Unit 4.9 - Employee Benefit Programs

Question 1

What are the 3 required employee benefits?

Answer 1

Employers are required to provide three benefits that are intended to protect employees’ incomes.

• Social Security
• Worker’s compensation
• Unemployment compensation

NOT sick pay, FMLA (50+ employees), COBRA (20+ employees), ACA (50+ employees), 401k, or short term disability

Question 2

What are Social Security benefits?

Answer 2

SSA 1935, FDR’s New Deal

1. Old age or disability benefits
2. Benefits for dependents of retired, disabled, or deceased workers
3. Lump-sum death benefits
4. Medicare

Question 3

What is Worker’s Compensation?

Answer 3

Provides income continuation and reimbursement of accident expenses for employees who are injured on the job.

• Administered by each state and therefore have their own laws.
• Common state adopted benefits:
• Death benefits
• Medical expenses
• Wage replacement payments
• Experience rating determines company’s insurance costs

Question 4

What is Unemployment Insurance?

Answer 4

Provides short-term financial assistance to workers who are laid off and seeking employment.

• The Federal Unemployment Tax Act (FUTA) applies to employers who 1+ employees for 20 weeks or pays wages of $1,500+ per quarter.
• Employers pay 6.2% payroll tax on the first $7,000 of annual wages.
• Unemployment compensation costs are absorbed by the employer and depend on the number of employees drawing on the UI funds - Experience Rating

Question 5

What are the 3 pension plans?

Answer 5

• Defined benefit (DB) pension plan - company funded only defined by salary + years of service
• Defined contribution (DC) pension plan - 401k plan; separate account for each participant
• Cash balance plan - combination of both above plans; individual accounts funded by employer (Very few employers do this)

Question 6

What are Individual Savings Plans?

Answer 6

Deferred accounts that are approved by the IRS, called qualified plans, enjoy special tax considerations.

• 401(k) Plans
• 403 (b) Plan
• IRAs
• SEPs
• Keogh (H.R. 10) * SIMPLE
• Roth IRAs

Question 7

What is the Pension Protection Act (PPA)?

Answer 7

Allows employers to automatically enroll employees in a 401(k) plan.

Requires employers to send notices to employees

Question 8

What are the Health & Accident Insurances?

Answer 8

• Health insurance
• Dental care
• Income replacement
• Sick leave
• Personal leave
• Long-term disability
• Life insurance

Not required benefits

Question 9

What is Income Replacement?

Answer 9

Life insurance and income continuation plans to help alleviate difficulties.

• Disability
• Life Insurance
• Supplemental Unemployment
• Severance Pay

Not required