Employee Benefits
TCHRA
2014
Larry Morgan, SPHR, GPHR, MAIR
Total Rewards
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Compensation and Benefits
19% PHR
13% SPHR
Compensation is “direct”
Benefits are considered “indirect
compensation”
Agenda
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Review employee benefits
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History
Benefit planning and assessment
Legal, tax and regulatory issues
Plan design issues
Cost
Employee communications
Identify items most likely to appear on
exam
A Total Compensation System
Total compensation
Direct
compensation
Pay systems
+
Indirect
compensation
Benefit programs
Indirect compensation
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Designed to
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Attract (limited value)
Retain
Improve productivity, work quality, and
competitiveness
Protect employee/family physical and
financial well being
Tax favorable treatment
Must be affordable for employers and
attractive to employee
Objectives of a Total Compensation
System
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Compatible with organizational mission,
values and strategy
Compatible with corporate culture
Appropriate for the workforce
Attract and retain talent
Externally equitable
Internally equitable
Easy to communicate and understand
Cost effective
Legally compliant
Conflicts
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Employees want everything at lowest
costs
Employers want to control expenses
Government want revenues
Burden on private employers / citizens
vs. federal/state government programs
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Medicare/ Medicaid vs. private health
insurance
Social security vs. pension, 401k/403b and
savings
More on conflict
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Tax Code and Department of Labor define
balance between conflicting priorities
“Qualified plan” definition
If not “qualified”, the employer must delay
taking a deduction on the expense
Plans cannot “favor” highly compensated
employees (HCE), owners, officers, etc.
Definition of HCE varies by benefit plan
Total Compensation and the Organizational Life
Cycle
Introduction
Growth
Maturity
Decline
Wages
and
salaries
Competitive
but
conservative
Moderate
At or above
market
Pressure to
reduce
Incentives
Stock
possibilities
Bonuses tied
to
objectives,
stock
options
Bonuses,
incentive
plans, stock
options
Reduced
bonuses, costsaving
incentives
Benefits
Basic
Moderate,
with limited
executive
perks
Comprehensive, with
expanded
executive
perks
Looking to limit
benefit costs,
“frozen”
executive perks
A brief history of Benefits
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Societal issues drive changes
Early 1900’s saw few employee benefits
1930’s
1940’s and 1950’s
1970’s
1990’s
Competitive Marketplace
Benefits as “hidden paycheck”
Conducting a Benefit Needs Assessment
Review organizational
strategy
Review current
benefits
Conduct gap analysis
Review compensation
philosophy
Review employee
needs
The purpose of a gap analysis is to
A. determine which employees are
underinsured.
B. revise benefits that are not
meeting employee or
organizational needs.
C. eliminate benefits that are the
most costly.
D. ensure that all employees receive
the same benefits.
Types of Benefits
1. Mandated
2. Voluntary
Mandated
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COBRA
FMLA
FUTA
SUTA
Workers comp
Social Security
FICA
Medicare
Voluntary (Optional) Benefits
Health and Welfare
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Health care
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Dental
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Vision
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Section 125
Other
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Tuition
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Discounts
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Training
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Legal
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EAP
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Memberships
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Publications
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Cell phone
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Training
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Retirement
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Pension
Defined Benefit
Defined Contribution
Retiree Medical
Perquisites
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Car
Computer
Home security
Physical
First class air
Financial planning
Legal
Paid Time Off
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Sick leave
Vacation
Holidays
PTO
A closer look at specific
Benefit Programs
COBRA Regulations
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Update general and
qualifying event notices.
Provide an initial notice
