Benefits

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legally mandated benefits: -social security and medicare
-unemployment insurance
-FMLAWorkers compensation
-Health benefit continuation
(COBRA & ERISA)
SSA: social security act
-introduced OASDI
-established UI, unemployment insurance
OASDI: Old age, survivors, and disability insurance. to be paid upon retirement, disability, or to dependents after death
Medicare: created in SSA 1965 ammendment
provided medical and hospital insurance to elderly
FICA: federal insurance contributions act

gave IRS responsibility to collect taxes for OASDI and medicare
SUI: State unemployment insurance
-states responsible for UI
and setting FUTA tax rate
FUTA: Federal unemployment tax act
-gives IRS responsibility to collect
-employers subject to FUTA are those who pay employees who are not farm or household workers
-subject if pay >$1.5k/quarter or 20+ weeks
-farms if pay >$20k to all or 10+ workers
-house if pay >$1k/quarter
Reducing unemployment tax rates: -maintain accurate records for termination
-agressivley and diligently fight unjustified claims
FMLA: Family medical leave act
DO NOT CONFUSE W/ FLSA (fair labor standards act)
signed in 93 to protect workers who had to attend seriously ill family members
FMLA provisions: -12 weeks of unpaid leave in 12months
-continuation of health benefits
-resinstatementto same or equivalent position
FMLA applies to:: *all public agencies and schools
*employers w/ 50+ employees at all worksites within a 75 mile radius, including telecommuters
employees eligible for FMLA: -worker for an employer subject to FMLA
-employed >12 months
-worjed >1,250 hours in the preceding 12 months from the day the leave begins. If no time records employee must prove otherwise or will be presumed to have requirement.
-employees must confirm eligibility within 2 days of notice or advise when will be eligible or they will become immediately eligible without right of contest
key employee exception: -may be denied reinstatement if employer states that it would cause substantial and grievous economic injury to tis operations
-must be among top 10% highest paid at worksite
-must eb advised within reasonable period of time
Types of FMLA leave: continous
reduced
intermittent
continuous FMLA Leave: absent for an extended period of time
reduced FMLA Leave: regular work schedule reduced for a period of time
intermittent FMLA Leave: absent from work due to a single illness or injury
-must schedule the leave
-increments no less than one hour
-provide 2 days notice whenever possible
workers compensation: requires that employers assume responsibility for all work related injuries,illnesses and deaths
-state-enforced
nosubscriber plans: pay totality of injury instead of insureance premiums
-rare and only make sense for large companies
COBRA: consolidated omnibus budget reconciliation act
-an ammendment of ERISA
-requires continued health benefits for co. w/ 20+ employees who already do so when qualifying events occur
voluntary benefits: no federal laws requiring them but there are laws that regulate them:
*ERISA
*OWPA
*OBRA
*COBRA
*HIPAA
*EGTRRA
*REA
*unemployment compensation ammendments of 1992
*small business protection act of 1996
*mental health parity at of 1986
ERISA: Employee retirement income security act
-set standards for private pensions and group welfare programs
-ammended by COBRA and HIPAA
OWBPA: older worker benefit protection act
-ammends ADEA
-prohibits discrimination in employee benefit plans for older workers unless any age-based reductions ae justified by significant cost considerations
-allows seniority systems as long as they don't require termination based on age
-extends ADEA to benefits
OWBPA waiver: employees may waive rights to make claims under act:
-must be written in a way that can be indertood by avg employee
-must refer specifically to rights under adea
-may not waive rights to actions subsequent to signing
-mus advise right to consult attorney
-can cancel within 7 days
-must have 21 days to consider or in groups, 45 days
OBRA: omnibus budget reconciliation act
required to honor medical child support when order by court and group health plans include adopted children
deferred comp: tax deferred retirment plans
like pension, IRA, 401(k)s
defined benefit: traditional pension plans, provides specific enefit upon retirement
defined contribution: contribution is known but final benefit is not
nonforfeitable claim: exists due to participant's service, unconditional and legally enforceable
plan administrator: person designated by plan sponsor to manage the plan
plan sponsor: entity that establishes plan
qualified plan: meets ERISA req. & provides tax advantages to both employees and employers
-to be qualified can't provide additional beneft to officers or highly compensated employees
nonqualified plan: benefits exceed limitations of qualified plans or don't meet IRS req.
WPDA: welfare and pension disclosure act
ERISA replaced this
required plan administrators to file descriptions of plans with DOL
ERISA requirements: -requires filing reports
-sets eligibility requiremnts
-sets vesting requirements for qualified pension plans
-sets benefit accrual requirements
-form and pament of benefits
-funding requirements
-fiduciary responsibility
-admin and enforcement
ERIS required filing reports: requires orgs to file:
1. SPD
2. Annual Report
3. Participant Benefit rights reports
SPD: summary plan description
provides info about provisions, policies and rules of plan and actions they can take
-must describe eligibility req.
-must describe plan financing source and provider
-must describe claims procedures and name of DOL office that will assist with HIPAA claims and remedies if claims are denied
-must be distributed every 5 years or every 10 years if no change
Annual Reports: -annual reports must be filed for all employee benefit plans including:
*financial statment
*names & addreses of plan fiduciaries
*names of last year's compensated employees,current relationship, nature of, and amount paid
*# of employees in plan

