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Employee Benefits. TCHRA 2014 Larry Morgan, SPHR, GPHR, MAIR. Total Rewards. Compensation and Benefits 19% PHR 13% SPHR Compensation is “direct” Benefits are considered “ indirect compensation ”. Agenda. Review employee benefits History Benefit planning and assessment

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employee benefits

Employee Benefits



Larry Morgan, SPHR, GPHR, MAIR

total rewards
Total Rewards
  • Compensation and Benefits
  • 19% PHR 13% SPHR
  • Compensation is “direct”
  • Benefits are considered “indirect compensation”
  • Review employee benefits
    • History
    • Benefit planning and assessment
    • Legal, tax and regulatory issues
    • Plan design issues
    • Cost
    • Employee communications
  • Identify items most likely to appear on exam
a total compensation system

Total compensation

Direct compensation

Indirect compensation


Pay systems

Benefit programs

A Total Compensation System
indirect compensation
Indirect compensation
  • Designed to
    • Attract (limited value)
    • Retain
    • Improve productivity, work quality, and competitiveness
    • Protect employee/family physical and financial well being
    • Tax favorable treatment
  • Must be affordable for employers and attractive to employee
objectives of a total compensation system
Objectives of a Total Compensation System
  • Compatible with organizational mission, values and strategy
  • Compatible with corporate culture
  • Appropriate for the workforce
  • Attract and retain talent
  • Externally equitable
  • Internally equitable
  • Easy to communicate and understand
  • Cost effective
  • Legally compliant
  • Employees want everything at lowest costs
  • Employers want to control expenses
  • Government want revenues
  • Burden on private employers / citizens vs. federal/state government programs
    • Medicare/ Medicaid vs. private health insurance
    • Social security vs. pension, 401k/403b and savings
more on conflict
More on conflict
  • Tax Code and Department of Labor define balance between conflicting priorities
  • “Qualified plan” definition
  • If not “qualified”, the employer must delay taking a deduction on the expense
  • Plans cannot “favor” highly compensated employees (HCE), owners, officers, etc.
  • Definition of HCE varies by benefit plan
a brief history of benefits
A brief history of Benefits
  • Societal issues drive changes
  • Early 1900’s saw few employee benefits
  • 1930’s
  • 1940’s and 1950’s
  • 1970’s
  • 1990’s
  • Competitive Marketplace
  • Benefits as “hidden paycheck”
conducting a benefit needs assessment

Review organizational strategy

Review compensation philosophy

Review current benefits

Review employee needs

Conduct gap analysis

Conducting a Benefit Needs Assessment
the purpose of a gap analysis is to
The purpose of a gap analysis is to

A. determine which employees are underinsured.

B. revise benefits that are not meeting employee or organizational needs.

C. eliminate benefits that are the most costly.

D. ensure that all employees receive the same benefits.


Types of Benefits

    • Mandated
    • Voluntary
  • FMLA
  • FUTA
  • SUTA
  • Workers comp
  • Social Security
    • FICA
    • Medicare
voluntary optional benefits
Voluntary (Optional) Benefits

Health and Welfare

  • Health care
  • Dental
  • Vision
  • Section 125


    • Tuition
    • Discounts
    • Training
    • Legal
    • EAP
    • Memberships
    • Publications
    • Cell phone
    • Training
  • Retirement
    • Pension
      • Defined Benefit
      • Defined Contribution
    • Retiree Medical
  • Perquisites
    • Car
    • Computer
    • Home security
    • Physical
    • First class air
    • Financial planning
    • Legal

