1. Benefits 2

2. Voluntary Benefits Health Insurance Traditional Health Insurance Traditional Health Insurance Health Maintenance Organizations (HMOs) Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) Preferred Provider Organizations (PPOs) Consumer-Driven Health Plan (CDHP) Consumer-Driven Health Plan (CDHP) Health Savings Accounts etc. Health Savings Accounts etc.

3. Rising Cost of Health Benefits Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year but still higher than the increase in workers’ wages (3.7 percent) or the overall inflation rate (2.6 percent). The 6.1 percent average increase this year was the slowest rate of premium growth since 1999. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent. The 6.1 percent average increase this year was the slowest rate of premium growth since 1999. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent. The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy. The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy. Covered workers on average pay 16 percent of the overall premiums for single coverage and 28 percent for family coverage – shares that have remained relatively stable over the past years. Covered workers on average pay 16 percent of the overall premiums for single coverage and 28 percent for family coverage – shares that have remained relatively stable over the past years. Henry J. Kaiser Family Foundation 2007

4. Healthcare Cost Containment Health Maintenance Organizations (HMOs) Organizations of physicians and health-care professionals that provide a wide range of services to subscribers and dependents on a prepaid basis. Organizations of physicians and health-care professionals that provide a wide range of services to subscribers and dependents on a prepaid basis. Preferred Provider Organization (PPO) Is a group of physicians establish an organization that guarantees lower healthcare costs to the employer. Is a group of physicians establish an organization that guarantees lower healthcare costs to the employer. Allows employees to select their doctor of choice from a list of participating physicians. Allows employees to select their doctor of choice from a list of participating physicians.

5. Cost Containment (cont’d) Consumer-Driven Health Plan (CDHP) Is a high-deductible medical insurance plan financed by employer contributions to an employee’s limited individual healthcare spending account Is a high-deductible medical insurance plan financed by employer contributions to an employee’s limited individual healthcare spending account Also known as: Also known as: Defined-contribution health plans Defined-contribution health plans Medical savings accounts (MSAs) Medical savings accounts (MSAs) Health savings accounts (HSAs) Health savings accounts (HSAs) Flexible spending accounts (FSAs) Flexible spending accounts (FSAs) Health reimbursement accounts (HRAs). Health reimbursement accounts (HRAs).

6. Employer Methods for Containing Health Care Costs Preadmission certification for surgical procedures Financial incentives for outpatient surgery and testing Mail-order prescription drug program and medical drug discount cards Mandatory second opinions for surgical procedures Alternative approaches to health care treatment such as herbal therapy or homeopathy Educational programs encouraging health care consumers to assume more responsibility and accountability for the cost and quality of their health care Promoting Web sites or printed materials that list common conditions, treatment, drug prices, and effectiveness Implementation of step therapy programs Multitier hospital coverage networks that allow employees to choose from a variety of hospitals with small, moderate, and steep copayments at the point of service Use of variable copayments (for example, $10 for physician and $25 for specialists) Requiring employees to pay an additional cost if a working spouse refuses coverage from his or her employer Customized health care benefits design allowing employees to purchase riders to increase the level of benefits provided Promotion of wellness and employee assistance programs Automated benefits functions Dependent audits to rid benefit rolls of ineligibles Implementation of a disease management program

7. Domestic Partner Benefits Domestic Partner (Apple Computer) A person over age 18 who shares living quarters with another adult in an exclusive, committed relationship in which the partners are responsible for each other’s common welfare. A person over age 18 who shares living quarters with another adult in an exclusive, committed relationship in which the partners are responsible for each other’s common welfare. A standard definition of domestic partnership contains the following: A minimum age requirement A minimum age requirement A requirement that the couple live together A requirement that the couple live together A specification of financial interdependence A specification of financial interdependence A requirement that relationship be a permanent one A requirement that relationship be a permanent one A requirement that each not be a blood relative A requirement that each not be a blood relative

8. Payment for Time Not Worked Sick leave Severance pay Paid holidays Vacations with pay Time Not Worked

9. Other Discretionary Benefits Supplemental Unemployment Benefits (SUBs) A plan that enables an employee who is laid off to draw, in addition to unemployment compensation, weekly benefits from the employer that are paid from a fund created for this purpose. A plan that enables an employee who is laid off to draw, in addition to unemployment compensation, weekly benefits from the employer that are paid from a fund created for this purpose. SUB benefits are considered deferred compensation and not current earnings. SUB benefits are considered deferred compensation and not current earnings. The fund is derived from employer contributions based on the total hours of work performed by employees. The fund is derived from employer contributions based on the total hours of work performed by employees.

10. Retirement Benefits Pensions:  Defined Benefits Plans  Defined Contribution Plans  Cash Balance Plan (Hybrid) Retiree Health Care  401k and 403b  IRA and SEP IRA

11. Trends Affecting Retirement The number of people age 65 and older tripled to about 34 million between 1940 and 1995. According to U.S. census projections, people age 65 and older are expected to number 86 million by 2050, an increase of 51 million since 2000. In 1960, 45.4 percent of male workers over age 65 were still in the labor force; in 1990, only 27.4 percent were still working. While the labor force participation rates of women between ages 55 and 64 have been rising, further increases are not expected. Eight baby boomers turn 50 every ten minutes. The U.S. net national savings rate was relatively stable at about 7 percent of GDP from 1951 to 1980. It has collapsed since 1980, most recently dropping to less than 1 percent of GDP. In 1900, the average life expectancy in the U.S. was 48; today, it is 80 for women and 75 for men. Virtually all of these gains can be attributed to improvements in public health and safety, such as clean water, refrigeration, seat belts, and routine vaccinations.