within 90 days of the date
an employee/spouse is
covered under the plan
and mail the summary
plan description to the
residence.
Establish reasonable
notification procedures
and communicate them
to all employees.
• Notify all employees who
inform the company of a
qualifying event within 14
days even if they do not
qualify for COBRA.
• Notify individuals whose
coverage ends before the
maximum continuous
coverage period allowed.
Consolidated Omnibus Budget
Reconciliation Act (COBRA)
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Provides continuous group medical
coverage after a qualifying event.
Type of event determines the length of
coverage (18 to 36 months).
Voluntary, involuntary, reduction of
hours, divorce, age attainment
Employer can charge actual cost plus an
administration fee.
Initial notice.
Qualifying event notice.
COBRA timeframe
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Termination for gross misconduct – O months
Other termination (voluntary or involuntary) – 18 months
Layoff or reduction in hours – 18 months
Disability – 29 months*
Divorce or death of employed spouse – 36 months
Dependent child loses eligibility – 36 months**
State laws may vary
Note changes under Patient Protection and Affordable
Health Care Act to age 26 mandate (through calendar
year of age 26 allowed)
According to COBRA, a company with at
least 20 employees must offer
A. Health insurance to its employees.
B. Continued medical coverage to
employees terminated for gross
misconduct.
C. COBRA benefits to workers if the
company terminates its health plan.
D. COBRA benefits to spouses of
deceased workers.
Social Security
Employer pays 7.65%
Employee pays 7.65%
Two components
• Social Security 6.2%
• Medicare 1.45%
• 2013 maximum limit on SS portion is $113,700
• No limit on Medicare portion 1.45%**
• Deduction still made on 401(k)!!!
• No deduction on FSA pre-tax accounts
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** 2.35% on income over $200,000
Social Security
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Provides:
 Retirement income.
 Disability, death, and
survivor’s benefits.
To qualify:
 People must work 40
quarters, or ten years.
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Calculated as a set
percentage of salary:
 Yearly maximum limit
 Deducted from
employees’ pay
 People who work and
receive payments must
still pay in.
Social Security Retirement Benefits
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Retirement income:
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Depends on individual’s average earnings.
Indexes benefits to inflation.
Pays reduced benefits at age 62.
Indexes retirement age for full benefits to year
of birth.
Social Security Disability Benefits
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Are paid to workers (and eligible dependents)
under full retirement age.
Are paid when workers:
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Cannot work for at least five months.
Have an impairment that is expected to continue
for 12 months or result in death.
Start after a five-month waiting period.
Social Security Death and Survivor’s
Benefits
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Death benefits
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$255 lump-sum payment to a surviving spouse
Survivor’s benefits are paid to:
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Spouse at age 60 (50 if disabled).
Spouse caring for a child under age 16/disabled
child.
Unmarried children under age 18.
Children if disabled before age 22.
Dependent parents, age 62 or older.
Medicare
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Not dependent on
income or ability to
pay.
Employee and
employer pay a
percentage of salary;
there is no yearly
maximum.
All individuals are
eligible at age 65.
Employer benefits are
primary for employees
65 and over who are
working.
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Part A (hospitalization)
is mandatory.
Part B (medical
insurance) is optional.
Managed care option.
Part C (Medicare
Advantage Plans)
allows participation in
different health care
plans such as HMO and
PPO
Part D (prescription
drugs)
Medicare Part D
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Adds an outpatient prescription drug benefit.
Benefits include:
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Annual deductible of $325.
Coverage gap between $2,970 and $4,750.
Catastrophic level of coverage reached after
$6,734 in out of pocket.
Unemployment Insurance
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State run program
Mandatory benefit funded primarily by
employers.
Eligibility in most states includes:
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Being available and actively seeking work.
Not refusing suitable employment.
Not having left job voluntarily.
Not being unemployed because of labor dispute.
Not being terminated for misconduct.
Working a minimum number of weeks.
Duration: 26 weeks
