as the participant defers a portion of their gross salary; ER’s can match the contributions up to a certain amount, if they choose
