1. Introduction to Employee Benefits Chapter 1&2

2. u Definition of Employee benefits: * Narrow approach: employer provided benefits for death, accident, sickness, retirement & unemployment * Broad approach: mandatory benefits, insurance and retirement, time not worked, extra cash and cost of services.

3. Importance of Employee Benefits (March 2008) CivilianState & LocalPrivate u Wages & salaries 69.7% 65.9% 70.6% u Benefits 30.3 34.1 29.4 u Legally required 7.9 6.0 8.4 u Retirement & savings 4.4 7.6 3.6 –Defined contribution 1.8 0.8 2.0 –Defined benefit 2.7 6.7 1.6 u Insurance 8.4 11.4 7.7 –Health benefits 7.9 11.0 7.2 u Supplemental pay 2.6 0.9 3.0 u Paid leave 7.0 8.2 6.7

4. Factors Influencing the Growth of Employee Benefits u Influence of organized labor u Cost advantages u Tax advantages u Legislation

5. Purpose of Employee Benefits u Employee benefits as a financial planning tool u Planning for employee benefits is a DYNAMIC PROCESS u What benefit plans can do? Help employees meet needs that otherwise cannot be met Provide unique tax benefits

6. * Meeting the 4-R needs of the employer * A program to help resist unionization * Provide competitive benefits * Meeting cost targets

7. Current and Future Trends u Rising health care costs u Outsourcing u Legislative

8. u Rising health care costs: u Double digit inflation u Employee contribution: –$81.37/month for single plan –$312.78 /month for family plan u Employer premiums: –$293.25/ month for single plan –$664.04/month for family plan

9. u Employees assuming a larger share of cost u Consumer-directed health plans u Retiree health issues

10. u Outsourcing u Reasons: –Lack of employer expertise –Better service to employees –Focus on company’s core activities u Functions outsourced –COBRA –Administration of medical and dental claims –Government reporting –Flexible spending accounts u Vendors: –Benefit consulting firms –Insurance companies –Stock brokerage firms –Mutual funds

11. Legislative Trends u Anti-managed care trend u Health Insurance Reform (???) u Medicare Reform u Pension Reform