Note: Federal program may extend this
during periods of high unemployment with
supplemental unemployment benefits (SUB)
Workers’ Compensation
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State insurance paid by the employer.
Protects workers in case of a work-related
injury or disease.
Experience-rated; employers who have a
high number of claims pay more.
Employers assume all costs, regardless
of who is to blame.
Workers’ Compensation
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Benefits include:
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Medical care.
Disability income.
Rehabilitation.
Death benefits.
Compensation is tied to fixed schedules.
States regulate workers’ compensation.
An employee drops a cup of coffee on the
shop floor, slips, and breaks a leg. The cost
of the injury will be covered
A. by the employer
B. by the employee
C. jointly by the employer and employee
D. by Medicare
Qualified vs. Non-qualified
benefits
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Qualified
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Meets IRS and ERISA standards
Employer may take immediate tax deduction
Non-qualified
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Typically used for executives
Keeps executives “whole”
Employer cannot take deduction until it is taxable to
the employee
Employee Retirement Income
Security Act (ERISA)
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Establishes standards for taxfavored status of ALL benefits.
Allows organization to deduct
cost.
Allows employee tax favored
status
Minimum eligibility standards
Sets standards for retirement
plans.
Operate plans for exclusive
benefit of participants and
their beneficiaries.
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Sets up the Pension Benefit
Guaranty Corporation (PBGC).
Defines minimum vesting
schedules for cliff and graded
vesting.
Sets procedures for claims
administration and appeals of
adverse determinations.
Establishes prudent person
rule.
Characteristics of Qualified
Plans
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Under ERISA, plans must:
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Be in writing and be communicated to
employees.
Be established for exclusive benefit of
employees/beneficiaries.
Satisfy rules concerning eligibility, vesting, and
funding.
Not favor officers, shareholders, or HCEs.
Prudent Person Rule- SPHR only
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Fiduciary role
Employer sponsor must follow prudent
person rule
Cannot take risks that a reasonably
knowledgeable, prudent investor would
take under similar circumstances
Retirement plans
Defined Benefit Plans
• Benefit amount
is based on a
formula.
• Employer funds
the plan and
bears the risk.
• Insured by the
PBGC.
Flat-dollar formula
Career-average
formula
Cash balance
plan
Final-pay formula
Cash Balance Plan- hybrid
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Type of defined benefit
plan
Expresses promised
benefit in terms of
hypothetical account
balance
Employer assumes
investment risks and
rewards
Is portable
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At retirement,
employees receive
either:
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Lifetime annuity
Lump sum
Defined Contribution Plans
Profit-sharing plans
• Employees and
employers pay a
specific amount per
person into the
fund.
• Benefits are
determined by fund
performance.
Money
purchase plans
ESOPs
401(k) / 403(b) plans
Other Tax-Deferred Plans
IRAs
SEPs
SIMPLE
403(b) plans
457 plans
For individuals
For self-employed individuals and
very small businesses
For employees (with contributions
and matching)
For certain tax-exempt 501(c)(3)
organizations
For employees of states, state
agencies, and political subdivisions
and certain tax-exempt
organizations
Catch up contributions
DC limit employee contributions to
$17,500 in 2013
 However, persons turning age 50 or
above to supplement IRA and
401k/403b contributions
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2013 catch up limit is $5,500
Rollovers
Unemployment Compensation Amendments
(UCA) imposes a 20% federal income tax
withholding requirement on plan rollovers unless
there is a trustee-to-trustee transfer.
Which of the following tax-deferred plans
applies to employees of colleges,
universities, and public charities?
A. SEPs
B. IRA
C. 457
D. 403(b)
Economic Growth and Tax Relief
Reconciliation Act (EGTRRA)
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Adjusts minimum vesting schedules for
employer matching contributions to defined
contribution plans.
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Three-year cliff vesting
Six-year graded vesting (20% after two years and
20% per year thereafter)
Vesting for DB Pension Plans
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Five year cliff vest or
20% after three years and 100%
after seven years
Economic Growth and Tax Relief
Reconciliation Act (EGTRRA)
