Type of Benefits (Chpt 9)

Question 1

What is Workers’ Compensation?

Answer 1

a form of no-fault insurance (employees are eligible even if
their actions caused the accident) that covers injuries and diseases that arise out of, and while in the course of, employment

legislated separately by each province and territory, but the variations in benefits and costs are relatively minor

shifting from the provision of compensation to injured workers to prevention of accidents through
promoting occupational health and safety and facilitating recovery and return to work for injured workers

Question 2

4 benefits from Workers Compensation

&

Taxable?

Answer 2

• Loss of earnings due to temporary disability (total or partial)
• Loss of earnings due to permanent disability (total or partial)
• Healthcare expenses (including those normally paid under provincial healthcare plans)
• Survivor benefits for fatal injuries

all jurisdictions provide the above benefits

amount of compensation varies by jurisdiction from 75 to 90 percent of net earnings & two jurisdictions providing 75
percent of gross earnings

Non-taxable

Question 3

How does workers’ comp get paid out after processing a claim?

ER’s challenge with workers’ comp (1)

EEs challenge with workers’ comp (1)

Answer 3

the money comes from a a collective liability fund

Employers
are put in different rate groups, or classes, according to the nature of their business, and all members of the class pay the
same assessment rates, based on a percentage of payroll, into the fund. Some jurisdictions offer “experience rating” plans
that partially link assessment rates to a company’s level of claims

ERs bear the entire expense but have limited control over
administration

EEs have longer claims duration (may not get relief for some time) b/c of an aging workforce & increase in medical costs

Question 4

Canada/Quebec Pension Plan (C/QPP)

Ages of Receiving CPP
&
Who is responsible for CPP investments

Answer 4

designed to replace
employment income in case of retirement, death, or disability.

Retirement benefits start at 65 w/ 25%of avg pensionable earnings adj for avg inflation during last 5 years before retirement

Earliest is 60 yrs old but discounted

after 65 gets increased %

Canada Pension Plan Investment Board is responsible for investing the money contributed to the CPP

A maximum of
30 percent of the funds are permitted to be invested outside of Canada

the fund cannot own more than 30 percent of any
single company

Question 5

EI

Answer 5

provides workers with temporary income replacement as a
result of employment interruptions due to work shortages, sickness, non-occupational accidents, maternity leave, parental or
adoption leave, or compassionate-care leave.

Not payable when an employee is terminated for just cause or quits
without good reason

Question 6

Who pays for EI & how much?
------
What % of EE's avg insured earnings?
------
Waiting Period
------
Max period of payments
a) regular
b) sickness/mat/family leave
c) compassionate-leave

Answer 6

The EI program is funded entirely by contributions from employees and employers.

Employers contribute 1.4 times their employees’ contributions.

Employers that
provide a wage-loss replacement plan for illness that pays at least as much as the EI benefit qualify for a rate reduction.

-----
The basic benefit is 55 percent of the individual’s average insured earnings and is included in taxable income.
------
waiting period: 2 weeks
------
a) payable for a maximum of 45 weeks
b) up to 50 weeks for combined sickness, maternity, and parental leave
c) 6 weeks for compassionate leave

Question 7

Supplementary Unemployment Benefit (SUB)

Answer 7

plans are voluntary, self-insured employer plans to supplement benefits
received under the EI plan

EI benefits are not reduced by any SUB
benefits received.

The EI Commission has to approve SUB plans and work-sharing programs

Question 8

GOVERNMENT-SPONSORED HEALTHCARE PLANS

Answer 8

provide basic medical and hospital services with no direct fee to patients

financed through a) premiums (paid
by residents),
b) health payroll taxes (paid by employers),
c) general tax revenues, or
d) some combination of the three to partially
fund the cost of their plans

Question 9

Retirement and Savings Plans

1) what % of EEs get pension from ERs?
2) what fosters growth of interest in pension programs?
3) why are pension plans important?

Answer 9

1) 40 percent of paid workers in Canada are covered by an employer-provided pension plan; others need own retirement planning with RRSPs and private investments
2) security motive & certain tax advantages

3) employees with employer-provided retirement plans
are more likely to have sufficient savings for a comfortable retirement than are others who do not have these plans

Question 10

What is a defined benefit plan?

How is it funded?

