Risk Final Exam Review Sheet.docx

Risk Final Exam Review Sheet.docx - Final Exam Topic 10...

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Final Exam Topic 10 – Introduction to Employer-Provided Benefits Personnel Loss Exposures o Personnel losses arise from the loss or injury of: Key people Top salesperson Key decision-maker Talented artist Skilled engineer Employees o Losses caused by: Death, illness, disability Kidnap and ransom Labor union strike Recruited by competitor Retirement o Solution: Cross-training Employee (EE) Benefits o Definition of EE benefits Total compensation = current cash salary + value of EE benefits o EE Benefits = any type of compensation other than direct current wages paid to EES. o Types of human capital loss exposures managed in an EE benefit plan Medical expenses to EE (on or off the job) Loss of income to an EE or an EE’s dependents Death Injury / illness/ sickness Retirement Unemployment Loss of productivity to employer (ER) Daycare Managing human capital risk Why are EE benefits important to ERs? o On average, firms spend about 40% of payroll on EE benefits Second largest expense item behind payroll In particular, healthcare is very expensive o Compliance Risk associated with EE Benefits E.g. workers compensation laws, Affordable Care Act requirements o Firms aggressively “manage” EE benefits costs Continue to increase, primarily because of healthcare
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Types of EE Benefits to Meet Loss Exposures o Medical Expenses – Health Insurance Traditional Indemnity Plans Historically predominant; now about 4% of market Manage Care Plans Health Maintenance Organizations (HMO) Preferred Provider Organizations (PPO) Point-of-service-type HMO (POS) Consumer Driven Health Plans (CDHP) CDHPs with a Health Reimbursement Account (HRA) OR Health Savings Account (HSA) Social Security Medicare benefits (OASDH I – Health Insurance) Specialty Coverages for “Narrowly Defined Perils” Dental Insurance Vision insurance (eye exams, glasses; not surgery) Prescription drug insurance Long term care insurance o Loss of Income Loss of income due to retirement “Pension Plan” (Defined Benefit Plan) Defined Contribution Plan 401 (k) plans for profit firms or 403 (b) for non-profit firms Social Security retirement benefits (OA SDHI – Old Age) Loss of income due to disability Occupational disability o Worker’s Compensation disability benefits Non-occupational disabilities o Sick leave o Short term disability o Long term disability Social Security disability benefits (OASD HI – Disability) Loss of income due to unemployment Severance Package Unemployment insurance Loss of income due to death Group term life insurance Social Security death benefits (OAS DHI – survivor spouses, dependent children) Workers compensation death benefits Survivor Benefits under retirement plans
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Required EE Benefits o Which benefits (if any) are required to be offered by firms?
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