a human resource management approach
DESCRIPTION
STRATEGIC COMPENSATION. A Human Resource Management Approach. Chapter 11 Discretionary Benefits. Prepared by David Oakes. Discretionary Costs. In 2004 $11,107 per employee 40% of total payroll costs $15,000 total with legally-required benefits . Benefit Types. - PowerPoint PPT PresentationTRANSCRIPT
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A Human Resource A Human Resource Management ApproachManagement Approach
STRATEGIC STRATEGIC COMPENSATIONCOMPENSATION
Prepared by David Oakes
Chapter 11Chapter 11
Discretionary BenefitsDiscretionary Benefits
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Discretionary CostsDiscretionary Costs
In 2004 $11,107 per employee
40% of total payroll costs
$15,000 total with legally-required benefits
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Benefit TypesBenefit Types
Protection programs
Pay for time-not-worked
Services
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Income ProtectionIncome Protection
Disability insurance
Life insurance
Pension programs
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Health ProtectionHealth Protection Self - funded plans Health maintenance organizations (HMOs) Preferred provider organizations (PPOs) Dental insurance Vision insurance Prescription drug plan
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Short-Term DisabilityShort-Term Disability
Less than 6 months duration
Unable to perform job
Benefit: 50% - 100% of pre-tax income
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Long-Term DisabilityLong-Term Disability 6 months to life
Unable to perform any job qualified for
Benefit 50% - 70% of pre-tax pay
6 - 12 month waiting period
Other benefits used first
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Pension Plan Financing OptionsPension Plan Financing Options
Noncontributory
Contributory
Employee-financed programs
A combination of the three
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Pension Plan Tax Treatment Pension Plan Tax Treatment OptionsOptions
Qualified Employers get tax deductions for contributions Employees taxed less at retirement
Nonqualified Employers & employees receive few tax break
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Qualified PlansQualified Plans Eligibility
Minimum age 21, & 1 year of service Nondiscrimination
Limited preferential treatment Vesting
Usually 3 - 6 years Payout restrictions
Tax penalty if taken before age 59.5
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Defined Contribution PlansDefined Contribution Plans
Profit sharing plans
Employee stock ownership (ESOPs)
401(k)s
Savings & thrift plans
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401(k)s401(k)s
Named after IRS code section Employees invest pre-tax income Plan limits
2006 - $15,000 2007 - $15,500 2008 - $16,000 $500 yearly increases
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ESOPsESOPs The basis for 401 (k) plans
Contributions invested in company securities
Distributions made in company stock
Like stock bonus plans, except stock is purchased with borrowed funds
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Saving & Thrift PlansSaving & Thrift Plans Employers match employees’ contributions
Usually up to 50% of employees’ Tax penalties for early withdrawals Employees can select investment vehicle
Stocks Bonds Money market funds
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Defined Benefit PlansDefined Benefit Plans Guarantees benefits amount
Amount expressed as a monthly sum % of pre-retirement pay X years of service
Employers’ contributions can vary, but benefit at retirement cannot
Not widely used
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Health Care ProgramsHealth Care Programs
Fee-for-service
Managed care
Point of service
Consumer-driven health care
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Fee-For-Service PlansFee-For-Service Plans
Indemnity plans Cover usual, customary, reasonable charges
Hospital expenses Surgical expenses Physicians’ fees
Deductibles & coinsurance Out-of-pocket maximums Individual or group coverage
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HMOsHMOs Organize, deliver, & finance care Provides prepaid medical services May include co-payments Regulated by Health Maintenance Organization Act of 1973 Prepaid group practices Individual practice associations
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PPOsPPOs Select group of health care providers
Employees choose from a list Financial incentives to use list
Physicians must Meet quality standards Abides by PPO cost-containment Accepts PPO fee structure
Does not provide prepaid benefits
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Consumer-Driven CareConsumer-Driven Care
Flexible-spending accounts
Health reimbursement arrangements
Health savings accounts
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Flexible-Spending AccountsFlexible-Spending Accounts
Supplemental health coverage
Employee funds account with pre-tax income
Pays for qualified expenses
Unused funds forfeited
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Health Reimbursement Health Reimbursement ArrangementsArrangements
Supplemental health coverage
Employees funded
Unused funds carried over
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Prescription Drug PlansPrescription Drug Plans
Medical reimbursement plans
Prescription card programs
Mail order prescription drug program
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RELEVANT LEGISLATIONRELEVANT LEGISLATION
ERISA
COBRA
FLSA
HIPPA
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ERISAERISA Regulates fringe compensation
Medical Disability Life insurance Pension
Monitors Reporting Disclosure Funding Fiduciary & vesting responsibilities
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COBRACOBRA
Continues health care coverage to 36 months Can cost up to 102% of premium Employers penalized for noncompliance Exempt employers
Those with less than 20 employees Churches Federal government
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HIPPAHIPPA
Guarantees health coverage Addresses preexisting conditions Concerns access to health information
Transfer Disclosure Use