Noe Chapter 13 Providing Employee Benefits Employee Benefits compensation in forms other than cash Legally Required Benefits 1 Social Security the federal Old Age Survivors Disability and Health Insurance program which combines old age retirement insurance survivor s insurance disability insurance hospital insurance Medicare part A and supplemental medial insurance Medicare part B for the elderly Employers and employees share the cost through a payroll tax 2 Unemployment Insurance a federally mandated program to minimize the hardships of unemployment through payments to unemployed workers help in finding new jobs and incentives to stabilize employment Most of the funding comes from federal and state taxes on employers Tax imposed on employer depends on experience rating the number of employees a company has laid off in the past and the cost of providing them with unemployment benefits 3 Workers Compensation state programs that provide benefits to workers who suffer work related injuries or illnesses or to their survivors 4 Family and Medical Leave Act FMLA federal law requiring organizations with 50 or more employees to provide up to 12 weeks of unpaid leave after childbirth or adoption to care for a seriously ill family member or for an employee s own serious illness or to take care of urgent needs that arise when a spouse child or parent in the National Guard or Reserve is called to active duty 5 Health Care Benefits Patient Protection and Affordable Care Act health care reform law passed in 2010 that includes incentives and penalties for employers providing health insurance as a benefit Optional Benefits Programs 1 Paid Leave vacations holidays sick leave 2 Group Insurance a Consolidated Omnibus Budget Reconciliation Act COBRA federal law that requires employers to permit employees or their dependents to extend their health insurance coverage at group rates for up to 36 months following a qualifying event such as a layoff reduction in hours or the employee s death b Health Maintenance Organization HMO a health care plan that requires patients to receive their medical care from the HMO s health care professionals who are often paid a flat salary and provide all services on a prepaid basis c Preferred Provider Organization PPO a health care plan that contracts with health care professionals to provide services at a reduced fee and gives patients financial incentives to use network providers d Flexible Spending Account employee controlled pretax earnings set aside to pay for certain eligible expenses such as health care expenses during the same year e Employee wellness program a set of communications activities and facilities designed to change health related behaviors in was that reduce health risks Life Insurance f g Disability Insurance i Short Term Disability Insurance insurance that pays a percentage of a disabled employee s salary as benefits to the employee for 6 months or less ii Long Term Disability Insurance insurance that pays a percentage of a disabled employee s salary after an initial period and potentially for the rest of the employee s life h Long Term Care Insurance 3 Retirement Plans Contributory Plan retirement plan funded by contributions from the employer and employee Noncontribution Plan retirement plan funded entirely by employer a Defined Benefit Plan Pension plan that guarantees a specified level of retirement income i Employee Retirement Income Security ACT ERISA federal law that increased the responsibility of pension plan trustees to protect retirees established certain rights related to vesting and portability and created the Pension Benefit Guarantee Corporation ii Pension Benefit Guarantee Corporation PBGC Federal agency that insures retirement benefits and guarantees retirees a basic benefit if the employer experiences financial difficulties b Defined Contribution Plan Retirement Plan in which the employer set up an individual account for each employee and specifies the size of the investment into that account i 401K employees contribute a percentage of their earnings and employers may make matching contributions The amount employees contribute is not taxed as part of their income until they receive it from the plan IRA ii iii Roth IRAs c Cash Balance Plans retirement plan in which the employer sets up an individual account for each employee and contributes a percentage of the employee s salary the account earns interest at a predefined rate Vesting Rights guarantee that when employees become participants in a pension plan and work a specified number of years they will receive a pension at retirement age regardless of whether they remained with the employer Summary Plan Description SPD Report that describes a pension plan s funding eligibility requirements risks and other details Cafeteria Style Plan a benefits plan that offers employees a set of alternatives from which they can choose the types and amounts of benefits they want
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