12. Types of Pension Plans Contributory plan Contributions to a plan are made jointly by employees and employers. Contributions to a plan are made jointly by employees and employers. Noncontributory plan Contributions to a plan are made solely by the employer. Contributions to a plan are made solely by the employer. Defined-benefit plan The amount an employee is to receive upon retirement is specifically set forth. Defined-contribution plan The basis (amount) an employer contributes to the pension fund is specified.

13. Contemporary Pension Plan Options 401(k) Savings Plans Defined Contribution A tax-deferred savings plan. A tax-deferred savings plan. Employees save through payroll deductions. Employees save through payroll deductions. Employers may match a portion of employee savings. Employers may match a portion of employee savings. Cash-Balance Pension Plans Employer contributes a percentage of employee’s pay each year. Account balance earns interest each year. Experts predict it will replace traditional pension plans.

14. Federal Regulation of Pension Plans Employee Retirement Income Security Act (ERISA) Private pension plans are subject to ERISA regulations that provides standards and controls for pension plans: Private pension plans are subject to ERISA regulations that provides standards and controls for pension plans: Plans must comply IRS tax standards to qualify. Plans must comply IRS tax standards to qualify. Plans must meet actuarial standards to qualify for Pension Benefit Guarantee (PBGC) insurance. Plans must meet actuarial standards to qualify for Pension Benefit Guarantee (PBGC) insurance. Plans must meet Department of Labor standards for treatment of plan participants. Plans must meet Department of Labor standards for treatment of plan participants.

15. Federal Regulation of Pension Plans Vesting A guarantee of accrued benefits to participants at retirement age, regardless of their employment status at that time. A guarantee of accrued benefits to participants at retirement age, regardless of their employment status at that time. ERISA requires that plans must provide that employees will have vested rights in their accrued benefits after certain minimum-years-of-service requirements have been met. ERISA requires that plans must provide that employees will have vested rights in their accrued benefits after certain minimum-years-of-service requirements have been met. Pension Plans and Underfunding Inadequate funds to cover retirement obligations along with pension plan failures could overwhelm the PBGC. Inadequate funds to cover retirement obligations along with pension plan failures could overwhelm the PBGC.

16. Retiree Health Benefits Future retirees should expect to cover the costs of their health care not covered by Medicare. By 2031, companies are expected to pay less than 10 percent of total medical expenses for retirees as part of actions already taken. About 20 percent of employers studied have eliminated retiree medical plans for new hires, and 17 percent will require new hires to pay the full premium for coverage. Watson Wyatt Worldwide 2002

17. Employee Services Employee Assistance Programs (EAPs) Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs. Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs. Typically provide diagnosis, counseling, and referral for advice or treatment for problems related to alcohol or drug abuse, emotional difficulties, and financial or family difficulties. Typically provide diagnosis, counseling, and referral for advice or treatment for problems related to alcohol or drug abuse, emotional difficulties, and financial or family difficulties. Child and Elder Care Care provided to a child or an elderly relative by an employee who remains actively at work. Care provided to a child or an elderly relative by an employee who remains actively at work.

18. Work/Life Benefits: Balancing Work and Home Needs Child care/elder care referral services Time off for children’s school activities Employer-paid on-site or near-site child care facilities Flexible work hours scheduling Health club and wellness programs Employer-accumulated leave days for dependent care Subsidized temporary or emergency dependent care costs Extended leave policies for child/elder care Educational reimbursement Sick-child programs (caregiver on call) Work-at-home arrangements/telecommuting Partial funding of child care costs Part-time work schedules

19. AwardsAwards Other Benefits and Services Recreational and Social Credit Unions Food Services Purchasing Assistance Transportation Pooling On-Site Health Services Legal Services Financial Planning Housing and Moving

20. F1000 Firms Using Flexible Benefits Organizing for High Performance, 2001

21. Choosing Benefits at NCR (2000) Medical Opt out -$4,800 Traditional Base HMO-$800 Enhanced +$1,000 PPO +$1,300 Long-Term Disability Opt Out -$84050%SalaryBase 60% Salary +$24070%Salary+$480 Life Insurance NoneBase 1 X Salary +$240 2X Salary +$480 3X Salary +$720 4X Salary +$960 401KNone-$1,800 3% Match 5 year vest +$1,200 6% Match 5 year vest Base 6% Match 1 year vest +$900 10%Match No vest +$2,400 Paid Parental Leave None-$1803-dayBase 12 week ½ Salary +$540 12 Week Full Salary +$1,800

22. Perks to Attract and Retain   In North Texas, the Container Store – which ranked No. 4 in Fortune magazine's list of best places to work – offers employees on-site carwashes, dry cleaning and free yoga classes.   Texas Instruments Inc. provides on-site concierge service for its Dallas employees.   At Dallas-based Half Price Books, employees are allowed to borrow any of the books, music or movies in stock.   And employees at T. Boone Pickens' BP Capital LLC can use the office fitness room and book appointments with a personal trainer. Dallas Morning News 2.21.07

23. Special Extras Game room Home computers Stock for spouse Pet friendly Pet day care Health club Chef – take home meals Nap room Sabbaticals Beer on Friday Concierge service Wash gym clothes Oil change in parking lot Dental service in parking lot Dry cleaning No dress code 42 kinds of drinks Game tickets Credit union Discount club membership

24. Design benefits to align with overall compensation strategy Benefits provide security for employees and their families It is important to: Provide benefits employees value and appreciate Provide benefits employees value and appreciate Communicate value of benefits to employees Communicate value of benefits to employees Summary and Conclusions