Paid Time Off

    • Sick leave
    • Vacation
    • Holidays
    • PTO
cobra regulations
COBRA Regulations
  • Notify all employees who inform the company of a qualifying event within 14 days even if they do not qualify for COBRA.
  • Notify individuals whose coverage ends before the maximum continuous coverage period allowed.
  • Update general and qualifying event notices.
  • Provide an initial notice within 90 days of the date an employee/spouse is covered under the plan and mail the summary plan description to the residence.
  • Establish reasonable notification procedures and communicate them to all employees.
consolidated omnibus budget reconciliation act cobra
Consolidated Omnibus Budget Reconciliation Act (COBRA)
  • Provides continuous group medical coverage after a qualifying event.
  • Type of event determines the length of coverage (18 to 36 months).
  • Voluntary, involuntary, reduction of hours, divorce, age attainment
  • Employer can charge actual cost plus an administration fee.
  • Initial notice.
  • Qualifying event notice.
cobra timeframe
COBRA timeframe
  • Termination for gross misconduct – O months
  • Other termination (voluntary or involuntary) – 18 months
  • Layoff or reduction in hours – 18 months
  • Disability – 29 months*
  • Divorce or death of employed spouse – 36 months
  • Dependent child loses eligibility – 36 months**
  • State laws may vary
  • Note changes under Patient Protection and Affordable Health Care Act to age 26 mandate (through calendar year of age 26 allowed)
according to cobra a company with at least 20 employees must offer
According to COBRA, a company with at least 20 employees must offer

A. Health insurance to its employees.

B. Continued medical coverage to employees terminated for gross misconduct.

C. COBRA benefits to workers if the company terminates its health plan.

D. COBRA benefits to spouses of deceased workers.

social security
Social Security

Employer pays 7.65%

Employee pays 7.65%

Two components

    • Social Security 6.2%
    • Medicare 1.45%
  • 2013 maximum limit on SS portion is $113,700
  • No limit on Medicare portion 1.45%**
  • Deduction still made on 401(k)!!!
  • No deduction on FSA pre-tax accounts
  • ** 2.35% on income over $200,000
social security1
Social Security
  • Provides:
    • Retirement income.
    • Disability, death, and survivor’s benefits.
  • To qualify:
    • People must work 40 quarters, or ten years.
  • Calculated as a set percentage of salary:
    • Yearly maximum limit
    • Deducted from employees’ pay
    • People who work and receive payments must still pay in.
social security retirement benefits
Social Security Retirement Benefits
  • Retirement income:
    • Depends on individual’s average earnings.
    • Indexes benefits to inflation.
    • Pays reduced benefits at age 62.
    • Indexes retirement age for full benefits to year of birth.
social security disability benefits
Social Security Disability Benefits
  • Are paid to workers (and eligible dependents) under full retirement age.
  • Are paid when workers:
    • Cannot work for at least five months.
    • Have an impairment that is expected to continue for 12 months or result in death.
  • Start after a five-month waiting period.
social security death and survivor s benefits
Social Security Death and Survivor’s Benefits
  • Death benefits
    • $255 lump-sum payment to a surviving spouse
  • Survivor’s benefits are paid to:
    • Spouse at age 60 (50 if disabled).
    • Spouse caring for a child under age 16/disabled child.
    • Unmarried children under age 18.
    • Children if disabled before age 22.
    • Dependent parents, age 62 or older.
  • Not dependent on income or ability to pay.
  • Employee and employer pay a percentage of salary; there is no yearly maximum.
  • All individuals are eligible at age 65.
  • Employer benefits are primary for employees 65 and over who are working.
  • Part A (hospitalization) is mandatory.
  • Part B (medical insurance) is optional.
  • Managed care option.
  • Part C (Medicare Advantage Plans) allows participation in different health care plans such as HMO and PPO
  • Part D (prescription drugs)
medicare part d
Medicare Part D
  • Adds an outpatient prescription drug benefit.
  • Benefits include:
    • Annual deductible of $325.
    • Coverage gap between $2,970 and $4,750.
    • Catastrophic level of coverage reached after $6,734 in out of pocket.
unemployment insurance
Unemployment Insurance
  • State run program
  • Mandatory benefit funded primarily by employers.
  • Eligibility in most states includes:
    • Being available and actively seeking work.
    • Not refusing suitable employment.
    • Not having left job voluntarily.
    • Not being unemployed because of labor dispute.
    • Not being terminated for misconduct.
    • Working a minimum number of weeks.
  • Duration: 26 weeks
  • Note: Federal program may extend this during periods of high unemployment with supplemental unemployment benefits (SUB)
workers compensation
Workers’ Compensation
  • State insurance paid by the employer.
  • Protects workers in case of a work-related injury or disease.
  • Experience-rated; employers who have a high number of claims pay more.
  • Employers assume all costs, regardless of who is to blame.
workers compensation1
Workers’ Compensation
  • Benefits include:
    • Medical care.
    • Disability income.
    • Rehabilitation.
    • Death benefits.
  • Compensation is tied to fixed schedules.
  • States regulate workers’ compensation.
An employee drops a cup of coffee on the shop floor, slips, and breaks a leg. The cost of the injury will be covered

