IMch19 - CHAPTER 19 Employee Benefits: Life and Health...

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CHAPTER 19 Employee Benefits: Life and Health Benefits REASONS FOR EMPLOYEE BENEFITS Employee Relations Tax Advantages PREMATURE DEATH BENEFITS Social Security Benefits Distinguishing Features of Group Insurance Underwriting Unit Is a Group Lower Expenses Experience Rating Group Life Insurance Eligibility for Benefits Contributory versus Noncontributory Plans Structure and Level of Death Benefit Type of Insurance Contractual Provisions HEALTH EXPENSE BENEFITS Eligibility Contributory versus Noncontributory Plans Providers of Coverage Choice of Physician Coverage and Exclusions Cost to the Employee Other Provisions Cost Containment Coordination of Benefits Pre-Existing Conditions Termination Rights DISABILITY INCOME BENEFITS Social Security Disability Income Benefits Sick Leave Plans Disability Income Plans Definition of Disability Elimination Periods Benefit Levels Contributory versus Noncontributory Plans KEY TERMS AND CONCEPTS 1
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Consumer-driven health care Contributory Conversion clause Coordination of benefits (COB) provisions Currently insured Dependent life Earnings multiple approach Employee benefits Fully insured Group accidental death and Group ordinary Group term insurance Group universal life Job classification approach Long-term disability (LTD) income plans Managed care Medicare carve-out Noncontributory OASDI wage base Precertification Pre-existing condition Qualification rules Salary bracket approach Short-term disability (STD) income plans Sick leave plans Social Security Survivor income benefit insurance (SIBI) Underwriting Utilization review Wellness programs ANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION 1. Two main reasons that employers provide employee benefits are to improve employee relations and to take advantage of the special income tax status granted to many benefit programs. 2. The four tax advantages are: (1) the employer can deduct the cost of the benefit from current taxable income, (2) the employees may not have to report the cost of the benefit as taxable income, (3) the employees may be able to avoid or defer taxation on the benefit payments, and (4) the employer may be able to prefund expenses in a manner in which interest earnings on these funds will be deferred or not taxable. 3. In group insurance the underwriting unit is a group instead of an individual. Group insurance typically has lower expenses associated with it because the sales commissions tend to be lower, individual selection is not required, and employers may handle some administrative tasks. Experience rating is generally used in group insurance but not in individual insurance. 4. The friend should be advised to consider the amount of the contribution versus the amount of benefit received, whether individual insurance is available at a lower rate, and the relevant tax considerations. 5.
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IMch19 - CHAPTER 19 Employee Benefits: Life and Health...

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