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Chapter 1, Benefits and Beyond
Let’s start our venture. Benefits and Beyond
Why are you taking this Course?
Chapter 1 -Introduction to Benefits
An adventure in the world of employee benefits
10/20/10 1Thomas E. Murphy
2
What’s in the News?
10/20/10Thomas E. Murphy
Health Care Reform and the Uninsured. Will employees have enough savings for
retirement? What should we do about the underfunding
of Social Security and Medicare? Should we continue to rely on employer
sponsorship of basic benefits? Why are our benefits so expensive?
Benefits!
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The business and human resource strategy compel employers to continue to offer benefits. In 2014, the law will require they offer health insurance.
If they do not offer benefits, they may be unable to recruit and retain employees.
But benefits costs are rising dramatically! Employers are changing benefit designs and
shift some of the risk and costs to its employees.
The Employer’s Dilemma
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Retirement – sources of income
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Health Care – sponsors
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Why not just give them the money?
Query:
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It is part of their HRM strategy. Favorable tax treatment for employer and
employee Size and leverage Expertise in design and administration Enhance productivity Respond to employee life cycle events Some are mandated by law or funded by
payroll taxes.
Because . . .
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How does it link to business strategy? How does it affect recruiting and selection? What are the choices? How do employee demographics play a
role? What do your product/service competitors
offer? Do you want long term employee
commitment?
The HR Reward Strategy
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Is the employer better suited to assume investment, inflation, and longevity risk with respect to retirement?
What happens when these are shifted to employees?
Why does the government sponsor and mandate benefits?
What was the intent of Social Security? Medicare, Medicaid?
What are some of the choices?
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Typical benefits offered
Protect income & health Long Term Benefits
Retirement income Health insurance Life insurance Disability protection Paid time off
Equity Work life benefits Unemployment
insurance Worker’s
compensation insurance
Long-term care Social Security and
Medicare payroll tax
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Developing Reward Strategy
Rewards are important When selling lemonade
Cash – fixed pay Variable pay – bonus
(short term) Equity (long term) Benefits Can compensation
create value for the employer! How?
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Benefits can ease a family’s financial burden.
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For example:
Affect behaviors? Enhance productivity?
Do benefits help attract better employees?
Do benefits have a positive effect on employee behavior?
Do benefits effectively respond to life cycle events?
Do benefits encourage longer service?
Do they affect employee commitment and loyalty?
Do they enhance productivity?
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Human resource economics, principles, and actuarial concepts
The Benefits Model Agency, Tournament, Efficiency wage
theories Adverse selection What are the life cycle events that lead to
providing benefits?
Topics we will cover:
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How do retirement plans work? What is a DBP, DCP, profit sharing, ESOP,
Cash Balance Plan? Are there plans more suitable for smaller
employers? What are the issues with respect to
employer sponsored retirement plans? How does the recession affect these plans?
Topics we will cover:
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How effective are the pension plans in providing adequate retirement income for life?
How does employer sponsored health care work?
What is an indemnity plan, a PPO, POS, HMO, and an HSA?
What changes will occur as a result of the Pension Protection and Affordable Care Act?
Topics we will cover:
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What are the design features of health care plans?
What is causing the current crisis in health care coverage in the U.S.?
What were the choices relating to health care reform?
How can we improve access to quality health care?
Topics we will cover:
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Topics we will cover:
One Big ProblemHave we found the solution?
There are 50 million in the U.S. without health insurance.
Who are they? Why are they
uninsured? What is impact? Are we dealing with
the real problem?
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Topics we will cover:
Legal regulationLegally mandated benefit
What are the legal compliance issues?
What are ERISA, and the PPA? How does the Internal Revenue Code apply?
What are statutorily mandated benefits: COBRA, HIPAA, FMLA, USERRA, PP&ACA?
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Can we financially measure the value of benefits?
How? Can we measure
the value of a change in benefit design?
How?
Topics we will cover:
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What is equity? Does it enhance productivity?
What are ISOs, NQSOs, RSUs, and SARs?
How do they relate to the helmet and skateboard.
Topics we will cover:
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Topics we will cover:
Global Benefits – How do other countries provide benefits?
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Topics we will cover:
Unions represent 7% (12%)
How administered?
Collective bargaining and benefits – what are the employer and union obligations?
How are such benefits designed?
What are the current issues?
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Topics we will cover:
One disability affects many
The Benefit Lineup
Life and Disability Insurance
Annuities Long term care Reverse mortgages Social Security
Disability Worker’s
Compensation
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Convenience benefits – EAPs, home care, concierge services.
Benefit administration and planning- corporate governance, trust management, investment strategies, employee communications, and the role of management information systems relating to benefits.
Topics we will cover:
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An Analytical Template
To Improve the quality of business decisions.
And, to better evaluate their impact.
To better allocate capital
How modern and efficient are our benefits?
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Apply the “Ladder of Abstraction”
Articulate vision Measurable Goals What are
operational drivers that affect vision
Get inputs, ideas, collect data
ID Range of HRM solutions that support operational drivers
Estimate potential financial impact.
Take baselines Pilot with controls Evaluate, adjust,
implement, drop.
The Analytical Template
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Benefits respond to life cycle events and enhance the quality of life . . Such as a vacation in the French Alps
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Or a comfortable retirement
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Benefits – one size does not fit all Linked to HR strategy and to business strategy Make note of the diverse interests of various
demographics in the workforce. Benefits should link to these groups.
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