A. by the employer

B. by the employee

C. jointly by the employer and employee

D. by Medicare

qualified vs non qualified benefits
Qualified vs. Non-qualified benefits
  • Qualified
    • Meets IRS and ERISA standards
    • Employer may take immediate tax deduction
  • Non-qualified
    • Typically used for executives
    • Keeps executives “whole”
    • Employer cannot take deduction until it is taxable to the employee
employee retirement income security act erisa
Employee Retirement Income Security Act (ERISA)
  • Establishes standards for tax-favored status of ALL benefits.
  • Allows organization to deduct cost.
  • Allows employee tax favored status
  • Minimum eligibility standards
  • Sets standards for retirement plans.
  • Operate plans for exclusive benefit of participants and their beneficiaries.
  • Sets up the Pension Benefit Guaranty Corporation (PBGC).
  • Defines minimum vesting schedules for cliff and graded vesting.
  • Sets procedures for claims administration and appeals of adverse determinations.
  • Establishes prudent person rule.
characteristics of qualified plans
Characteristics of Qualified Plans
  • Under ERISA, plans must:
    • Be in writing and be communicated to employees.
    • Be established for exclusive benefit of employees/beneficiaries.
    • Satisfy rules concerning eligibility, vesting, and funding.
    • Not favor officers, shareholders, or HCEs.
prudent person rule sphr only
Prudent Person Rule- SPHR only
  • Fiduciary role
  • Employer sponsor must follow prudent person rule
  • Cannot take risks that a reasonably knowledgeable, prudent investor would take under similar circumstances
defined benefit plans

Flat-dollar formula

  • Benefit amount is based on a formula.
  • Employer funds the plan and bears the risk.
  • Insured by the PBGC.



Cash balance plan

Final-pay formula

Defined Benefit Plans
cash balance plan hybrid
Cash Balance Plan- hybrid
  • Type of defined benefit plan
  • Expresses promised benefit in terms of hypothetical account balance
  • Employer assumes investment risks and rewards
  • Is portable
  • At retirement, employees receive either:
    • Lifetime annuity
    • Lump sum
defined contribution plans
Defined Contribution Plans

Profit-sharing plans

  • Employees and employers pay a specific amount per person into the fund.
  • Benefits are determined by fund performance.

Money purchase plans


401(k) / 403(b) plans

catch up contributions
Catch up contributions
  • DC limit employee contributions to $17,500 in 2013
  • However, persons turning age 50 or above to supplement IRA and 401k/403b contributions
    • 2013 catch up limit is $5,500

Unemployment Compensation Amendments (UCA) imposes a 20% federal income tax withholding requirement on plan rollovers unless there is a trustee-to-trustee transfer.

Which of the following tax-deferred plans applies to employees of colleges, universities, and public charities?