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Sets permissible compensation limits—
Code Section 401(a)(17).
Sets limits on annual pensions—Code
Section 415(b).
Permits catch-up contributions for
employees age 50 and older.
Modifies distribution and rollover rules.
Nonqualified Deferred
Compensation Plans
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Provide additional benefits to key executives.
Employees defer reporting income; not
subject to the limits placed on qualified plans.
Employer contributions are not deductible.
Funds are not protected by ERISA or PBGC.
Examples: Rabbi trusts, top hat, mirror plans
and excess deferral plans
Qualified Domestic Relations
Orders (QDROs)
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Create or recognize the right of an
alternative payee to receive all or a
portion of an employee’s pension
benefits.
Orders must relate to child support,
alimony, or marital property rights and
must be made under state domestic
relations law.
Health Care
Health-Care Plans
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Indemnity (fee-for-service) plans
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Full-choice plan
Employees can go to any qualified
physician.
Fees are generated when services are
used.
Managed care plans
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Prepaid health-care plans
Physician is paid per capita (per head)
rather than for actual treatment provided.
Members enroll and pay a set monthly or
annual fee.
Types of Managed Care Plans
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HMO- Health maintenance organizations
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Group, staff, and IPA models
PPO- Preferred provider organizations
POS- Point-of-service organizations
EPO- Exclusive provider organizations
PHO- Physician hospital organizations
More than one health plan?
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Coordination of benefits apply
First the claim goes to the employee
Then, to other plans
Birthday rule
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For dependents, primary coverage is
whichever employee (parent) has birthday
first in calendar year
An employee is covered under more than one
employer-sponsored insurance plan. A health
claim requires
A. utilization review.
B. coordination of benefits.
C. establishment of out-of-pocket maximums.
D. premium sharing.
Other Health-Care Options
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Dental plans
Vision care plans
Prescription drug plans
Employee assistance programs
Alternative health care
Cancer plans
Health-Care Funding
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Fully insured
 Minimum premium
 Partially self-funded
Administrative-services-only
Third-party administrator
Self-insured
Section 105
Health insurance purchasing cooperative
Controlling Health-Care Costs
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Balance billing
Consumer Directed Health
Care
Increase deductibles
Increase co-pays
Redesign policies
Promote wellness
Employee education
Reasonable and customary
Utilization review
Nonprescription Drugs
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Nonprescription over the counter drugs
or medicines can no longer be
reimbursed through an FSA without a
doctors note.
Expenditures must be for medical care
defined as the diagnosis, cure,
mitigation, treatment, or prevention of
disease.
Health Reimbursement Accounts
(HRA)
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Employer-funded plan.
Combines a high deductible health care
plan with individual HRAs the employer
funds.
HDHP deductible levels for 2013
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Individual $1,250
Family $2,400
Plan reimburses employees for eligible and
substantiated health-care expenses.
Employees may NOT contribute on any
pretax basis.
Not portable
Health Savings Account
(HSA)
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Tax-sheltered savings
• Earnings grow tax-free
account similar to an IRA
and distributions for
that is created to pay for
qualified medical
medical expenses
expenses are tax-free.
Individual must be
• Unused funds can be
covered by a high
carried over from year to
deductible health plan
year, are portable, and
(HDHP) and must not be
can be used into
covered by any other
retirement.
non-HDHP.
Contributions can be
made by the employer,
employee, or both.
In order for the employee to gain a
favorable tax treatment from benefits
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Must comply with ERISA
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Plan document
Cannot favor highly compensated
employees
Summary plan description
Must comply with Section 125
regulations
Section 125 Plans
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Premium-only plans
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Employees receive favorable tax treatment on
benefits already offered.

