benefits and beyond c. 1 intro

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!


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


Retirement – sources of income


Health Care – sponsors


Why not just give them the money?

Query:


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 . . .


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


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?


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


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?


Benefits can ease a family’s financial burden.


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?


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:


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?



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?



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?




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?



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?


Can we financially measure the value of benefits?

How? Can we measure

the value of a change in benefit design?

How?



What is equity? Does it enhance productivity?

What are ISOs, NQSOs, RSUs, and SARs?

How do they relate to the helmet and skateboard.




Global Benefits – How do other countries provide benefits?



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?



One disability affects many

The Benefit Lineup

Life and Disability Insurance

Annuities Long term care Reverse mortgages Social Security

Disability Worker’s

Compensation


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.



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?


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


Benefits respond to life cycle events and enhance the quality of life . . Such as a vacation in the French Alps


Or a comfortable retirement


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.