C. 457

D. 403(b)

economic growth and tax relief reconciliation act egtrra
Economic Growth and Tax Relief Reconciliation Act (EGTRRA)
  • Adjusts minimum vesting schedules for employer matching contributions to defined contribution plans.
    • Three-year cliff vesting
    • Six-year graded vesting (20% after two years and 20% per year thereafter)
vesting for db pension plans
Vesting for DB Pension Plans
  • Five year cliff vest or
  • 20% after three years and 100% after seven years
economic growth and tax relief reconciliation act egtrra1
Economic Growth and Tax Relief Reconciliation Act (EGTRRA)
  • Sets permissible compensation limits—Code Section 401(a)(17).
  • Sets limits on annual pensions—Code Section 415(b).
  • Permits catch-up contributions for employees age 50 and older.
  • Modifies distribution and rollover rules.
nonqualified deferred compensation plans
Nonqualified Deferred Compensation Plans
  • Provide additional benefits to key executives.
  • Employees defer reporting income; not subject to the limits placed on qualified plans.
  • Employer contributions are not deductible.
  • Funds are not protected by ERISA or PBGC.

Examples: Rabbi trusts, top hat, mirror plans and excess deferral plans

qualified domestic relations orders qdros
Qualified Domestic Relations Orders (QDROs)
  • Create or recognize the right of an alternative payee to receive all or a portion of an employee’s pension benefits.
  • Orders must relate to child support, alimony, or marital property rights and must be made under state domestic relations law.
health care plans
Health-Care Plans
  • Indemnity (fee-for-service) plans
    • Full-choice plan
    • Employees can go to any qualified physician.
    • Fees are generated when services are used.
  • Managed care plans
    • Prepaid health-care plans
    • Physician is paid per capita (per head) rather than for actual treatment provided.
    • Members enroll and pay a set monthly or annual fee.
types of managed care plans
Types of Managed Care Plans
  • HMO- Health maintenance organizations
    • Group, staff, and IPA models
  • PPO- Preferred provider organizations
  • POS- Point-of-service organizations
  • EPO- Exclusive provider organizations
  • PHO- Physician hospital organizations
more than one health plan
More than one health plan?
  • Coordination of benefits apply
  • First the claim goes to the employee
  • Then, to other plans
  • Birthday rule
    • For dependents, primary coverage is whichever employee (parent) has birthday first in calendar year
An employee is covered under more than one employer-sponsored insurance plan. A health claim requires

