Transcript Chapter Ten - Florida International University

Chapter Ten
Legally Required Benefits
Utility of Employee Benefits
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Promote social stability & welfare.
Allow retirees, disabled, & others to participate in the
economy as consumer of products and services.
Provide a cushion in times of economic hardship,
thereby providing social stability.
Social security and other benefits can be traced to
the Great Depression & the traumatic experience of
dealing with large masses of displaced workers.
Foster employee loyalty and well-being, thereby
facilitating a stable workforce.
The “Pyramid” Underlying Social Security
Benefits
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Assumption: the number of retirees will always be
smaller than the number of active workers, and
therefore withdrawing a bit of money from each active
worker will be sufficient to support retirees.
Problem: This assumes steady population growth:
retirees
active workers
Workers per retiree projections
Workers per retiree
3.3 workers per retiree
3
2
1.7 workers per retiree
1
2003
Year
Source: Fortune Magazine, November 2003 issue
2052
Example of Annual Benefits Cost Distribution
(Employer costs = salary + 29.28% of employee’s salary)
Benefit
Employer
Employee
Health Plan
$3,407.16
$632.75
Life and AD&D insurance
$604.80
$332.83
Short & long term disability
$387.78
$0.00
Savings plan contribution
$4,950.00
$4,375.00
Social Security
$3,633.75
$3,633.75
Unemployment
$56.00
$0.00
Workers compensation
$135.00
$0.00
Total benefits cost
$13,174.49
$8,974.33
Base annual salary
$45,000.00
Total annual compensation
$58,174.49
1-4
Reporting Benefits Cost-Sharing Rates
-Benefit Costs-
59.5% employer
40.5% employee
1-4
Reporting Benefits Cost-Sharing Rates
-Salary & Benefit Costs-
84.57%
employer
15.43%
employee
1-4
De-statization of employee benefits
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Foster individual retirement plans (401k, etc.) that can
supplement social security payments (which are unlikely to keep
up with the cost of living).
Government role: no longer to provide benefits but to promote
individual savings: Economic Growth & Tax Relief Reconciliatory
Act (EGTRRA) (signed by President Bush in June 2001) :
» Increased employee contribution limits
» Catch-up contributions for workers 50 and older ($1,000 a year until
reaching $5,000 in 2006)
» Tax credit on contributions up to $2,000 to retirement plans and
IRAs
» Speeded-up vesting.
» New contributions can be rolled over to ANY plan type, not just a
same-type plan or IRA.
Legally Required Benefits
Social Security Act of 1935: Great Depression
Unemployment insurance (State administered)
Federal Unemployment Tax Act (6.2% of the first $7,000 earned
by each employee, but rate depends on the company’s prior
experience with unemployment).
Eligibility criteria:
»1. Not have left a job voluntarily
»2. Be able and available to work
»3. Be actively seeking work
»4. Not have refused an offer of suitable employment
»5. Not be unemployed because of a labor dispute (exception in a
few states)
»6. Not have had employment terminated because of gross
violations of conduct within the workplace
Table 10-2
Unemployment Benefit Amounts for Selected States
STATE
WEEKLY BEN.
MAXIMUM TOTAL
AMOUNT
BENEFIT INCLUDING
(WBA)
EXTENDED BENEFITS
Alabama
California
Florida
$22 min.,
$180 max.
eff. 7/3/94
$40 min.,
$230 max.
Lesser of 26 times
WBA or 1/3 base
period wages
26 times WBA, up
to 1/2 base period
wages
$10 min.,
$250 max.
1/2 of weeks
worked in base
period
MINIMUM BASE
PERIOD AND
WAITING
QUALIFYING WAGES PERIOD
1 1/2 items high
quarter wages; at
least $774.02
$1,300 in high
quarter, or $900 in
high quarter and
total base period
wages of 1 1/4 times
high quarter wages
20 times claimant’s
average weekly
wages (at least $20)
None
One
week
One
week
Legally Required Benefits
Social Security Act of 1935: OASDI
(Federally administered)
Old Age: based on quarters of coverage; fully
insured when they earn credit for 40 quarters (10
years); benefits will be permanently reduced if
elected prior to age 65 (a sliding scale in the
future; e.g., 67 in you were born in 1960, older if
you were born later), eligible for partial benefits at
age 62.
Survivor: Dependent becomes eligible if deceased
was fully insured.
Disability Benefits: fully insured; disability must
endure for at least 1 year or expected to result in
death.
Health Insurance
(Medicare) Serves nearly all US citizens aged 65 or older
» Compulsory hospitalization insurance (Part A)
Covers both inpatient and outpatient hospital services,
but no physician’s fees, custodial care, routine
examinations, cosmetic surgery.
» Voluntary supplementary medical insurance coverage
(Part B)
Covers physician services and some others not covered by
Part A (e.g., outpatient hospital services).
» Prescription Drug Coverage (Part D). Effective January
1st, 2006. Beneficiaries choose among three options:
– Remain under the traditional fee-for-service Medicare program
w/o drug coverage
– Purchase additional coverage via a private prescription plan.
– Switch to private health care plan offering health services and
prescription coverage (Medicare advantage).
– Part D will require Medicare to compete against private plans
starting in 2010.
Workers’Compensation
» State-regulated.
» Protects employers, who accept
accepting liability without fault.
» Provide reasonable income and
medical benefits in case of injury,
occupational disease, death claims
» Importance of educational and
preventive programs (safety training,
audits, inspections).
