1. Employee Benefits Mike Otis, Benefits Manager Human Resource Services Employee Benefits 3770 Beardshear Hall Human Resource Services

2. Benefits Exercise “It’s good for the heart!” Employee Benefits 3770 Beardshear Hall Human Resource Services

3. Utopia Enterprises – Your Employer of Choice! We provide a “buffet” of benefit choices to meet your individual needs!! Employee Benefits 3770 Beardshear Hall Human Resource Services

4. Employee Benefits 3770 Beardshear Hall Human Resource Services Benefits Offered Source: 2005 Iowa Employer Benefits Study, David P. Lind and Associates Offered by Employers with 250 or more Employees Rank Health Insurance97.7%1 Life Insurance95.4%2 Retirement Plans94.4%3 Paid Holidays94.1%4 Pre-Tax deductions for Employee benefit contributions86.5%5 Long Term Disability Insurance84.1%6 Paid Vacation83.7%7 Educational Assistance/Tuition Reimbursement75.1%8 Sick Leave73.8%9 Employee Assistance Program (EAP)73.1%10 Fitness Center or Gym subsidy36.7%11 Long Term Care Insurance32.8%12 Flextime32.5%13 Casual Dress (every day, not just Fridays)32.2%14 Retiree Health Insurance (post age 65)25.6%15 Telecommuting18.9%16 Child Care Assistance (on or off site)7.4%17 Subsidized employee mealsNot on list18 Free Coffee/SodaNot on list19 Pet InsuranceNot on list20

5. Agenda Employer Challenges General Concepts Health Benefits Life and Disability Benefits Flexible Spending Accounts Vacation/Sick Pay/PTO Retirement Plans Voluntary Benefits Employee Benefits 3770 Beardshear Hall Human Resource Services

6. Employer Challenges Structuring employee benefit packages that meet the needs of a diverse workforce – one size does not fit all Benefits that help with recruiting and retention efforts Administering benefit programs – costly and time-consuming. Not a profit-making venture! Limited budgets – Benefits were 44% of Payroll in 2005 (U.S. Chamber of Commerce report) Government restrictions/legislation Employee Benefits 3770 Beardshear Hall Human Resource Services

7. General Concepts Core (traditional) vs. Non-core (voluntary) Employee Benefits Pre-tax benefits/after-tax benefits Cafeteria Plan concept The value of a “Hidden Paycheck” Total-Compensation package approach (cash and non-cash compensation) Employee Benefits 3770 Beardshear Hall Human Resource Services

8. Core vs. Non-Core Benefits Employee Benefits 3770 Beardshear Hall Human Resource Services Core Benefits (Traditional) Non-core Benefits (Voluntary – Elective) Health InsuranceDental Prescription DrugsVision Basic Life InsuranceSupplement Life, Dependent Life VacationLong-term care insurance HolidaysAuto-homeowners insurance Sick PayMortgage services/discounts DisabilityOn-site daycare Tuition reimbursement Yes, even Pet Insurance

9. Health Benefits General types of health coverage – Medical – Prescription Drugs – Dental – Vision Costs for coverage are usually paid under a “cafeteria plan” approach where employees will receive benefit dollars/credits to use to pay for benefits and will be able to select the level of coverage (i.e., single coverage/family coverage) Employee Benefits 3770 Beardshear Hall Human Resource Services

10. Types of Medical Plans Indemnity – most expensive. Uses deductibles and co-insurance to manage costs. Not offered by many employers Preferred Provider Organization (PPO) – managed care. Has a higher level of coverage for using in-network medical providers. Employees pay more for out-of-network providers Health Maintenance Organization (HMO) – usually the lowest cost choice. Requires care to be coordinated by a Primary Care Physician (PCP). May be limited (or no) coverage outside of the network High Deductible Health Plans (HDHP) with a Health Savings Account (HSA) – newer types of plans that may benefit healthier participants. Require participants to pay full cost for some services up to a predetermined level before insurance pays. Some services (preventative) may be covered at no cost to participant. Savings can be put into HSAs which have tax advantages. Employee Benefits 3770 Beardshear Hall Human Resource Services

11. Prescription Drug Benefits May or may not be part of the regular medical plan – most often a separate benefit Managed care plan Typically uses “tiered” coverage – Generic – Brand – Non-brand – Mail Order Generic drugs are generally as effective as brand- name pharmaceuticals Not all drugs are covered Mail order is typical (may be required) for maintenance medications Employee Benefits 3770 Beardshear Hall Human Resource Services

12. Dental Benefits May or may not be a managed care dental network Typical plan has 4 parts – Preventative (exams, x-rays, cleanings) – typically 100% paid – Basic services (fillings, etc) – typically subject to deductible and co-insurance) – Major services (crowns, bridges) – typically subject to deductible and co-insurance (usually 50%) – Orthodontia – typically limited to children. Standard plan is 50% coinsurance to lifetime max of $1500 - $3000 Employee Benefits 3770 Beardshear Hall Human Resource Services

13. Vision Benefits Usually an optional (voluntary) benefit May or may not be separate from the regular medical plan – Some medical plans pay for annual vision exam Typically is a managed care vision network May require employee contributions or may be a discount-only plan Typically covers an annual eye exam at a minimal cost Usually provides for glasses “or” contacts using a deductible and co-insurance every 1-3 years Laser eye surgery typically not provided – but may have a discount using a preferred service Employee Benefits 3770 Beardshear Hall Human Resource Services

14. Life Insurance Benefits Know what is offered – “term” life vs. “whole” life Typical employer sponsored life insurance offerings – Basic life – Supplemental (optional) life – Accidental Death and Dismemberment (AD&D) – Dependent life insurance Employee Benefits 3770 Beardshear Hall Human Resource Services