A. utilization review.

B. coordination of benefits.

C. establishment of out-of-pocket maximums.

D. premium sharing.

other health care options
Other Health-Care Options
  • Dental plans
  • Vision care plans
  • Prescription drug plans
  • Employee assistance programs
  • Alternative health care
  • Cancer plans
health care funding
Health-Care Funding
  • Fully insured
    • Minimum premium
    • Partially self-funded
  • Administrative-services-only
  • Third-party administrator
  • Self-insured
  • Section 105
  • Health insurance purchasing cooperative
controlling health care costs
Controlling Health-Care Costs
  • Balance billing
  • Consumer Directed Health Care
  • Increase deductibles
  • Increase co-pays
  • Redesign policies
  • Promote wellness
  • Employee education
  • Reasonable and customary
  • Utilization review
nonprescription drugs
Nonprescription Drugs
  • Nonprescription over the counter drugs or medicines can no longer be reimbursed through an FSA without a doctors note.
  • Expenditures must be for medical care defined as the diagnosis, cure, mitigation, treatment, or prevention of disease.
health reimbursement accounts hra
Health Reimbursement Accounts (HRA)
  • Employer-funded plan.
  • Combines a high deductible health care plan with individual HRAs the employer funds.
  • HDHP deductible levels for 2013
      • Individual $1,250
      • Family $2,400
  • Plan reimburses employees for eligible and substantiated health-care expenses.
  • Employees may NOT contribute on any pretax basis.
  • Not portable
health savings account hsa
Health Savings Account (HSA)
  • Earnings grow tax-free and distributions for qualified medical expenses are tax-free.
  • Unused funds can be carried over from year to year, are portable, and can be used into retirement.
  • Tax-sheltered savings account similar to an IRA that is created to pay for medical expenses
  • Individual must be covered by a high deductible health plan (HDHP) and must not be covered by any other non-HDHP.
  • Contributions can be made by the employer, employee, or both.
in order for the employee to gain a favorable tax treatment from benefits
In order for the employee to gain a favorable tax treatment from benefits
  • Must comply with ERISA
    • Plan document
    • Cannot favor highly compensated employees
    • Summary plan description
  • Must comply with Section 125 regulations
section 125 plans
Section 125 Plans
  • Premium-only plans
    • Employees receive favorable tax treatment on benefits already offered.
  • Full cafeteria plans
    • Benefit credits are used to purchase benefits.
    • Unused credits can be cashed out.
flexible spending accounts
Flexible Spending Accounts
  • Flexible spending accounts
    • Pretax dollars are set aside to pay for dependent care $5000 or unreimbursed medical expenses $2500.
  • Medical Spending account
    • “Use-it-or-lose-it” options include Grace period of two and one-half months at the end of the plan year or $500 carryover
    • No over the counter medications
    • Limited use FSA for HRA plans
domestic partners
Domestic Partners
  • If same sex couples married in state or jurisdiction which recognizes the marriage, favorable federal tax treatment regardless of state of residence.
  • State tax law may differ.
  • Opposite sex couples not recognized, imputed income tax on value of benefits to employee.
key provisions of the patient protection and affordable care act
Key Provisions of the Patient Protection and Affordable Care Act
  • Continues to evolve
  • Requires employees to have coverage*
  • Exchange programs created
  • Large employer penalty delayed until 2015 (50 or more FTE working 30 or more hours/week)
  • Reporting of employer and employee cost on W-2
  • Minimum essential coverage
  • Affordable coverage (individual only)
  • Must cover dependents to age 26
  • No requirement to cover spouse
  • Summary of Benefit Coverage statements
  • Additional taxation under PCORI and Transitional fees
paid leave
Paid Leave
  • Paid leave for events:
    • Break time
    • Holiday pay
    • Vacation pay
    • Community service pay
    • Leave of absence
    • Bereavement leave
    • Volunteer projects
  • Paid-time-off banks
    • Paid time off is lumped into one account.
    • Proven to be effective at controlling absenteeism.
family and medical leave act fmla
Family and Medical Leave Act (FMLA)
  • Provides 12 weeks of unpaid leave for employees to handle birth, adoption, or serious illness of a child, spouse, parent, or the employee.
  • In loco parentis
  • New ruling on domestic partners
  • Serious illness requires inpatient hospital, hospice, or residential care, or continuing physician care.
  • Military emergency exigency and caregiver leave
  • Modified duty (light duty) vs. same position issues
family and medical leave act fmla1
Family and Medical Leave Act (FMLA)
  • Covers employers with 50 or more employees.
  • Employee must have worked at least 12 months and 1250 hours within 12 month period
  • Entitles employees to:
    • Health benefit continuation.
    • Reinstatement rights.
  • Must treat the employee as an “active employee” while on leave.
  • Employers may determine if leave is paid or unpaid
  • Employers may define 12 month basis
  • Employers must notify employee in writing of FMLA leave status
  • Immediate supervisor CANNOT contact medical provider
according to the fmla which of the following is true
According to the FMLA, which of the following is true?
  • Employers must pay all health benefit costs for employees on leave.
  • Employees must return to a job with equivalent status, pay, and benefits.
  • A week containing a holiday does not count as a full week of FMLA leave.
  • Employees are eligible for FMLA leave after six months.
income replacement protection
Income Replacement Protection
  • Sick leave
  • Short term disability
  • Long term disability
  • SSDI
  • Paid time off programs
    • No fault plan- covers any absence
    • Not covered under ERISA
  • Sick leave
    • Common to require doctor statement after three days
    • Only used for employee or family member illness
  • Disability- usually a waiting period
  • Workers comp
disability coverage
Disability Coverage
  • If employer provides, any income is taxable
  • If employee pays, any income is not taxable
  • Worker comp pays for job related illness or injury
  • Short term generally covers continuous illness / injury up to six months
  • LTD may have same occupation clause of 2-3 years
  • Some plans have inflation or cost of living escalation and waiver of premium clauses
life insurance protection
Life Insurance Protection
  • May be paid by employer or employee
  • Group-term life insurance
    • First $50,000 in group life is not taxable income
    • Excess group-term life insurance
    • Dependent group life insurance
  • Split-dollar plans for executives
  • Accidental death and dismemberment
  • Supplemental life
long term care insurance
Long term care insurance
  • Provides for supplemental coverage in nursing home or at home care
  • In addition to Medicare levels
  • Premiums may be taken on pre-tax basis
which of the following statements about voluntary benefits is true
Which of the following statements about voluntary benefits is true?

