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2010
Learning Objectives
At the completion of this section of the module,
students will be able to:
Identify the issues in discretionary benefits
design and implementation.
Define the types of discretionary benefits.
Identify the relationship between various
discretionary benefits programs and
relevant federal law.
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Benefits Examples
Vacation leave
Sick leave
Social Security
Dental insurance
401(K) plans
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Vision insurance
Pensions
Health insurance
Prescription drug
insurance
Medicare
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competitors offer?
> Line of sight: Employee perceptions about
the value of the benefit.
> Return on investment (ROI).
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Benefits Administration
Four basic principles apply to good benefits plan
administration (Murphy, 2009):
Plans should be simple and easy to understand.
Sponsors (employer or benefit provider) should
control the administration expense of plans.
Where possible, allow employee choice to be part of
the overall plan.
Sponsors should allow employees to administer their
own plans by introducing information systems that
enable benefit selection, provide information and
enrollment.
Source: Murphy, T.E. (2009). Benefits and Beyond: A Comprehensive and Strategic Approach to
Retirement, Health Care, and More. Thousand Oaks, CA: Sage Publications
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Outsourcing Administration
An employer may determine that benefits
administration should be handled (all or in
part) by a third-party administrator. The
decision may be based on:
> Subject matter expertise.
> Economies of scale.
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Table 1
HEALTHCARECOVERAGE
ANDSPECIFICSTOP-LOSSCOVERAGE
PREVALENCE
* To ensure that the data are seen as credible, data for metrics with an n of less than 5 are not
displayed.
Percentage
Percentage
of
Percentage Percentage
of
Organization Percentage Percentageof
of
of
Organization
sProviding
of
Organizations
Organization Organization sProviding
OppositeOrganization withSpecific
sProviding
sProviding
Same-Sex
Sex
swithSelfStopLoss
Employee
Spouse
Domestic
Domestic
Funded
(SSL)
HealthCare HealthCare
Partner
Partner
HealthCare
Coverage
Coverage
Coverage
HealthCare
HealthCare
Coverage
Coverage
101
91
39
26
39
30
Percent
95%
92%
39%
26%
40%
81%
Source: Society for Human Resource Management, (2009). Health care benchmarking report.
Alexandria, VA: SHRM.
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Table 2
EMPLOYEEPARTICIPATIONAND
PLANSOFFERED
* To ensure that the data are seen as credible, data for metrics with an n of less than 5 are not
displayed.
Percentageof
Employees
Enrolled
Percentageof
Organizations
OfferingPlan
67
98
HMO
24%
55%
1 Plan
43%
EPO
1%
4%
2 Plans
35%
PPO
49%
83%
3 or More Plans
22%
POS
9%
23%
Indemnity
1%
7%
CDHP
3%
12%
Numberof
HealthCare
PlansOffered
98
Source: Society for Human Resource Management. (2009). Health care benchmarking report.
Alexandria, VA: SHRM.
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Coverage
Single or family?
> Employee (and dependents).
Individual or group?
> Individual and the insurance provider.
> Group of employees through a single
contract.
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Fee-for-Service
Traditional fee-for-service medical plans are
available through many employers but at a
declining rate. These plans offer the greatest
freedom of choice in selecting health care
providers.
> Deductible.
> Co-insurance.
> Out-of-pocket maximum.
> Lifetime benefit maximum.
> Employers may elect to self-fund the
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Dental Insurance
Most dental plans have four components:
1. Preventive and diagnostic.
2. Basic services.
3. Major services.
4. Orthodontia.
. Often provide 100 percent reimbursement for preventive
and diagnostic services and are not subject to a
deductible.
. This coverage is to encourage covered individuals to have
routine dental care that may prevent more costly services
in the future. Deductibles can apply to all other services.
Source: WorldatWork (2007)
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Vision Insurance
Vision care plans typically provide coverage for routine eye
exams every two years and a bi-annual, flat-dollar amount
for frames or lenses.
Source: Martocchio (2008)
Like major medical and dental plans, vision insurance
plans are also offered in a variety of formats similar to feefor-service or managed care options.
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Co-paymentAmount
1: Generic drugs
$8-10
2: Brand drugs
$10-15
3: Lifestyle drugs
$15-40
4: Mail order
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MentalHealthParityActof2007
SubstanceAbuseBenefits
These benefits are similar to mental health coverage
but are targeted to substance abuse treatment and
recovery.
This benefit is often part of an employees health
insurance program.
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Wellness Programs
These are lifestyle programs designed to improve
long-term employee well-being and might include
weight loss, smoking cessation, exercise and
stress management.
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Exercise: Part 1
The National Compensation Survey (administered by the U.S.
Bureau of Labor Statistics) conducts an annual survey about
health care benefits.
Based on the March 2008 Employee Benefit Survey (available at
http://www.bls.gov/ncs/ebs/benefits/2008/ownership/private/table0
5a.pdf
), answer the following questions:
1.What employee segment (civilian, private, state and local
government) has the most access to medical care? What
percentage of that population actually participates in medical care
plans? Is that percentage higher or lower than you expected?
2.What employer segment has the lowest employer share of
premium?
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Exercise: Part 2
Based on the March 2008 Employee Benefit survey table
(available at
http://www.bls.gov/ncs/ebs/benefits/2008/ownership/private/table0
1a.pdf
) that details information about private-sector employers that offer
retirement and health care benefits, answer the following
questions:
1. Are larger or smaller employers (based on the number of
employees) more likely to offer health care benefits?
2. Which organizations are more likely to offer health care
benefits: goods or service-producing organizations?
3. Organizations in which type of service-producing industry are
most and least likely to offer health care benefits?
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Retirement Benefits
Session 3
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ERISA (1974)
Requires plans to provide participants with
information about plan features and funding.
Outlines certain fiduciary responsibilities for those
who manage and control plan assets.
Requires plans to establish grievance and appeals
processes for participants.
Includes provisions to give participants the right to
sue for benefits and breaches of fiduciary duty.
ERISA established the Pension Benefit Guarantee
Corporation (PBGC).
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DefinedContribution
Benefit is unknown.
Cost is known.
Employee bears
financial risk.
Can provide
substantial benefits
to short-service
employees.
Source: WorldatWork (2007) p. 419
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Implementation Issues
Benefit formulas
> Most retirement plans use formulas to determine employee
eligibility, company contributions and employee benefits.
Vesting
> Determines when employees are eligible to receive
contributions made to the plan.
Cliffschedules typically mean that covered individuals
are eligible for the benefits/contributions after a certain
time period, but no benefits before that time period has
passed.
Gradedorgradualschedules offer partial benefits with
company tenure and full vesting at a certain time period.
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% Vested
100
Six-Year Graduated
Year
% Vested
20
40
60
80
100
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% Vested 0
100
Seven-Year Graduated
Years
0-3
3-4
4-5
5-6
6-7
%
Vested
20
40
60
80
100
60
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Exercise: Part 1
The Employee Benefits Research Institute
(EBRI) conducts a retirement confidence survey
annually to examine trends and attitudes about
retirement benefits and plans. Go to the survey
web site (http://www.ebri.org/surveys/rcs/ ) and
answer the following questions.
Based on the EBRIs survey results for 2009,
what are workers expectations for retirement?
Have they changed and why?
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Exercise: Part 2
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Exercise: Part 3
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