Table 10-4
Primary Obligations of State Workers’
Compensation Programs
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1. Take initiative in administering the law.
2. Continually review performance of the program and be willing
to change procedures and to request the state legislature to
make needed amendments.
3. Advise workers of their rights and obligations and assure that
they receive the benefits to which they are entitled.
4. Apprise employers and insurance carriers of their rights and
obligations; inform other parties in the delivery system such as
health care providers of their obligations and privileges.
5. Assist in voluntary and informal resolution of disputes that are
consistent with law.
6. Adjudicate claims that cannot be resolved voluntarily.
Source: J.V. Nackley, Primer on workers’ compensation (Washington, DC: The Bureau of National Affairs, 1989).
Discussion Question 10-1
According to a Florida Workers’Comp Judge, almost
half of the workers’ comp claims are due to
insurance adjusters’ errors. These are often caused
by insufficient communication between adjuster and
injured employee, which increases litigation.
Employers have also difficulty finding good doctors
who would accept workers comp patients (hospitals
have ended up taking the larger share of medical
expenses) –A new fee schedule that follows
Medicare’s should fix this.
Please research potential solutions to these issues
on the internet.
Family & Medical Leave Act of 1993
Due to:
» Growth in elderly population needing care.
» Prevalence of two-income families.
» Changing role of men regarding child care.
12 UNPAID work weeks of leave during any 12-month
period because of:
» Birth or adoption
» Serious health condition of spouse, child, parent, or
self.
Scenario:
FMLA (Family and Medical Leave Act)
ABC Corporation Inc. is a company that has a labor force of 55
employees and is managed by Chris. Maria has been employed at ABC
for about two years now. She is pregnant and is expecting to give
birth within the next month.
Questions:
1.
a.
b.
c.
d.
Which of the following are true?
Maria is entitled to 12 weeks of unpaid leave.
Because she is pregnant and therefore is entitled to leave because
the FMLA provides leave for the birth and care of a newborn child.
She has been working at ABC for more than a year which is a
requirement of the FMLA.
All of the above are true.
See next slide for answer
FMLA (Family and Medical Leave Act)
Correct Answer:
d.
All of the above all true.
Explanation:
Maria is entitled to leave because she has been working at ABC for
more than a year. An employer must grant an eligible employee up to
a total of 12 workweeks of unpaid leave in a 12-month period for any
of the possible reasons 1) the birth and care of a newborn child 2) care
for an adopted child 3) care for an immediate family member with a
serious health condition and 4) when the employee is unable to work
because of a serious health condition.
FMLA (Family and Medical Leave Act)
Scenario:
Janet works at XYZ corporation Inc., which employs 20 people. She only
started there six months ago. His brother-in-law has been diagnosed with a
serious illness and needs caretaking.
Why is Janet not entitled to leave under the FMLA?
a. Janet has only been working at XYZ for 6 months, which is less than
the one year requirement.
b. XYZ corporation only employs 20 people.
c. Her brother-in-law does not qualify as an immediate family
member.
d. All of the above all valid reasons.
See next slide for answer
FMLA (Family and Medical Leave Act)
Correct Answer:
All of the above all valid reasons.
Explanation:
Janet has to be employed for more than a year to be entitled to
family and medical leave. Only a covered employer can grant leave to
an eligible employee. The company must have 50 or more employees
who work within a 75-mile radius (smaller companies are exempt
because the leave is thought to impose a heavy burden on small
businesses). An employee may request leave to care for an immediate
family member such as a spouse, child or parent with a serious health
condition. A brother-in-law (or even a brother or a sister if they are
not the employee’s dependents) does not qualify as an immediate
family member.
Scenario:
FMLA (Family and Medical Leave Act)
John has been working at the ABC corporation for about three
years. His spouse has a chronic, serious health condition and
he spends a lot of time taking care of her during the year. This
year he has already taken more than 12 weeks for sick,
personal and vacation leave. He is requesting an additional 12
weeks family and medical leave.
Question:
Is John entitled to leave under the FMLA?
Yes.
No.
See next slide for answer
FMLA (Family and Medical Leave Act)
Correct Answer:
b.No.
Explanation:
Some employers require employees to first use their paid leave for
family and medical leave. In addition, employers may require the
employee to substitute accrued paid leave for FMLA leave and
therefore count that paid leave as part of their 12 weeks of family
leave.
FMLA (Family and Medical Leave Act)
Summary of FMLA:
1.
It provides certain employees with up to 12 workweeks of unpaid, job-protected
leave a year
2.
All public and private employers who have 50 or more employees who work at a
location within a 75-mile radius are required to provide FMLA leave
3.
Eligible employees are those who have worked for the employer a minimum of one
year
4.
Eligible employee are entitled to Family and Medical leave for one of following
reasons a) the birth and care of a newborn child b) care of an newly adopted child
c) care for an immediate family member (spouse, child or parent — but not a parent
"in-law") with a serious health condition and d) when the employee is unable to work
because of a serious health condition.
5.
Employers may require employees to first use their paid leave for family and
medical leave
Discussion Question 10-2
Do some on-line or library research on the kinds of
programs that employers use to control workers’ comp
costs. Identify activities involved, their intended
outcomes, and their potential pitfalls.
Program Activities
Outcomes Pitfalls
(What kind
(What activities &
of program) resources are part
of the program)
(How does the
program
reduce worker
comp costs?)
(What issues
may endanger
the success of
the program?)