Employee Benefit Packages.docx - Running Head Benefits 1...

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Running Head: Benefits Employee Benefit Packages Halee VanVactor BAS 274E Murray State University 1
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Running Head: Benefits Abstract Employee benefit packages are offered by organizations for employee compensation, retirement, and health insurance. The cost of benefits adds an average of 44.5% to every dollar of payroll, thus accounting for 30.8% of the total employee compensation package [Noe158]. Benefits are associated in a category of social insurance, private group insurance, retirement, pay for time not worked, and family-friendly policies. Each of these categories are further broken down into more specific plan, such as social insurance includes social security, social security retirement, unemployment, and so forth. It is important for companies and employees to under their benefit packages and be able to differ between them. 2
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Running Head: Benefits Social Insurance Social Insurance is legally required and includes social security, retirement, unemployment, and workers compensation. The Social Security Act of 1935 was the establishment of old-age insurance and unemployment insurance with additions of survivor’s insurance (1939), disability insurance (1956), hospital insurance (Medicare Part A, 1965), and supplementary medical insurance (Medicare Part B, 1965) for the elderly [Noe158]. The Old Age, Survivors, Disability, and Health Insurance (OASDHI) program was mandated by federal and accounts for greater than 90% of U.S. employees. As of 2013, an employee wishing to receive social security must have 40 quarters of covered employment and earning of at least $1,160 for each quarter in order to receive full benefits. In present day, Social Security retirement benefits begin when an individual reaches 67 years old for those born in 1960 or after. However, if an individual wish to retire early, then permanent reductions are made in their benefits and they will not receive them fully. For example, if retiring at 62, the maximum monthly benefit in 2013 is $1,923, but if retire at 70, the maximum retirement benefit in 2013 is $3,350 [Noe158]. Half of the state’s exempt state tax from full retirement benefits, as well as free federal. If other income is received or if that other income is greater than a certain level ($25,000 for single tax return filer, $32,000 for married/joint filer, then federal tax will not be exempted. Benefits are financed by allowing both employers and employees assess a payroll tax of 7.65% on the first $110,000 of the earnings [Noe158]. A percentage of 6.2 funds OASDHI and 1.45% funds Medicare Part A, out of the 7.65%. Social Security benefits are legally mandated and employers do not have the permission in designing this part of their programs. Employees’ 3
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Running Head: Benefits retirement decision is affected by Social Security regarding eligibility and any tax penalty for earnings.
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