NOTE CHANGES UNDER ACA
Full cafeteria plans
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Benefit credits are used to purchase benefits.
Unused credits can be cashed out.
Flexible Spending Accounts
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Flexible spending accounts
 Pretax dollars are set aside to pay for
dependent care $5000 or unreimbursed
medical expenses $2500.
Medical Spending account
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“Use-it-or-lose-it” options include Grace period of
two and one-half months at the end of the plan year
or $500 carryover
No over the counter medications
Limited use FSA for HRA plans
Domestic Partners
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If same sex couples married in state
or jurisdiction which recognizes the
marriage, favorable federal tax
treatment regardless of state of
residence.
State tax law may differ.
Opposite sex couples not
recognized, imputed income tax on
value of benefits to employee.
Key Provisions of the Patient
Protection and Affordable Care Act
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Continues to evolve
Requires employees to have coverage*
Exchange programs created
Large employer penalty delayed until 2015 (50 or
more FTE working 30 or more hours/week)
Reporting of employer and employee cost on W-2
Minimum essential coverage
Affordable coverage (individual only)
Must cover dependents to age 26
No requirement to cover spouse
Summary of Benefit Coverage statements
Additional taxation under PCORI and Transitional fees
Paid and unpaid leave plans
Paid Leave
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Paid leave for events:
 Break time
 Holiday pay
 Vacation pay
 Community service
pay
 Leave of absence
 Bereavement leave
 Volunteer projects
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Paid-time-off banks
 Paid time off is
lumped into one
account.
 Proven to be effective
at controlling
absenteeism.
Family and Medical Leave Act
(FMLA)
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Provides 12 weeks of unpaid leave for
employees to handle birth, adoption, or serious
illness of a child, spouse, parent, or the
employee.
In loco parentis
New ruling on domestic partners
Serious illness requires inpatient hospital,
hospice, or residential care, or continuing
physician care.
Military emergency exigency and caregiver leave
Modified duty (light duty) vs. same position
issues
Family and Medical Leave Act
(FMLA)
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Covers employers with 50 or more employees.
Employee must have worked at least 12 months and 1250
hours within 12 month period
Entitles employees to:
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Health benefit continuation.
Reinstatement rights.
Must treat the employee as an “active employee” while on
leave.
Employers may determine if leave is paid or unpaid
Employers may define 12 month basis
Employers must notify employee in writing of FMLA leave
status
Immediate supervisor CANNOT contact medical provider
According to the FMLA, which of the
following is true?
A.
B.
C.
D.
Employers must pay all health benefit
costs for employees on leave.
Employees must return to a job with
equivalent status, pay, and benefits.
A week containing a holiday does not
count as a full week of FMLA leave.
Employees are eligible for FMLA
leave after six months.
Income Replacement Protection
• Sick leave
• Short term disability
• Long term disability
• SSDI
Illness
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Paid time off programs
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Sick leave
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No fault plan- covers any absence
Not covered under ERISA
Common to require doctor statement after
three days
Only used for employee or family member
illness
Disability- usually a waiting period
Workers comp
Disability Coverage
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If employer provides, any income is taxable
If employee pays, any income is not taxable
Worker comp pays for job related illness or
injury
Short term generally covers continuous illness
/ injury up to six months
LTD may have same occupation clause of 2-3
years
Some plans have inflation or cost of living
escalation and waiver of premium clauses
Other benefits
Life Insurance Protection
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May be paid by employer or employee
Group-term life insurance
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First $50,000 in group life is not taxable
income
Excess group-term life insurance
Dependent group life insurance
Split-dollar plans for executives
Accidental death and dismemberment
Supplemental life
Long term care insurance
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Provides for supplemental coverage in nursing
home or at home care
In addition to Medicare levels
Premiums may be taken on pre-tax basis
Which of the following statements
about voluntary benefits is true?
A. Employers can deduct their part of a long-term
care premium from annual income taxes.
B. Group-term life insurance policies of less than
$75,000 are not taxed.
C. Employees do not have to pay taxes on
supplemental unemployment benefits.
D. Insurance provided only to executives is not
taxable
Section 529 plans
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Provides college or education savings
May be employer sponsored
Post tax, but interest is not taxable
May be transferred to other family
members
Excise tax if not used for education
Wellness
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Employers may provide incentive up to
20% of health care premium for
PARTICIPATION in wellness programs
Cannot be outcome based
Must have alternatives for persons not
able to participate
GINA concerns
HIPAA concerns
Other Benefits
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Flexible Spending Accounts
•
Non-reimbursed medical care
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Dependent care:
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$245 month limit
Tuition reimbursement (Section 127)
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Child-care services
Elder care
$5000 maximum
Transportation assistance (Section 132)
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Over the counter medications no longer covered
Employer is “at risk” if employee leaves
$5250 annual limit
Legal insurance
Severance
Which of the following items is generally
subject to federal taxation?
A. $1,000 reimbursement for a business trip
B. $300 per month for parking
C. $20 gift from a vendor
D. $1,500 for a job-related training seminar
An employer pays an FSA medical claim for $500 in
March. In April, the employee leaves the company after
setting aside only $250. What happens in this situation?
A.
B.
C.
D.
The employee must return $250 to the company.
The employer may withhold $250 from the
employee’s last paycheck.
The employee is entitled to the reimbursement as
paid.
The employee becomes ineligible for COBRA
coverage.
Executive Perquisites
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Travel upgrades
Airline lounge
Company car
Golden parachute
Golden handcuffs
Employment agreements
Physical exam
Tax preparation
Financial planning
Legal services
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SERP
Additional medical
Emergency evacuation
Country club or health club
Business expense account
Internet use
Security system
Driver
Cell phone / Smartphone
Cost of Benefits
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Benefits are very expensive
US Chamber of Commerce survey in
2009 suggests employee benefits are
44% of payroll
Employee satisfaction rises as level of
understanding increases
Employer may or may not contribute
based on type of benefit (eg. Defined
benefit pension or HRA vs. health care)
Major Legislative and
Regulatory actions
Regulatory Agencies and Programs
IRC
FASB
IRS
State
Mandates
Treasury
Dept
DOL
SEC
State
Insurance
Key laws affecting Benefits
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ADEA
COBRA
EGTERRA
ERISA
FMLA
GINA
HIPAA
IRC
Mental Health Parity
Act
OWBPA
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Patient Protection and
Affordable Care Act
PBGC
Pension Protection
Act
REA
Sarbanes Oxley
Unemployment
Compensation
Genetic Information NonDiscrimination Act (GINA)

