1. Employee Benefits: Unique Aspects Legal Compliance Tend to become institutionalized Complexity Legal Compliance Tend to become institutionalized Complexity ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

2. Growth of Employee Benefits: Percentage of Wages and Salaries ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N Percentage 1929 55 65 75 86 88 90 93 40% 30% 20% 10% 3.0 17.0 21.5 30.0 35.5 41.3 37.9 36.7

3. Employee Benefits in 1993 by Category Source: Adapted from the U.S. Chamber of Commerce Research Center, Employee Benefits (Washington,DC: U.S. Chamber of Commerce), 1991, 1994. 25.2% Payment for time not worked 28.3% Medical & other insurance 21.1% Legally required 16.0% Retirement plans Paid rest periods (5.6%) Miscellaneous (3.8%) Benefits as % of payroll equals 41.3% Benefits as % of payroll equals 41.3%

4. Reasons for Benefits Growth New Deal legislationNew Deal legislation Wage and price controls -WW IIWage and price controls -WW II Favorable tax treatmentFavorable tax treatment Cost advantages of group purchasesCost advantages of group purchases Negotiation objective of unionsNegotiation objective of unions New Deal legislationNew Deal legislation Wage and price controls -WW IIWage and price controls -WW II Favorable tax treatmentFavorable tax treatment Cost advantages of group purchasesCost advantages of group purchases Negotiation objective of unionsNegotiation objective of unions ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

5. Legally Mandated Benefits Social Security About 8% employer and employee tax on wages Additional Medicaid tax of 1.45% Also includes dependent coverage and Long-term Disability Unemployment Compensation Tax on employers based on use Eligibility: work 1 year - not on strike, quit or fired for cause Workers Compensation Disability,medical care, death benefit & rehabilitation 2/3 of earnings are tax free Based on risk and experience rating Family and Medical Leave Act Social Security About 8% employer and employee tax on wages Additional Medicaid tax of 1.45% Also includes dependent coverage and Long-term Disability Unemployment Compensation Tax on employers based on use Eligibility: work 1 year - not on strike, quit or fired for cause Workers Compensation Disability,medical care, death benefit & rehabilitation 2/3 of earnings are tax free Based on risk and experience rating Family and Medical Leave Act ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

6. Private Group Insurance Life Health - most offer –COBRA - provides continuation of health insurance up to 36 months Disability - short and long term Life Health - most offer –COBRA - provides continuation of health insurance up to 36 months Disability - short and long term ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

7. Retirement Defined Benefit vs. Defined Contribution ERISA (1974) –funding –vesting –communication –portability Defined Benefit vs. Defined Contribution ERISA (1974) –funding –vesting –communication –portability ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

8. ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N Value of Savings at Age 65 for Different Portfolios Value of Savings at 65 (Millions of Dollars) 1.00 0.75 0.50 0.25 $837,434 $357,003 21-2931-3921-2931-39 $128,253 $214,957 It pays to save early and take some risk Investment portfolio (60% stocks, 30% bonds, 10% cash) Investment portfolio of 100% cash(money market )

9. Payment For Time Not Worked Vacations - not mandated –usually 10 days per year in U.S. –30 days mandatory in Europe Holidays Family and Medical Leave Act of 1993 Sick leave Vacations - not mandated –usually 10 days per year in U.S. –30 days mandatory in Europe Holidays Family and Medical Leave Act of 1993 Sick leave ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

10. Average Annual Hours Worked in Manufacturing Source: U.S. Chamber of Commerce Research Center, Employee Benefits 1990 (Washington DC: U.S. Chamber of Commerce, 1991). Annual Hours 3000 2000 1000 Japan United States FranceGermany 2080 1912 1771 1667 Does this account for compettitive differences between Pacific Rim countries and Europe?

11. Managing Benefits Surveys and Benchmarks Cost controls - Managed Care - Coinsurance - Use of HMOs and PPOs Workforce Demographics Communicatiing with employees Flexible Benefit (Cafeteria) Plans Surveys and Benchmarks Cost controls - Managed Care - Coinsurance - Use of HMOs and PPOs Workforce Demographics Communicatiing with employees Flexible Benefit (Cafeteria) Plans ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N

12. Flexible Benefit (Cafeteria) Plans Advantages more appreciation of benefits offered better match between benefits and employee preference cost reduction to employee Disadvantages increased design and start-up costs Advantages more appreciation of benefits offered better match between benefits and employee preference cost reduction to employee Disadvantages increased design and start-up costs ©a Times Mirror Higher Education Group, Inc., company, 1997 IRWI N