Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Outcomes Detect strategies companies use to develop benefits plans that are cost effective Identify and explain the employee benefits required by law Describe the types of work/life benefits that employers may provide Describe the different types of retirement programs and pension plans and the regulations related to them 2

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Selecting Benefits When designing benefit programs, company can: Purchase detailed compensation data Hire outside firms to aid in the designing process Involve employees’ participation Conduct opinion survey Establish committees to over look the program 3

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Flexible Benefits Flexible benefits plans Enable individual employees to choose benefits best suited to their particular needs Prevent certain benefits from being wasted on employees who have no need for them Employees are offered core benefits package of life and health insurance, sick leave, and vacation Give certain amount of funds to purchase other benefits needed through the plan 4

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Designing Benefits Information Avoid complex language when describing benefits Explain purpose of a benefit, its value for employees, and pros and cons of different benefit plans Use graphics to make information understandable at a glance Provide numerous examples illustrating how a benefit choice might affect different types of employees 5

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Social Security Insurance Protect workers against the loss of earnings resulting from old age and unemployment Amended to include disability or dependents, incase of death of the worker supporting them Together known as Old Age, Survivors, and Disability Insurance (OASDI) 6

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Social Security Insurance Supported by tax levied against an employee’s earnings Matched by employer in each pay period Tax revenues are used to pay major benefits Retirement Disability Survivors’ Medicare 7

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Unemployment Insurance Protects workers who lose their jobs through no fault of their own Eligible workers: Submit an application for unemployment compensation with state employment agencies Register for available work Willing to accept any suitable employment that may be offered to them 8

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Workers’ Compensation Insurance State-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness Covers Injuries on the job Work-related illnesses 9

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Work-Life Discretionary Benefits Organizations seek to create a work/life organizational climate that allows employees to balance work with personal needs Organization are adapting work-life programs to accommodate the entrance of Generation Y employees into the workplace 10

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Child and Elder Care Child care - Provided to a child by an employee who remains actively at work Elder care: Provided to an elderly relative by an employee who remains actively at work Backup care program: Employer provides or subsidizes temporary care for its employee’s elders or children when their regular arrangements fall through 11

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Payment for Time Not Worked Vacations with pay Paid holidays Sick leave Sabbaticals Severance pay Supplemental unemployment benefits (SUBs) 12

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Retirement Programs No law mandating retirement age in United States Factors that influences an employee to retire Personal/financial condition Health Family obligations Satisfaction from work Ability to meet changing job demands 13

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Preretirement and Phased Retirement Programs Requires major financial lifestyle adjustment Seminars are conducted to create awareness of kinds of adjustments required when employees retire Phased retirement: Program that allows its employees to gradually cut their hours before retiring 14

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pension Plans Reward employees for their years of service by providing them with income when they retire Categorized based on Contributions made by employer Amount of pension benefits to be paid 15

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Pension Plans Contributions are made jointly by employees and employers Contributory plan Contributions are made solely by the employer Noncontributory plan Amount an employee is to receive on retirement is specifically set forth Defined benefit plan Establishes basis on which an employer will contribute to the pension fund Defined contribution plan 16

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Pension Protection Act Allows employers to automatically enroll employees in defined contribution plans Permits higher contribution limits for 401(k) plans Enables workers to build larger retirement holdings Gives workers greater control over how their accounts are invested 17

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Cash Balance Pension Plans Allows employer to make yearly contribution into employee’s retirement savings account Based on percentage of employee’s pay, typically four percent Benefits depend on employee’s age and years of service with the company 18

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Federal Regulation of Pension Plans Private pension plans are subject to federal regulation under Employee Retirement Income Security Act (ERISA) Vesting: Guarantee of accrued pension benefits to participants at retirement age, regardless of their employment status at that time Prevents companies from laying off employees before they retire, so they are unable to collect their pensions 19

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Federal Regulation of Pension Plans According to ERISA Pension plans must provide employees with vested rights to their accrued benefits after they meet a certain minimum years of service Minimum funding standards should be followed to ensure availability of pension benefits to employees upon retiring Pension Benefit Guaranty Corporation (PBGC) was created Ensures that if a plan is terminated, guaranteed minimum benefits are paid to participants 20