Protects individuals from having genetic
information used:
 In employment.



To impact health plan eligibility, enrollment, or
premiums.
Limits exceptions for genetic testing to:
 Wellness programming.

Physician’s request.

Checking biological effects of toxic substances
in the workplace.
Covered under HIPAA
Health Insurance Portability and
Accountability Act (HIPAA)




Limits exclusions for preexisting conditions.
Guarantees workers leaving a job with
employer-sponsored health coverage the right
to purchase coverage on their own.
Guarantees renewability as long as premiums
are paid.
Makes health coverage portable.
Health Insurance Portability and
Accountability Act (HIPAA)

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Classifies long-term care expenses as
medical expenses.
Increases the tax deduction for medical
expenses of self-employed individuals.
Provides tax exemptions on premature IRA
withdrawals used for medical expenses.
Includes fraud and abuse provisions.
Requires employer to safeguard information
and protect against data release and identify
theft
HIPAA Privacy Rule:
Administrative Duties
•
•
•
•
Establish a system of consistently enforced
sanctions.
Keep records for six years.
Establish written contracts with third parties
who have access to protected information.
Review data protection and access
• Filing systems restricted
• Employee benefit information kept out of
personnel files
• System security
• Data encryption
HIPAA Privacy Rule:
Administrative Duties
•
•
•
•
•
•
•
•
Health Information Technology for Economic and Clinical
Health (HITECH )
Establish systems for tracking protected health
information.
Safeguards for protecting private information
PHI and ePHI definition• Includes diagnosis, medical treatment and payment
• Safeguards DOB, SS, sharing of health related
information
• Other reasons require release of information
Designate a privacy officer.
Establish a complaint mechanism.
Ensure that individuals cannot waive their rights.
Provide training to the workforce.
Mental Health Parity Act
(MHPA)
Employers are not mandated to have mental
health coverage
 Requires same dollar limits for mental health,
substance abuse and medical benefits
 Copays and deductibles must be the same
 Annual and lifetime limits must be the same
 . Note preventative care requirement for
depression and eating disorders as part of
Health Care Reform Act