-audited by CPA or enrolled actuary licensed by DOL and dept of treasury to provide actuarial services for pension plans

-become public records
participant benefit rights reports: may request report of total benefits accrued on their behalf as well as nonforfeitable amount.
-max one/year
ERISA records: -must be kept for 6 years from DOL filing
-rejected plans must me resubmitted within 45 days
-filed within 210 days after end of plan year
ERISA participant requirements: -1+ years w/ co
unless 100% vesting after 2 years, then 2+yrs
-21+ years old
-not excluded for reaching specified age
-after reach requirements must become participants first day of plan year or 6 months after they do so, whichever comes first
Vesting: point at which employees own the contributions employer has made to pension plan wether or not they remain employed
ERISA vesting standards: refers only to funds contributed by employer, not employee.
*Cliff vesting
- max at 5 years for qualified plans
*Graded vesting
-20% vesting after 3 years and 20%/year after that. Full vesting after 7 years
Cliff vesting: participants become 100% vested after a specified period of time
graded vesting: schedule for partial vesting each year for a specified # of years
ERISA Benefit Accrual requirements: sets requirements for how much entitled to receive if they leave before retirement
entitled to all selfcontributed funds
ERISA Form and payment of benefits: sets requirements for when payments are made and alternate payees issued by court
-defines funding requirements and safeguarding of funds
funding: -enrolled actuary determins money required to fund
-required to be maintained in account separate from business operating funds
fiduciary responsibility: holds assets in behalf of and must act in the best intereste of participants and beneficiaries
-fiduciaries held personally liable fomr breach of responsibility during their time acting as
-no transactions b/w fiduciaries and parties of interest
enforcement: -fines from $5-100k and up to 1 yr prison additional civil actions may be taken through DOL
EGTRRA: economic growth and tax releif reconciliation act of 2001
-increased contribution limits and catch-up contributions to 50+yr employees
defined benefit plans: employer provides pension based on formula; salary and length of service

employers pay specified benefit
CBP: cash balance plan
-hybrid of defined benefit and defined contribution plans
-less costly to employers
-account is credited each year with a pay credit (such as 5% of comp) and an interest credit (fixed rate or variable linked to an index). changes in value of plan's investments don't directly affect the benefit amounts. investment risks are the employer's
-it is also portable:
*can take benefits as lump sum at retirement
*vested participants can choose (with consent from their spouses) to receive their accrued benefits in lump sums if they terminate employment prior to retirement

risk of not benefiting older employees
defined contribution plans: both fund individual retirement accounts, contribution is fixed but final benefit is not due to investment

