Employment benefits
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Employment Benefits. Business Organizations II LAP 202 Mike Brigner, J.D. Fringe Benefits. Some Mandated By Law: Social Security : 3 types SS Retirement for age 62, 65 & rising (FICA tax to Employer and Employee) SSI (Supplemental Income) SSD (Social Security Disability)

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Employment Benefits

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Employment Benefits

  • Business Organizations II

  • LAP 202

  • Mike Brigner, J.D.


Fringe Benefits

  • Some Mandated By Law:

  • Social Security: 3 types

    • SS Retirement for age 62, 65 & rising

      • (FICA tax to Employer and Employee)

    • SSI (Supplemental Income)

    • SSD (Social Security Disability)

  • Unemployment insurance

    • (Was OBES. Now JFS, Jobs & Family Services)

  • Workers’ compensation insurance (OBWC)

  • (Some law firms do nothing but S.S. or Workers’ Comp representation)


Fringe Benefits

  • Not Mandated By Law:

  • Health Insurance (Note: Mass, Hawaii & every European country has mandatory health insurance)

  • Accident and Disability Insurance (AD&D)

  • Life Insurance

  • Retirement Plans

  • Stock Options

  • Perks

  • These all may be included in “Cafeteria Plan” for employee to choose from. Usually deemed taxable compensation.


Employee Welfare Benefit Plans

  • Why offer?

  • Tax benefit to employer

  • Contributions by employee & employer

  • Required by law?

  • Reporting and disclosure requirements

  • (Complex, most local law firms don’t handle)

Commonly called

health insurance plans

Also includes disability

benefits, life insurance,

dental, child care, legal

services plans.


Federal Laws re Health Ins.

  • HIPPA: Health Insurance Portability Act

    • New employer must cover pre-existing conditions

    • NOTE: Pregnancy IS a pre-existing conditn

  • COBRA: Continuation of Benefits

    • If employer has over 20 employees

    • Upon leaving, employee may continue health insurance up to 3 years at own cost


ERISA

  • Employee Retirement Income Security Act

  • “Every Ridiculous Idea Since Adam”

  • Complex, but the key to almost all pension plans

  • (Few local law firms doing ERISA work)


Tax Benefits of ERISA-Qualified Retirement Plans & IRAs

  • Deductible contributions for employers & employees

  • Employees not taxed on contributions made for them by employer

  • Earnings on plan assets grow tax-free until distributed

  • Many plans (401k) permit employees to contribute own money on pre-tax basis


ERISA Qualified Retirement Plans

  • Defined Benefit Plans

  • Sets certain pension benefit amount received each month

  • Tax-deferred contributions

    • So employee pays no taxes now on contributions

    • Instead, employee is taxes when receiving benefits, when tax bracket should be lower


ERISA Qualified Retirement Plans

  • Defined Benefit Plans (cont’d)

  • Plus: Employee can plan on definite retirement income

  • Minus: Costly for employer to administer

  • Minus: Employee gets one set amount, unless COLA provided

  • Minus: Employer may borrow pension $, then go bankrupt & employees have 0


ERISA Qualified Retirement Plans

  • Defined Contribution Plans

  • Sets amount employer will contribute into participant’s account each year

    • Profit sharing plans -- 401(k) plans

    • ESOPs --Profit-sharing plans

  • Also tax-deferred contributions

  • Where is $? Invested in stock market


ERISA Qualified Retirement Plans

  • Defined Contribution Plans (cont’d)

  • Minus: Less certain retirement income for employee

  • Minus: Employer can terminate plan. No new $ added, but you keep what you have

  • Plus: Less costly for employer

  • Plus: Portable

  • Plus: Available for loans: buying home, medical emergency, educational purposes


ERISA Qualified Retirement Plans

  • Individual Retirement Accounts (IRAs)

  • SEP-IRAs

  • Roth IRAs

  • Keogh Plans

  • 401(k) Plans


Qualified Plan Reporting Requirements

  • (http://www.irs.gov/forms_pubs)

  • Determination letter (to assure “qualified” status)

    • Form 8717 (User Fee)

  • Original IRS Filing (Form 5300)

    • Form 5300

    • Copy of Plan

  • Annual IRS Filing

    • Form 5500


Employment Benefits

  • Concluded

  • Thank you

  • Mike Brigner, J.D.


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