Older Worker’s Benefit Protection Act
(OWBPA)
•
•
•
Prohibits discrimination in employee
benefits and includes specific
requirements for waivers of claims.
Prohibits older workers from waiving
their ADEA rights unless they are
given 21 days to consider the
agreement and consult an attorney;
in group terminations, workers must
receive 45 days.
Comply with ADEA
Omnibus Budget Reconciliation
Act (OBRA)
Reduced compensation limits in qualified
retirement programs.
 Triggered increased activity in
nonqualified retirement programs.

Pension Protection Act
•
PPA made provisions of EGTRRA permanent
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Catch up contributions
SIMPLE IRA and 401(k)
Roth 401K and 403b
Accelerating vesting schedules for DB and DC
plans


•
20% minimum at two years, 20% each year thereafter
and 100% at end of six years (by year seven) OR
Cliff vest at three years
Automatic enrollment into a 401k plan with
default contribution levels
Retirement Equity Act (REA)


Provides legal protections for spousal
beneficiaries of retirement plan participants.
Requires written spousal consent for:



Changes in retirement plan distribution
elections.
Changes in spousal beneficiary designations.
In-service withdrawals.
Sarbanes-Oxley Act (SOX)

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Requires administrators to notify plan
participants of blackout periods for 401(k)
or defined contribution plans.
Protects employees who report violations
of federal security laws or fraud against
shareholders.
Administered by DOL’s Employee
Benefits Security Administration.
Securities and Exchange Act


Affects company stock option and
purchase plans.
Requires:


Registration of all securities sold.
Disclosure and restriction of “insider”
trading.

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
Black out periods
Special filings
Regulates discounts on stock purchase by
employees
Blackout Notice Requirements

Must be done in writing 30 days in
advance and must contain:




Reasons for blackout.
Identification of affected rights and
investments.
Expected beginning date and length of
blackout.
Statement that individuals should evaluate
the appropriateness of their current
investment decisions.
Uniformed Services Employment and
Reemployment Rights Act (USERRA)





Addresses employer’s obligation to employees on
active military duty.
Prohibits discrimination in employment, job
retention, and advancement (now included within
EEOC including “hostile work environment”).
Allows military leave for up to five years with vesting
toward retirement and paid time off.
Requires employees to give notice of their need for
leave.
Emergency exigency
Uniformed Services Employment and
Reemployment Rights Act (USERRA)


Requires service members to notify employers
of their intention to return to work.
Requires employers to make health coverage
available to employees and covered
dependents at the employees’ expense
(including a 2% administrative fee).

Health care duration is for 24 months or length
of military service, whichever is less.
According to USERRA, employees called
up for active duty are entitled to
A. higher limits for salary deferral contributions.
B. credited service for retirement plan purposes.
C. lower copayments and deductibles for
continued family medical benefits.
D. an early vesting schedule for retirement
benefits.
Some states have additional rights
(Not on exam)
•
Minnesota Parental Leave Act
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•
Minnesota COBRA
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•
•
•
Similar to FMLA
20 or more employees
Six weeks
Two or more employees
Shorter time frames
If divorced or disabled, longer extensions
Minnesota School Conference Leave
Employee sick leave allowed for relatives
Minnesota Bone Marrow Leave
Federal vs. State Laws




Generally, federal law supersedes state
laws
Not necessarily true with Employee
Rights
Most favorable given to employee
Examples:


Minimum wage
COBRA and state health insurance
continuation
Tax and Accounting Treatment

FASB decides how financial firms should
report financial information to shareholders.


