employee benefits mike otis, benefits manager human resource services employee benefits 3770...

Employee Benefits

Mike Otis, Benefits Manager

Human Resource Services

Employee Benefits

3770 Beardshear Hall


Benefits Exercise

“It’s good for the heart!”

Employee Benefits



Utopia Enterprises – Your Employer of Choice!

We provide a “buffet” of benefit choices to meet your individual

needs!!

Employee Benefits



Employee Benefits



Benefits OfferedSource: 2005 Iowa Employer Benefits Study, David P.

Lind and Associates

Offered by Employers with 250 or more Employees

Rank

Health Insurance 97.7% 1

Life Insurance 95.4% 2

Retirement Plans 94.4% 3

Paid Holidays 94.1% 4

Pre-Tax deductions for Employee benefit contributions 86.5% 5

Long Term Disability Insurance 84.1% 6

Paid Vacation 83.7% 7

Educational Assistance/Tuition Reimbursement 75.1% 8

Sick Leave 73.8% 9

Employee Assistance Program (EAP) 73.1% 10

Fitness Center or Gym subsidy 36.7% 11

Long Term Care Insurance 32.8% 12

Flextime 32.5% 13

Casual Dress (every day, not just Fridays) 32.2% 14

Retiree Health Insurance (post age 65) 25.6% 15

Telecommuting 18.9% 16

Child Care Assistance (on or off site) 7.4% 17

Subsidized employee meals Not on list 18

Free Coffee/Soda Not on list 19

Pet Insurance Not on list 20

Agenda• Employer Challenges

• General Concepts

• Health Benefits

• Life and Disability Benefits

• Flexible Spending Accounts

• Vacation/Sick Pay/PTO

• Retirement Plans

• Voluntary Benefits

Employee Benefits



Employer Challenges• Structuring employee benefit packages that meet the needs of a diverse workforce – one size does not fit all• Benefits that help with recruiting and retention efforts• Administering benefit programs – costly and time-consuming. Not a profit-making venture!• Limited budgets – Benefits were 44% of Payroll in 2005 (U.S. Chamber of Commerce report)

• Government restrictions/legislation

Employee Benefits



General Concepts • Core (traditional) vs. Non-core (voluntary) Employee Benefits

• Pre-tax benefits/after-tax benefits

• Cafeteria Plan concept

• The value of a “Hidden Paycheck”

• Total-Compensation package approach (cash and non-cash compensation)

Employee Benefits



Core vs. Non-Core Benefits

Employee Benefits



Core Benefits (Traditional)

Non-core Benefits (Voluntary – Elective)

Health Insurance Dental

Prescription Drugs Vision

Basic Life Insurance Supplement Life, Dependent Life

Vacation Long-term care insurance

Holidays Auto-homeowners insurance

Sick Pay Mortgage services/discounts

Disability On-site daycare

Tuition reimbursement

Yes, even Pet Insurance

Health Benefits • General types of health coverage

– Medical– Prescription Drugs– Dental– Vision

• Costs for coverage are usually paid under a “cafeteria plan” approach where employees will receive benefit dollars/credits to use to pay for benefits and will be able to select the level of coverage (i.e., single coverage/family coverage)

Employee Benefits



Types of Medical Plans • Indemnity – most expensive. Uses deductibles and co-insurance to manage costs. Not offered by many employers• Preferred Provider Organization (PPO) – managed care. Has a higher level of coverage for using in-network medical providers. Employees pay more for out-of-network providers• Health Maintenance Organization (HMO) – usually the lowest cost choice. Requires care to be coordinated by a Primary Care Physician (PCP). May be limited (or no) coverage outside of the network• High Deductible Health Plans (HDHP) with a Health Savings Account (HSA) – newer types of plans that may benefit healthier participants. Require participants to pay full cost for some services up to a predetermined level before insurance pays. Some services (preventative) may be covered at no cost to participant. Savings can be put into HSAs which have tax advantages.

Employee Benefits



Prescription Drug Benefits • May or may not be part of the regular medical plan – most often a separate benefit• Managed care plan• Typically uses “tiered” coverage

– Generic– Brand– Non-brand– Mail Order

• Generic drugs are generally as effective as brand-name pharmaceuticals • Not all drugs are covered• Mail order is typical (may be required) for maintenance medications

Employee Benefits



Dental Benefits • May or may not be a managed care dental network• Typical plan has 4 parts

– Preventative (exams, x-rays, cleanings) – typically 100% paid– Basic services (fillings, etc) – typically subject to deductible and co-insurance)– Major services (crowns, bridges) – typically subject to deductible and co-insurance (usually 50%)– Orthodontia – typically limited to children. Standard plan is 50% coinsurance to lifetime max of $1500 - $3000

Employee Benefits



Vision Benefits • Usually an optional (voluntary) benefit • May or may not be separate from the regular medical plan

– Some medical plans pay for annual vision exam • Typically is a managed care vision network• May require employee contributions or may be a discount-only plan• Typically covers an annual eye exam at a minimal cost• Usually provides for glasses “or” contacts using a deductible and co-insurance every 1-3 years• Laser eye surgery typically not provided – but may have a discount using a preferred service

Employee Benefits



Life Insurance Benefits • Know what is offered – “term” life vs. “whole” life• Typical employer sponsored life insurance offerings

– Basic life– Supplemental (optional) life– Accidental Death and Dismemberment (AD&D)– Dependent life insurance

