Managing employee benefits

1. Managing employee benefits • An indirect reward given to an employee or group of employees for organizational membership. • Health insurance, paid leave, retirement, etc.

2. Benefits and HR strategy • Benefits as competitive advantage • Workforce attraction and retention • Benefits management • Benefits communication • Global benefits: some countries have national pensions and/or insurance plans • All those days off in other countries! • Role of benefits for workforce attraction and retention: baby boomers want retirement and young want portable and flexible benefits • Most benefits are not taxed

3. Benefits management and communications • Benefits design • Benefits administration • Technology administration • Benefits measurement • Cost control efforts • Communication to employees • Part time employee benefits: if they get them, it depends on how much they work • Flexible benefits: program that allows employees to select the benefits they prefer from groups of benefits established by the employer/cafeteria plans • Adverse selection: only high risk employees select something and the well people don’t pick it and thus oops, it costs the group too much because the well people aren’t paying for it

4. HR benefits and administration • Outsourcing: Employee assistance, 401K, flexible spending accounts, retiree benefits • HR Unit: develops and administers benefits systems, answer’s questions, monitors benefits usage, cost control methods • Manager: answer simple benefits questions, liaison with HR, maintain good communication with employees near retirement, coordinate use of time off

5. This page is important! • HR Technology and benefits: track benefits, answer questions, online enrollment, health records, which reduces HR Administrative Costs • Benefits measurement: Return on expenditures MUST be tracked – worker’s compensation, wellness programs, prescription drug costs, leave time, tuition aid, and disability insurance • Benefits cost control: measuring and controlling benefits, reducing or dropping benefits offered, changing by adding or taking away 401K matches, Cost sharing – having employees pay for more of their benefits, adding wellness programs, employee health education, changing prescription drug plans, and negotiating plans.

6. Communicate the Benefits • Benefits communication and satisfaction of employees are linked • Employees don’t understand the value of benefits • Employee Retirement Income Security Act: health programs must write summary plan descriptions to detail the rights and benefits associated with plans • Use Twitter! • Benefits statement: some give employees a personal statement of benefits • ERISA requires employees receive annual pension statement

7. Types of benefits • Government mandated benefits: social security, unemployment insurance, workman’s comp, FMLA, COBRA, HIPAA---government would like to stop paying so much but now we have mandated national health care???? • Voluntary benefits: to make someone want to STAY on a job

8. Security benefits • Worker’s compensation: security benefits provided to persons who are injured on the job including cash benefits, medical care, rehabilitation services when injured on the job and the employee will not sue the employer • Severance pay: security benefit voluntarily offered by employers to individuals whose jobs are eliminated or who leave by mutual agreement with their employers • Unemployment compensation: Social security Act of 1935 • State system, usually 26 weeks, at 50% to 80% of normal pay, only 40% of eligible people apply, there are abuses, exhausted funds • supplemental unemployment benefits might come from union agreements

9. Health care benefits • Costs are rising due to uninsured workers and others • Costs are rising for retiree’s

10. Controlling health care • Changing copayments and employee contributions • Copayments: strategy of requiring employees to pay a portion of the cost of insurance premiums, medical care, and prescription drugs • Using managed care – approaches that monitor and reduce medical costs through restrictions and market system alternatives • Preferred provider organizations (PPO)- a health care provider that contracts with an employer or an employer group to supply health care services to employees at a competitive rate • Health maintenance organizations (HMO) – plan that provides services for a fixed period on a prepaid basis • Utilization review – audit of services and costs billed by health care providers • Mini medical plans – limits number of doctor visits paid per year to fewer than 10, covers only certain prescription drugs, provides very limited hospital coverage, and caps total annual health benefits costs at 10,000 or less

11. Consumer driven health plans • CDH/ defined contribution health plans– provides employer financial contributions to employees to help cover their health related expenses. Employer places set amount into employee’s account and identifies a number of health care alternatives that are available. Employees pay more and usage falls on them • Health savings account: high deductible health plans with federal tax advantages. Employee sets aside pre tax money, higher annual deductions • Health reimbursement arrangements: employer sets aside money in a health reimbursement account to help employees pay for qualified medical expenses. What is “qualified expense”?

