Employee Benefits Chapter 13 Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon Chapter 13

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Overview of Benefits Management Employee Benefits Overview of Benefits Management Benefits are indirect compensation that provide something of value to the employee. Some are mandatory, due to federal and state statutes, and some are optional, based on the desires of the firm. According to the U.S. Bureau of Labor Statistics, benefits average roughly 30 percent of total employee compensation cost. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

The Strategic Value of Benefits Programs Employee Benefits The Strategic Value of Benefits Programs Because people demand more and better benefits to match how they live, companies add new benefits. This requires HR to spend more time monitoring benefits’ cost and value. But benefits also provide incentives to employees to continue working for the firm because they are being cared for by the company. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Why are benefits growing as a portion of overall compensation? Employee Benefits Why are benefits growing as a portion of overall compensation? Tax advantages. Statutory requirements. Influence of Organized Labor. Buying in Bulk. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Employee Benefits Considerations in Providing Benefits Programs Amounts – affordability to the firm. Mix – various mixes include: a retirement benefit, health insurance, life and disability insurance, dental care, doggie day care, free parking, public transportation vouchers, etc. Flexibility – allows employees to choose one type of benefit over another. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Employee Benefits Statutory Benefits Social Security – Old-Age, Survivors and Disability Insurance (OASDI) programs. Retirement. Disability and survivor benefits. Medicare - national healthcare program for the elderly or disabled. Workers’ Compensation - provides medical treatment and temporary payments to employees who are injured on the job or become ill because of their job. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Statutory Benefits Employee Benefits Unemployment Insurance - federal program managed by each state; provides payments for a fixed period to workers who lost their jobs. Family and Medical Leave Act of 1993 (FMLA) – unpaid leave that employers must provide to eligible employees when they or immediate family members are faced with medical issues. The Patient Protection and Affordable Care Act of 2010 (PPACA) – requires all employers with more than 50 employees to provide health insurance for employees or face significant penalties levied by the federal government. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Statutory Requirements When Providing Certain Voluntary Benefits Employee Benefits Statutory Requirements When Providing Certain Voluntary Benefits Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) – requires employers to offer to temporarily maintain health insurance on individuals who leave their employment. Health Insurance Portability and Accountability Act of 1996 (HIPAA) - if an employee had group health insurance at a previous employer and if the new employer has health care coverage, the firm is required to provide the opportunity to participate in their health insurance plan. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Fiduciaries – they must act under a concept called the “prudent man”. Employee Benefits Employee Retirement Income Security Act of 1974 (ERISA) – major provisions: Eligibility – available to all employees over 21 who have worked in the firm for one year. Vesting – a maximum time that a firm can retain company contributions to the employee’s account. Portability – allows employees to move their funds from the employer to another qualified fund. Fiduciaries – they must act under a concept called the “prudent man”. PBGC - Pension Benefit Guarantee Corporation insures retirement funds against failure. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Voluntary Benefits Paid Time Off Vacation or Annual Leave Sick Leave Employee Benefits Voluntary Benefits Paid Time Off Vacation or Annual Leave Sick Leave Holiday Pay Paid Personal Leave Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Voluntary Benefits - Group Health Insurance Employee Benefits Voluntary Benefits - Group Health Insurance Traditional health care plans typically cover a set percent of fees for medical services. Health Maintenance Organization (HMO) is a managed care program that provides both health maintenance services and medical care. Preferred Provider Organization (PPO) is a hybrid between traditional fee-for-service plans and HMOs. Health or Medical Savings Accounts (HSA/MSA) allow employers and employees to fund a medical savings account from which employees can pay medical expenses with pretax dollars. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Employee Benefits Utilization Analysis A review of the cost of a program and comparison of program costs with the rate of the program’s usage by the members of the company. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Employee Benefits Retirement Benefits Are not mandatory, but if provided, the firm must comply with ERISA provisions. Defined benefit plan provides the retiree with a specific amount and type of benefit that will be available when the individual retires. Defined contribution plan identifies only the amount of funds that will go into a retirement account, not what the employee will receive upon retirement. A 401k retirement plan is a savings investment account for individual employees of corporations; a 403b retirement plan is similar but it is used for nonprofits. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Retirement Benefits (continued) Employee Benefits Retirement Benefits (continued) Matching contributions – many employers that offer a 401k or 403b provide a matching contribution up to a set maximum. IRAs and Roth IRAs – any taxpayer can make tax-free contributions to an IRA (subject to a maximum annual income limit); these contributions reduce the taxable income by the full amount of the contribution in the year in which they are placed in the account. Simplified Employee Pension (SEP) Plans – for self- employed individuals and members of small companies. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Employee Insurance Coverage Employee Benefits Employee Insurance Coverage Life Insurance Disability Insurance Life and Health Insurance Others: Employer-sponsored automobile insurance, homeowners and renters insurance, identity theft, and pet insurance. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Employee Benefits Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Administration of Benefits Employee Benefits Administration of Benefits Flexible Benefit (Cafeteria) Plans – employees choose from multiple options. Modular plans – employees choose benefits from modules, each with a different mix of insurance, employee services and retirement options; these plans are the easiest for HR to manage. Core Plus Plans – core benefits are available to everyone; employees choose from remaining benefits. Full Choice Plans – complete flexibility for employees. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.

Communicate Value to Employees Employee Benefits Communicate Value to Employees So they understand the true cost and value of the benefits they receive from the firm. Provide information through multiple communication channels more often than just once a year during open enrollment. Consider snail mail, searchable knowledge bases and email reminders, and/or social media, depending on the demographics of the firm. Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.