Employee Benefits



Basic Life • Will be “term” life• May be a flat amount ($20,000) but usually a multiple of annual salary – 1X or 2X is standard. Sometimes up to 4X. Employers typically only provide for “basic” life insurance needs – may not be adequate for most employees• Rate for coverage is usually stated as “cost per thousand dollars of coverage” – is usually a blended rate for all of an employer’s employees• Employees may or may not get coverage at no cost under a cafeteria plan (benefit credits)

Employee Benefits



Supplemental Life • Optional coverage in addition to Basic life – not always offered. Employees pay cost • Will usually be “term” life coverage• Usually a multiple of annual salary – 1X to sometimes up to 6X• Rate for coverage is usually stated as “cost per thousand dollars of coverage” • Cost is based on current age• Caution – look at costs carefully – may be able to purchase more coverage in the general marketplace at a more favorable cost – especially if under age 35

Employee Benefits



Accidental Death and Dismemberment

• May be provided as part of Basic Life coverage or may be optional (voluntary)• Usually in multiples of salary – 1X to 4X• Only pays fully in the event of an accidental death – pays partially for dismemberment

Employee Benefits



Dependent Life • Usually optional (voluntary) benefit• Usually a flat amount for a spouse and for each child – typical $10,000 for spouse and $5000 for each child

Employee Benefits



Disability Coverage • Typically in two forms

– Short-term disability • Typically a salary continuance plan• May be provided by earned sick days or PTO bank (combines vacation and sick days)

– Long-term disability• Usually employer provided• May or may not have a waiting period before coverage is effective• Provides “partial” income replacement (50% - 70%)• Benefit waiting period is usually 90 days – 6 months• May not cover some conditions

Employee Benefits



Flexible Spending Accounts • Includes a Health Care Spending Account (HCSA) and a Dependent Care Spending Account (DCSA)• Allows participants to use pre-tax dollars to reimburse themselves for medical and dependent care expenses – great tax advantages!!• IRS limits annual reimbursement amounts• Use-it-or-lose-it provision – need to estimate expenses wisely

Employee Benefits



Health Care Spending Account • Participants make an annual election – taken from pay on a monthly basis – limited to $5000 annually per household

•Can be used for non-covered medical expenses such as co-pays, deductibles for medical, dental, prescription drugs, vision, etc

• Also includes many over-the-counter medications that are not covered under prescription drug plan (ex: Tums, Prilosec, Advil, Claritin and many others)

• Great to use to plan for major expenses like laser eye surgery, crowns or bridges, etc. that may not be covered under regular health plans or that have a large co-payment or deductible

Employee Benefits



Dependent Care Spending Account

• Limited to $5000 per household• Use to reimburse for dependent child care to allow parents to work (outside of home) or to attend school• Child care includes in-home care, child care centers, and pre-school (kindergarten expenses not eligible)• Covers children < age 14

Employee Benefits



Vacation• May be provided under separate program or combined under a PTO plan with sick days• May be earned monthly or provided on an annual basis• Many employers require all vacation to be used in a year – no carryover (balance sheet accrual)• If carryover allowed, typically subject to an accrued maximum number of days or hours

Employee Benefits



Retirement Benefits•Defined Benefit Plans (traditional Pension)•Defined Contribution Plans

– 403(b)/ 457 Not-for-profit employers– 401(k) For-profit employers– Required plans– Supplemental plans

• Hybrid Retirement Plans• Deferred Compensation Plans• IRS restrictions

Employee Benefits



Comments on Retirement • Defined Benefit (Pension) plans are the exception rather than the rule • Many employers now will automatically enroll employees in 401(k)/403(b) plans• Understand the time-value of money – compounding• Save early – the pain will be much less later• Take full advantage of any employer match to retirement plans• “DIVERSIFY” investments – Many employees are too conservative or too risky• Asset allocation models and retirement calculators are offered by many providers

Employee Benefits



Employee Benefits



401(k), 403(b) Illustration - saving $100/month - average 5% annual return - retirement @ age 65

Age

# of years

to save Balance

@ Age 65 25 40 $152,602 40 25 $59,551

Opportunity Loss $93,051

- with employer match of $50/month 25 40 $228,903 40 25 $89,326

Opportunity Loss $139,577

Conflicting Priorities for Savings/Retirement

• Car payments/car insurance

• Mortgage/rent/student loans

• Utilities

• Food/beverages

• Clothing

• Entertainment

• Life expenses in general

Employee Benefits



Other Voluntary Benefits • Offered as optional benefits – typically employee pays full cost• Voluntary benefit programs typically offered at a discount price resulting from group purchasing power• Employer may offer the option of payroll deduction• Examples are auto/homeowners insurance, pet insurance, computer purchase discounts

Employee Benefits



Closing Thoughts • Employee benefits have huge budget impacts to employers• Employees need to understand the “total compensation” an employer provides – not just the “salary”• Employees should take advantage of retirement plan offerings and save early – and always save enough to at least take advantage of employer’s matching contribution• Employees should pick a medical plan that fits their situation – the least expensive plan is not always the best• Employees should make sure to have enough life insurance and disability insurance to cover financial obligations – outstanding student loans, mortgages, etc. Probably will need to purchase additional life coverage outside of employer-sponsored benefit• Using flexible spending accounts reduces overall taxes. A little effort can save a lot of $$$ for employees

Employee Benefits



Questions??

Employee Benefits



employee benefits mike otis, benefits manager human resource services employee benefits 3770...

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