Answer 10

employer agrees to provide a specific level of retirement
pension, which is expressed either as a fixed-dollar or as a percentage-of-earnings amount

• may vary (increase) with years of seniority in the company

Funded:
firm finances this obligation by following an actuarially determined benefits formula and making current payments that will yield the future pension benefit for a retiring employee

Question 11

3 different formulas for defined benefits plans

Answer 11

1) calculate average
earnings over the last (or best) three to five years of service and offer a pension of about one-half
this amount - most common

2) uses average career earnings
rather than earnings from the last few years: other things being equal, this would reduce the level of benefit for pensioners

3) commits an employer to a fixed (flat) dollar amount that does not depend on earnings data. This figure
generally rises with seniority level

Question 12

How does a company decide on which level of retirement compensation to offer? (4)

Answer 12

1. What is ER’s target expressed in relation to pre-retirement earnings? Example- 70
   percent of pre-retirement earnings
2. should C/QPP payments be considered when planning the level of income an
   employee should have during retirement?
3. should other, post-retirement income sources (e.g., savings plans partially
   funded by employer contributions) be integrated with the payment?
4. how to factor seniority
   into the payout formula?

Question 13

2 issues that come from defined benefit plans

Answer 13

1) there’s a high cost of frequent job changes

2) fluctuating investment returns (pension fund surpluses and deficits)

Question 14

DEFINED CONTRIBUTION PLANS

what is it?

who contributes?

where does the money stay?

What is extremely important here?

What must pension managers do?

Answer 14

requires specific contributions by an employer

Contributions may also be required from employees or the contributions may be optional

All contributions are deposited in a
pension fund to accumulate investment earnings until retirement

Final benefit received by EES depends on investment success so, investment management is extremely important

pension managers must review investment proposals submitted by third-party investment managers and evaluate the
information provided

Question 15

PENSION LEGISLATION

Where is there legislation re: pension benefits?

What other 2 requirements must pension plans meet?

What do they regulate?

Answer 15

1) each province except PEI & federal government
2) Income Tax Act & registered with CRA & and any applicable provincial pension commission

3) eligible service, maximum contributions, early and late retirement
benefits, pre-retirement and post-retirement death benefits, vesting on termination of employment, portability of pension
benefits between plans, and regulations regarding investment of pension fund assets

Question 16

Life Insurance

How much is paid?

How common?

2 other common forms of life insurance

Answer 16

1) group insurance policy with a face value of one to two times the employee’s annual salary
2) One of the most common employee benefits

3)
a- dependant life provides benefits in the event of the death of the spouse or child of an employee

b- accidental death and dismemberment insurance pays double the regular life insurance benefit if the employee dies in an accident & pays a percentage of the death benefit for accidental paralysis, or loss of limbs, eyesight, speech, or hearing

Question 17

Medical Insurance

1- which benefit is most important under this plan?

2- what is the biggest issue facing benefits managers in Canada?

Answer 17

1) drug plans to be their most important employee benefit: they are willing to pay more
to ensure that coverage is not diminished

2) Dramatic increases in healthcare costs - particularly prescription drugs b/c 75 percent of employer medical benefit costs

Question 18

2 general strategies available to benefits managers for

controlling the rapidly escalating costs of healthcare

Answer 18

1) organizations can motivate employees to change their demand
for healthcare through changes in either the design or the administration of health insurance policies

a - deductibles (the first x dollars of healthcare cost are paid by the employee),
b - coinsurance rates (the percentage of premium payments paid by the company versus the employee),
c - maximum benefits
(defining a maximum payout schedule for specific health problems), and
d - coordination of benefits (ensuring no double
payment when coverage exists under the employee’s plan and a spouse’s plan).

2) promotion of preventive health, or wellness, programs
a) quitting smoking
are popular inclusions
b) increased interest in healthier food in cafeterias and vending machines, on-site
physical fitness facilities, and early screening to identify possible health problems before they become serious

Question 19

1. A review of physical fitness programs found ___?
2. There is a link between workforce
   health and productivity improvement strategies (including wellness programs) and _____?

Answer 19

1. fitness led to better mental health and improved resistance to stress; there was also some
   evidence of increased productivity and commitment, as well as decreased absenteeism and turnover
2. strong human capital and
   financial results

Question 20

What were the most commonly offered wellness

initiatives by employers?

Answer 20

EAP initiatives & first aid/CPR courses

Question 21

Vision care dates back only to the ____ contract between the Auto Workers and the Big Three automakers

Answer 21

1976

Most plans are non-contributory and cover part
or all of the costs of eye examinations, lenses, frames, and contact lenses.

