MGI 301 Lecture Notes - Lecture 13: Full-Time Equivalent, Health Education, Ordinary Income
20 Jun 2018
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How Companies Increase Total Compensation
Employee Benefits
Introduction
Average cost of benefits is about 31.3% of total compensation package
Benefits are unique because:
omore regulation of benefits than direct pay
oalmost obligatory for employers to provide
ocomplex for employees to understand
oEmployers pass health care cost increases on to employees
Benefits Programs
Social Security
Social Security provides old-age insurance, unemployment insurance, survivors'
insurance, disability insurance, hospital insurance and supplementary medical insurance
oSocial Security retirement benefits free from federal tax and state tax in all but
13 states (CO, CT, KS, MN, MO, MT, NE, NM, ND, RI, UT, VT, WV)
oFull benefits begin at age 66 or reduced benefit at 62
Social Security provides old-age insurance, unemployment insurance, survivors
Unemployment Insurance
Objectives
oOffset lost income during involuntary unemployment
oHelp unemployed workers find new jobs
oProvide incentive for employers to stabilize employment
oPreserve investments in skills by providing workers with income during
short-term layoffs
Unemployed workers eligible
oWorked steadily in past (usually 52 weeks)
oAvailable and actively seeking work
oWere not discharged for cause
oDid not quit voluntarily
oNot out of work because of a labor dispute
Worker’s Compensation
Covers job-related injuries and death
Covers families of workers who accidentally die on job
Covers 90% of U.S. workers
Categories of Benefits
oDisability income, medical care, death benefits, rehab
Reducing claims
oImprove safety, hold managers accountable, monitor employee treatment
Private Group Insurance
Offered at employer’s discretion; not legally required
Types: medical and disability insurance
oMedical is most important so most orgs offer to FT employees
find more resources at oneclass.com
find more resources at oneclass.com
oDisability includes short-term and long-term plans
Group rates lower because of economies of scale, ability to pool risks and greater bargaining
power of a group
Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to permit
employees to extend health insurance coverage at group rates for up to 36 months following a
“qualifying event”
Employer-Sponsored Retirement Plans
Possible benefits of plans include:
osavings directly deducted from your paycheck
otax breaks
oin some cases, an employer matching of your contributions (aka free money!)
Most common include
o401(k) plan
oDefined benefit pension plan
o403(b) plan
Defined Benefit Pension Plan
Known as traditional retirement plans
Most common type of employer-sponsored retirement plan, until 1970s but today is rare;
replaced by defined contribution plans
Employee receives fixed monthly benefit at retirement and will not be responsible to make any
contributions to the plan
All contributions supplied by the employer, who bases the monthly benefit on employee’s
income and years of service
All investment decisions made by the employer, not employee
Plan is entirely administered by employer, so employee has no control over the funds upon
reaching retirement age
Defined Benefit Pension Plan
Known as traditional retirement plans
Most common type of employer-sponsored retirement plan, until 1970s but today is rare;
replaced by defined contribution plans
Employee receives fixed monthly benefit at retirement and will not be responsible to make any
contributions to the plan
All contributions supplied by the employer, who bases the monthly benefit on employee’s
income and years of service
All investment decisions made by the employer, not employee
Plan is entirely administered by employer, so employee has no control over the funds upon
reaching retirement age
401(k) Plan
Most common employer-sponsored retirement plan today primarily offered by large, for-profit
businesses
Is a defined contribution plan funded primarily by employee but often includes at least partial
employer match
find more resources at oneclass.com
find more resources at oneclass.com