15. Basic Life Will be “term” life May be a flat amount ($20,000) but usually a multiple of annual salary – 1X or 2X is standard. Sometimes up to 4X. Employers typically only provide for “basic” life insurance needs – may not be adequate for most employees Rate for coverage is usually stated as “cost per thousand dollars of coverage” – is usually a blended rate for all of an employer’s employees Employees may or may not get coverage at no cost under a cafeteria plan (benefit credits) Employee Benefits 3770 Beardshear Hall Human Resource Services

16. Supplemental Life Optional coverage in addition to Basic life – not always offered. Employees pay cost Will usually be “term” life coverage Usually a multiple of annual salary – 1X to sometimes up to 6X Rate for coverage is usually stated as “cost per thousand dollars of coverage” Cost is based on current age Caution – look at costs carefully – may be able to purchase more coverage in the general marketplace at a more favorable cost – especially if under age 35 Employee Benefits 3770 Beardshear Hall Human Resource Services

17. Accidental Death and Dismemberment May be provided as part of Basic Life coverage or may be optional (voluntary) Usually in multiples of salary – 1X to 4X Only pays fully in the event of an accidental death – pays partially for dismemberment Employee Benefits 3770 Beardshear Hall Human Resource Services

18. Dependent Life Usually optional (voluntary) benefit Usually a flat amount for a spouse and for each child – typical $10,000 for spouse and $5000 for each child Employee Benefits 3770 Beardshear Hall Human Resource Services

19. Disability Coverage Typically in two forms – Short-term disability Typically a salary continuance plan May be provided by earned sick days or PTO bank (combines vacation and sick days) – Long-term disability Usually employer provided May or may not have a waiting period before coverage is effective Provides “partial” income replacement (50% - 70%) Benefit waiting period is usually 90 days – 6 months May not cover some conditions Employee Benefits 3770 Beardshear Hall Human Resource Services

20. Flexible Spending Accounts Includes a Health Care Spending Account (HCSA) and a Dependent Care Spending Account (DCSA) Allows participants to use pre-tax dollars to reimburse themselves for medical and dependent care expenses – great tax advantages!! IRS limits annual reimbursement amounts Use-it-or-lose-it provision – need to estimate expenses wisely Employee Benefits 3770 Beardshear Hall Human Resource Services

21. Health Care Spending Account Participants make an annual election – taken from pay on a monthly basis – limited to $5000 annually per household Can be used for non-covered medical expenses such as co- pays, deductibles for medical, dental, prescription drugs, vision, etc Also includes many over-the-counter medications that are not covered under prescription drug plan (ex: Tums, Prilosec, Advil, Claritin and many others) Great to use to plan for major expenses like laser eye surgery, crowns or bridges, etc. that may not be covered under regular health plans or that have a large co-payment or deductible Employee Benefits 3770 Beardshear Hall Human Resource Services

22. Dependent Care Spending Account Limited to $5000 per household Use to reimburse for dependent child care to allow parents to work (outside of home) or to attend school Child care includes in-home care, child care centers, and pre-school (kindergarten expenses not eligible) Covers children < age 14 Employee Benefits 3770 Beardshear Hall Human Resource Services

23. Vacation May be provided under separate program or combined under a PTO plan with sick days May be earned monthly or provided on an annual basis Many employers require all vacation to be used in a year – no carryover (balance sheet accrual) If carryover allowed, typically subject to an accrued maximum number of days or hours Employee Benefits 3770 Beardshear Hall Human Resource Services

24. Retirement Benefits Defined Benefit Plans (traditional Pension) Defined Contribution Plans – 403(b)/ 457 Not-for-profit employers – 401(k) For-profit employers – Required plans – Supplemental plans Hybrid Retirement Plans Deferred Compensation Plans IRS restrictions Employee Benefits 3770 Beardshear Hall Human Resource Services

25. Comments on Retirement Defined Benefit (Pension) plans are the exception rather than the rule Many employers now will automatically enroll employees in 401(k)/403(b) plans Understand the time-value of money – compounding Save early – the pain will be much less later Take full advantage of any employer match to retirement plans “DIVERSIFY” investments – Many employees are too conservative or too risky Asset allocation models and retirement calculators are offered by many providers Employee Benefits 3770 Beardshear Hall Human Resource Services

26. Employee Benefits 3770 Beardshear Hall Human Resource Services

27. Conflicting Priorities for Savings/Retirement Car payments/car insurance Mortgage/rent/student loans Utilities Food/beverages Clothing Entertainment Life expenses in general Employee Benefits 3770 Beardshear Hall Human Resource Services

28. Other Voluntary Benefits Offered as optional benefits – typically employee pays full cost Voluntary benefit programs typically offered at a discount price resulting from group purchasing power Employer may offer the option of payroll deduction Examples are auto/homeowners insurance, pet insurance, computer purchase discounts Employee Benefits 3770 Beardshear Hall Human Resource Services

29. Closing Thoughts Employee benefits have huge budget impacts to employers Employees need to understand the “total compensation” an employer provides – not just the “salary” Employees should take advantage of retirement plan offerings and save early – and always save enough to at least take advantage of employer’s matching contribution Employees should pick a medical plan that fits their situation – the least expensive plan is not always the best Employees should make sure to have enough life insurance and disability insurance to cover financial obligations – outstanding student loans, mortgages, etc. Probably will need to purchase additional life coverage outside of employer-sponsored benefit Using flexible spending accounts reduces overall taxes. A little effort can save a lot of $$$ for employees Employee Benefits 3770 Beardshear Hall Human Resource Services

30. Questions?? Employee Benefits 3770 Beardshear Hall Human Resource Services