*profit sharing plans
*money purchase plans
*target benefit plans
*ESOPs
*401(k)plans
profit sharing plans: defined contributions plan
aka discretionary contributions

employers contribute deferred comp based on company earnings
-max, of 25% or $40k/year
-when calc contributions can only use first $200k of comp
-work well fo co.'s with erratic profit levels
money purchase plans: defined contributions plan
-fixed % of employee earnings to defer
-works well for org.'s w/ stable earnings
-limits are same as profit sharing plans
target benefit plans: defined contributions plan
-hybrid of money purchase and defined benefit
-contributions calculated using actuarial formulas to claculate amount needed to reach predetermined contribution at retirement
ESOP: defined contributions plan
employee stock ownership plan

own equity, post-enron limitation were placed on amount of it as part of deferred comp. plan
401(k): defined contributions plan
-established by the revenue act of 1978
-may defer fron comp, limits same as EGTRRA
-both employees and employers may contribute
403b - for non-profit workers
457 - for public employees

-employees responsible for fund management
-may not provide greater benefits to HCEs
-ADP conducted yearly to test if plan is within limits
HCE: highly compensated employee
-$90k+ comp
&
-owns 5%+ of co.
&
-is in top 20% of employee comp for co.

-tested through ADP
ADP: actual deferral percentage test

tests if HCEs are benefiting more than non-HCEs from 401(k)
if so must correct or lose tax benefits
REA: retirement equity act of 1984

lowered age limits for participation in pension plans and vesting
-reqired written approval from spouse if waived survivor benefits
Unemployment compensation ammendments of 1992: -reduced rules for rolling over lump sums from qualified retirement plans into other plans
-some made 20% tax withholding
small business job protection act of 1996: -redefined HCEs
-simplified ADP tests for 401(k)s to make suitable for small businesses
nonqualified deferred comp: -not protected by ERISA
-generally at excutive level
"top hat" plans
*grantor or rabbi trusts
*excess deferral plans
Grantor/rabbi trusts: nonqualified deffered comp plans for officers, HCEs and directors
unsecured and subject to claims by organization's creditors
-taxable as ordinary income
Excess deferral plans: org. makes contributions to nonqualified plan to reduce impact of ADPs to HCEs
Health and welfare benefits: *medical insurance
*dental insurance
*vision insurance
*prescription coverage
*life insurance
Medical insurance: *HMOs
*PPOs
*POSs
*EPOs
*PHOs
*FFSs
HMOs: health maintenance orgs.
-focus on preventive care
-use gatekeeper to get to specialist
PPOs: preferred provider orgs.
-use network of healthcare providers w/o gatekeeper
-employees make co-payments and pay deductibles
POSs: point of service plans
-include network but allow for referrals outside network
-when doctor refers it is covered, w/out referral coinsurance payment required
EPOs: exclusive provider orgs.
-has network and includes hospital
-epo physicians only see patients that are part of the EPO
-if patient sees physician outside EPO, not covered
PHOs: physician hospital orgs.
physicians join w/ hospital to market and negotiate contracts
-unique in that they contract directly w/ employer orgs.
FFSs: fee for service plans
most expensive becuae places no restrictions on doctors or hospitals available
plan options: -purchase insurance coverage (small orgs.)
-self-funded plan
-partially self-funded plan
self funded plan: -employer creates claim find and pays out
-annual discrimination tests to make sure HCEs don't use disproportionately
-may use thrid party adimistrator, claim management or admin service only plan to manage claims
partially self funded plan: use stop-loss insurance to prevent a single catastrophic event from devastating fund
-agrees upon preset max coverage
imputed income: indirect comp. paid by employees
-life insurance in excess of $50 k is considered this
flexible spending accounts FSAs: -authorized by revenue act of 1978
-aka section 125 plans
-allow employees to set aside pre-tax funds for medical expenses
-any funds left and not used are forfeited
-also dependent care account , section 129, up to $5k
COBRA requirements: -co. w/ 20+ employes who provide group health coverage must continue coverage when qualifying events occur...see cobra table
HIPAA: -prohibits discrimination on the basis of health status
-limits health insurance restrictions for pre-existing conditions
-insurers may only terminate group coverage if no payment, misrepresentation, or does not comply w/ plan provisions
-required PHI
PHI: protected health info.
mental health parity act of 1986: -required insures to provide same limits to mental health benefits as to physical
paid time off: *vacation pay
*holiday pay
*paid time off -combined all forms of time off into one
*sabbaticals and leaves of absence
*jury duty
*bereavement leave
*parental leave
Adoption assistanve: max of $10.16k to be excluded from gorss income to do so

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