Eligibility: Provides current and former employees and their spouses and dependents with temporary extension of health care benefits Qualifying events: Specified events (e.g., layoffs) Qualifying event coverage: 18 to 36 months, depending on category of qualifying event Coverage stops: When employee becomes eligible for medical insurance from new employer or gains Medicare coverage Cost: Cost of insurance plus 2% o Health Insurance Portability and Accountability Act (HIPAA) Key provisions
• Lessens an employer’s ability to deny coverage for a preexisting condition • Prohibits discrimination on the basis of health-related status • Provides stringent privacy provisions Retirement and savings plans—defined contribution, defined benefit, IRAs, ERISA, PBGC - Defined benefit plans o Employer provides a specific pension level of Fixed dollar amount or % of earnings amount that may vary with years of seniority o Employer finances this obligation by Following an actuarially determined benefits formula and Making current payments that will yield the future pension benefit for a retiring employee o Determination of benefit levels Average earnings at end of tenure (last 3-5 years) or Average career earnings or Fixed dollar amount not dependent on earnings - Defined contribution plans o Require specific contributions by employer o Final benefit received by employees is unknown Dependent on investment success of plan manager o Require specific contributions by employer o Final benefit received by employees is unknown Dependent on investment success of plan manager o Three popular forms of these plans 401 (k) plan • Pension plan Employee Stock Ownership Plan (ESOP) • A company makes a tax-deductible contribution of stock shares or cash to a trust. The trust allocates company stock to participating employee accountants. Profit sharing • Can be considered a defined contribution plan if distribution of profits is delayed until retirement - Exhibit 13.7: Relative Advantages of Different Pension Alternatives o Defined Benefits Plan Provides an explicit benefit which is easily communicated Company absorbs risk associated with changes in inflation and interest rates which affect cost More favorable to long service employees Employer costs unknown o Defined Contribution Plan Unknown benefit level is difficult to communicate Employees assume these risks More favorable to short-term employees Employer costs known up front
- Cash Balance plans – A hybrid of defined benefit and defined contribution plans o Employees have a hypothetical account into which a % of annual compensation is deposited - Individual Retirement Accounts (IRAs) o A tax-favored retirement savings plan that individuals can establish themselves - Employee Retirement Income Security Act (ERISA) o ERISA does not require that employers have a pension plan, but if employers does have a plan, it is controlled by provisions of the law o
You've reached the end of your free preview.
Want to read all 6 pages?
- Fall '12
- Management, Benefits, unemployment insurance, Health and Medical Benefits