Question 22

1. The rate of employee absence from work due to sickness has been slowly but steadily ______ in Canada
2. Short-term disability plans
3. How much is paid?
4. when is it considered long-term disability?

Answer 22

1. increasing
2. provide a continuation
   of all or part of an employee’s earnings when the employee is absent from work due to an illness or injury that is not work
   related (medical certificate is required if the absence extends beyond two or three days)
3. typically
   provide full pay for some period of time (often two or three weeks) and then gradually reduce the percentage of earnings paid
   as the period of absence lengthens
4. long-term disability (often after 26 weeks of absence)

Question 23

Long-term disability plans

When do they begin & end?

How much are paid and taxable?

Answer 23

provide income protection due to long-term illness or injury that is not work related
(work-related injuries are covered by Workers’ Compensation benefits).

begin after 26 weeks of disability and continue to age 65 (when pension plan benefits begin) or for life.

from 50 to 75 percent
of the employee’s base pay

not taxable if the employee pays the full cost of the plan (any employer contributions
result in taxable benefits for the disabled employee).

Question 24

long-term disability claims in Canada is ______ sharply

fastest growing disabilities

% of mental health long-term claims

% of mental health short-term claims

% of front-line managers w/mental health issue

So, now what?

Answer 24

rising

Psychiatric disabilities are the fastest growing
- depression is most common

Mental health issues are the leading cause of both long and short-term disability claims in Canada (72 percent and 82 percent, respectively).

44 percent of employees and front-line managers have experienced a mental health issue

disability management programs with a goal of returning disabled employees safely back
to work are becoming a priority in many organizations

Question 25

4 types of Pay for Time Not Worked

Answer 25

1. Paid rest periods, lunch periods, wash-up time, travel time, clothes-change time, and get-ready time benefits
2. Paid vacations
3. Paid holidays (statutory and other)
4. Other (jury duty allowances, bereavement pay, paid personal leave, paid time for community volunteer work)

pay for time
not worked continues to be a high-demand benefit

Question 26

employee assistance plan (EAP)

Answer 26

formal employer program that provides employees with confidential counselling
and/or treatment programs for problems such as mental health issues, marital/family problems, work/career stress, legal
problems, and substance abuse.

particularly important for:
- suffer workplace
trauma ranging from harassment to physical assault

proactive way to reduce absenteeism and disability costs

percentage of employees using EAPs is difficult to determine
due to confidentiality, but it is estimated to be on the order of 6 to 7 percent

Question 27

Childcare Services

Answer 27

resource and referral services, programs for sick children or
emergency childcare, and onsite day care centres

Emergency
childcare services are generally offered either at onsite centres or centres near the workplace, or through company-paid
babysitters.

Question 28

eldercare assistance

Answer 28

provide counselling and referral services

Question 29

Why was there a gradual growth up to 30% of ERs offering flexible benefit plans?

What is it?

What are 3 plans?

Answer 29

Administrative concerns about employee choice, and planning issues related to cost and competitor offerings

employees are allotted a fixed amount of money and permitted to spend that amount in the purchase of benefit options

1: completely flexible,
2: “core” benefits (such as basic life insurance) be included,
with the remainder being the employee’s choice.
3: different modules (packages) of benefits that
employees choose from.

Question 30

Why was there an increased

adoption of flexible benefits over the past decade?

Answer 30

1. employers consider that the advantages far outweigh the disadvantages
2. the cost savings from flexible benefits as a primary motivation
3. offer in response to cost pressures related to the increasing diversity of the workforce
4. increase employee awareness of the true costs of benefits and, therefore, increase employee
   recognition of benefits value

Question 31

5 advantages of flexible benefits programs

3 disadvantages

Answer 31

ADVANTAGES
1. Employees choose packages that best satisfy their unique needs.
2. Flexible benefits help firms meet the changing needs of a changing workforce.
3. Increased involvement of employees and families improves understanding of benefits.
4. Flexible plans make introduction of new benefits less costly. The new option is added merely
as one among a wide variety of elements from which to choose.
5. Cost containment: The employer sets a dollar maximum, and the employee chooses within that
constraint.

Disadvantages
1. Employees make bad choices and find themselves not covered for predictable emergencies.
2. Administrative burdens and expenses increase.
3. Adverse selection: Employees pick only benefits they will use. The subsequent high benefit
utilization increases costs.