Requires companies to treat employee stock
options as an expense on financial
statements beginning in 2005.
IRS implements and interprets tax
legislation:


Revenue rulings
Private-letter rulings
International issues – SPHR
only
•
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•
Standardization vs. localization
Culture
Home vs. host country expenses
Competitive labor market
Nationalized programs
Laws and regulations
Collective bargaining
Paid time off
Maternity / paternity
Special allowances
Taxation
Expatriation and repatriation issues
Totalization agreements
Evaluating the Total Compensation
System

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Is it in compliance?
Is it compatible with the mission and
strategy?
Does it fit the corporate culture?
Is it internally equitable?
Is it externally competitive?
Do employees understand the programs?
Do employees understand the value?
Required Communication

ERISA requires:



Summaries of the plan description, annual report,
and material modifications.
Filing Form 5500 with the DOL.
Other required communications include:

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COBRA Notice
CHIPs
ACA notifications re: grandfather status, dependents
covered to age 26, well woman care, etc.
HIPAA privacy notice
Continuation of benefits’ notice.
Explanation of stock options (SEC regulation).
Posting of all required federal and state employment
laws such as FMLA, GINA, etc.
Other Employee Communication

Communication plans


Written compensation philosophy, policies,
practices, procedures, and announcements,
as well as open enrollment periods, benefit
fairs, etc.
Direct communication

Confidential communication with HR or a
manager
Trends
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Health Care Reform Act providing greater
coverage and controls
Continued movement toward cost
containment
Consumer Driven Health Care
Employee education and awareness
Total reward statements
Baby boomers will be influential
Trend away from defined benefit plans
and retiree medical
Key Terms to know
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ADEA
Cliff vesting
COBRA
Consumer directed
health care
Coordination of benefits
Copayment
Deferred compensation
Defined benefit plan
Defined contribution
plan
ERISA
ESOP
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Excess deferral
FMLA
FASB
529 plan
Flexible spending
account
401(k) plan
403(b) plan
457 plan
Full cafeteria plan
Fully insured plan
Terms, continued

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GINA
Golden handcuffs
Golden parachute
Graded vesting
Group term life
insurance
HIPAA
Health insurance
purchasing cooperative
HMO
HRA
HSA
Highly compensated
employee

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In loco parentis
Indemnity health care
plans
Indirect compensation
IRA
International social
security agreements
(Totalization agreements)
Involuntary deductions
Lifetime maximum
benefit
Long term care insurance
Long term disability
Terms, continued

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
Managed care
Medicare
Medicare carve out
Mental Health Parity Act
Modified duty program
Money purchase plan
Non-duplication of
benefits
Non-qualified deferred
compensation
Older Worker Benefit
Protection Act
Out of pocket maximum

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Paid time off bank
Parachutes
PBGC
Pension Protection Act
Perquisites
Point of service
organization
Preexisting condition
PPO
Premium only plan
Profit sharing plan
Terms, continued

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Qualified plan
Qualified domestic
relations orders
Qualifying event
Rabbi trust
Reasonable and
customary
Roth 401(k)/403(b) plans
Roth IRA
SOX
SIMPLE
Section 125 plans
SEC
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Serious health condition
Severance
Short term disability
Sick leave
SEP
Social Security
Stop loss coverage
Supplemental
unemployment benefits
Top hat plan
Total rewards
Totalization agreements
Terms, continued

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
Unemployment
compensation
USERRA
Utilization review
Vesting
Voluntary deductions
Whistleblower
Work opportunity tax
credit
Work related disability
Workers compensation
Contact information
Larry Morgan
952-210-0742
Larry.morgan@orionhr.com