(c) 2007 by Prentice Hall12-1 Designing and Administering Benefits Chapter 12

(c) 2007 by Prentice Hall12-2 Explain the significance of employee benefits to both employers and employeesExplain the significance of employee benefits to both employers and employees Design a benefits package that supports the firm’s overall compensation strategy and other HRM policiesDesign a benefits package that supports the firm’s overall compensation strategy and other HRM policies Distinguish between a defined benefit retirement plan & a defined contribution retirement plan and recognize the situations in which each is most appropriateDistinguish between a defined benefit retirement plan & a defined contribution retirement plan and recognize the situations in which each is most appropriate Discuss how traditional health insurance plans and managed-care health insurance plans work and the advantages and disadvantages of eachDiscuss how traditional health insurance plans and managed-care health insurance plans work and the advantages and disadvantages of each Chapter 12 Overview

(c) 2007 by Prentice Hall12-3 Develop cost-containment strategies for the different types of employee benefitsDevelop cost-containment strategies for the different types of employee benefits Understand the administrative complexities of providing a full array of benefits to the work force and suggest ways to deliver benefits effectivelyUnderstand the administrative complexities of providing a full array of benefits to the work force and suggest ways to deliver benefits effectively Recognize the HR department’s key role in keeping accurate records of employee benefits and informing employees about their benefitsRecognize the HR department’s key role in keeping accurate records of employee benefits and informing employees about their benefits Chapter 12 Overview (cont’d)

(c) 2007 by Prentice Hall12-4 Benefits issues are important to employeesBenefits issues are important to employees Benefits are a powerful recruiting toolBenefits are a powerful recruiting tool Benefits help retain talented employeesBenefits help retain talented employees Certain benefits play a part in managerial decisionsCertain benefits play a part in managerial decisions Benefits are important to managersBenefits are important to managers The Managerial Perspective to Benefits

(c) 2007 by Prentice Hall12-5 An Overview of Benefits Employee benefits or indirect compensation – Group membership rewards that provide security for employees and their family membersEmployee benefits or indirect compensation – Group membership rewards that provide security for employees and their family members

(c) 2007 by Prentice Hall12-6 How the Benefits Dollar Is Spent

(c) 2007 by Prentice Hall12-7 Benefits – Basic Terminology ContributionsContributions CoinsuranceCoinsurance CopaymentCopayment DeductibleDeductible Flex/cafeteria benefits programFlex/cafeteria benefits program

(c) 2007 by Prentice Hall12-8 The Cost of Benefits in the U.S. Federal tax policyFederal tax policy Federal legislationFederal legislation Union influenceUnion influence Cost saving of group plansCost saving of group plans

(c) 2007 by Prentice Hall12-9 Legally Required BenefitsLegally Required Benefits Health InsuranceHealth Insurance RetirementRetirement InsuranceInsurance Paid Time OffPaid Time Off Employee ServicesEmployee Services Types of Benefits

(c) 2007 by Prentice Hall12-10 The Benefits Strategy The Benefits MixThe Benefits Mix Benefits AmountBenefits Amount Flexibility of BenefitsFlexibility of Benefits

(c) 2007 by Prentice Hall12-11 Social Security Retirement IncomeRetirement Income Disability IncomeDisability Income MedicareMedicare Survivor BenefitsSurvivor Benefits Legally Required Benefits

(c) 2007 by Prentice Hall12-12 Legally Required Benefits Workers’ CompensationWorkers’ Compensation Unemployment Insurance – SUBUnemployment Insurance – SUB Unpaid Leave – FMLA of 1993Unpaid Leave – FMLA of 1993

(c) 2007 by Prentice Hall12-13 Health Insurance – COBRA of 1985 – HIPAA – Preexisting Condition Traditional Health Insurance – Premium Voluntary Benefits

(c) 2007 by Prentice Hall12-14 Health Spending in Various Countries 2003

(c) 2007 by Prentice Hall12-15 Health Maintenance Organizations (HMOs)Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs)Preferred Provider Organizations (PPOs) Health Insurance Coverage of Employees’ PartnersHealth Insurance Coverage of Employees’ Partners Health-care Cost ContainmentHealth-care Cost Containment Voluntary Benefits

(c) 2007 by Prentice Hall12-16 Tips for obtaining your own health insuranceTips for obtaining your own health insurance –Form your own small group –Join an association that has group coverage –Check out prices on the Web –Take advantage of COBRA provisions Customer-Driven HR

(c) 2007 by Prentice Hall12-17 Retirement Benefits ERISA – vestingERISA – vesting Defined Benefits Plan – pensionsDefined Benefits Plan – pensions Defined Contribution PlansDefined Contribution Plans 401k401k IRAIRA SEPSEP Keogh PlanKeogh Plan HybridHybrid

(c) 2007 by Prentice Hall12-18 Insurance Plans Life InsuranceLife Insurance –Long-term disability insurance Paid Time OffPaid Time Off – Sick leave – Vacations – Severance pay – Holiday and other paid time off Employee ServicesEmployee Services

(c) 2007 by Prentice Hall12-19 Flexible Benefits Types of flexible benefits plansTypes of flexible benefits plans – Modular – Core-plus options – Flexible spending accounts Challenges with flexible benefitsChallenges with flexible benefits –Adverse selection –Employees who make poor choices –Administrative complexity Administering Benefits

(c) 2007 by Prentice Hall12-20 Administering Benefits Benefits Communication Benefits Communication Increasing complexity of programsIncreasing complexity of programs Companies do not devote resources to explain programs to employeesCompanies do not devote resources to explain programs to employees

(c) 2007 by Prentice Hall12-21 An Overview of BenefitsAn Overview of Benefits The Benefits StrategyThe Benefits Strategy Legally Required BenefitsLegally Required Benefits Voluntary BenefitsVoluntary Benefits Administering BenefitsAdministering Benefits Summary and Conclusions