12. Health care preventive wellness efforts • Employee reactions to cost control efforts: they don’t like it

13. Health care legislation • COBRA • HIPPA • Flexible spending accounts: allow employees to contribute pretax dollars to fund certain additional benefits • CHIP Act • Medicare

14. Retirement benefits • Social security: 1935 • Pension plans: established and funded by the employer and employees • Defined benefit plan: employees are promised a pension amount based on age and service • Defined contribution plan: employer makes an annual payment to an employee’s pension account • Cash balance pension plans: benefits are based on an accumulation of annual company contributions plus interest credited each year.

15. Pension plan concepts • Contributory plan: money for pension benefits is paid by both employees and the employer • Noncontributory plan: all the funds for pension benefits are provided by the employer • Vesting: right of employees to receive certain benefits from their pension plans • Portability: allows employees to move their pension benefits from one employer to another

16. Individual retirement options • 401,403,457, and Keogh plans • 401 K plan: agreement in which a percentage of an employee’s pay is withheld and invested in a tax deferred account • Roth, 2006 : pay into it and pay the tax on that current year…

17. Legal requirements for retirement benefits • Employee retirement income security act (ERISA), 1974: regulates private pension plans, if you pay in, you better get it from employer • Retirement equity in pension plans: Arizona Governing Committee v. Norris - forced pension plan administrators to use “unisex” mortality tables and in 1984, Congress passed Retirement Equity Act as amendment to ERISA –could not penalize employees via their pension plan because of absences • Qualified Domestic Relations Order (QDRO): added to ERISA and divorcing couples have to decide who gets assets in retirement plans

18. Retiree Benefits and Legal Requirements: Rule 106 – employers must establish accounting reserves for funding retiree health care – IT IS GOING UP FOR US OLD FOLKS! • Pension Protection Act of 2006: employers must disclose the assets and liabilities of pension plans, they must increase funding to cover unfunded liabilities and focuses on the deficit these plans cause to insure us old folks.

19. Retirement benefits and age discrimination • Age 40 !!!!!!!!!!!!!! • Age Discrimination in Employment Act (ADEA): most people can’t be forced to retire because of their age • Normal retirement is when you can retire and collect benefits as defined by employer and it is not always 65 AND employers can spend less on benefits for retirees than younger counterparts! It is costing more and more to get OLD. • Early retirement: part time, buy outs to reduce us old and expensive folks • Older Workers Benefit Protection Act: 1990, OWBPA, equal treatment for old folks at early retirement or severance situation, including signing waivers not to sue in set criteria that must be met

20. Financial benefits • Insurance benefits: some are not taxed • Life insurance • Disability insurance • Long term care • Legal

21. Financial benefits 2. Financial Services: credit union, purchase discounts, thrift plans, savings plans, stock investment plans, stock purchase plan: employer provides matching funds equal to the amount invested by the employee for the purchase of stock in the company, financial counseling, relocation assistance

22. Financial benefits 3. Educational assistance: ROI of tuition aid: More than 90% of employers offer some form of educational assistance to employees

23. Family oriented benefits • Family Medical Leave (FML): birth, adoption, spouse, serious health condition- in patient, hospital, hospice or residential medical care or continuing physician care • Good for 12 weeks during a 12 month period if you worked 1,250 hours the year before. Employers must define what is their 12 month period • You get to come back to same job • Employees use it and employers don’t adhere to laws and get sued too much

24. Family care benefits • Adoption benefits • Child care assistance • Elder care assistance • Benefits for domestic partners: Texas and the request to Attorney General!

25. Time off and other benefits • Holiday pay • Vacation pay • Leaves of absence: jury, military, election, funeral, bereavement • Family leave: paternity • Sick leave • Paid time off plans (PTO): combines all sick leave, vacation time, and holidays into a total number of hours or days that employees can take off with pay