A. Employers can deduct their part of a long-term care premium from annual income taxes.

B. Group-term life insurance policies of less than $75,000 are not taxed.

C. Employees do not have to pay taxes on supplemental unemployment benefits.

D. Insurance provided only to executives is not taxable

section 529 plans
Section 529 plans
  • Provides college or education savings
  • May be employer sponsored
  • Post tax, but interest is not taxable
  • May be transferred to other family members
  • Excise tax if not used for education
  • Employers may provide incentive up to 20% of health care premium for PARTICIPATION in wellness programs
  • Cannot be outcome based
  • Must have alternatives for persons not able to participate
  • GINA concerns
  • HIPAA concerns
other benefits1
Other Benefits
  • Flexible Spending Accounts
    • Non-reimbursed medical care
      • Over the counter medications no longer covered
      • Employer is “at risk” if employee leaves
    • Dependent care:
      • Child-care services
      • Elder care
      • $5000 maximum
  • Transportation assistance (Section 132)
    • $245 month limit
  • Tuition reimbursement (Section 127)
    • $5250 annual limit
  • Legal insurance
  • Severance
which of the following items is generally subject to federal taxation
Which of the following items is generally subject to federal taxation?

A. $1,000 reimbursement for a business trip

B. $300 per month for parking

C. $20 gift from a vendor

D. $1,500 for a job-related training seminar


An employer pays an FSA medical claim for $500 in March. In April, the employee leaves the company after setting aside only $250. What happens in this situation?

  • The employee must return $250 to the company.
  • The employer may withhold $250 from the employee’s last paycheck.
  • The employee is entitled to the reimbursement as paid.
  • The employee becomes ineligible for COBRA coverage.
executive perquisites
Executive Perquisites
  • Travel upgrades
  • Airline lounge
  • Company car
  • Golden parachute
  • Golden handcuffs
  • Employment agreements
  • Physical exam
  • Tax preparation
  • Financial planning
  • Legal services
  • SERP
  • Additional medical
  • Emergency evacuation
  • Country club or health club
  • Business expense account
  • Internet use
  • Security system
  • Driver
  • Cell phone / Smartphone
cost of benefits
Cost of Benefits
  • Benefits are very expensive
  • US Chamber of Commerce survey in 2009 suggests employee benefits are 44% of payroll
  • Employee satisfaction rises as level of understanding increases
  • Employer may or may not contribute based on type of benefit (eg. Defined benefit pension or HRA vs. health care)
regulatory agencies and programs
Regulatory Agencies and Programs




State Mandates

Treasury Dept


State Insurance


key laws affecting benefits
Key laws affecting Benefits
  • ADEA
  • FMLA
  • GINA
  • IRC
  • Mental Health Parity Act
  • Patient Protection and Affordable Care Act
  • PBGC
  • Pension Protection Act
  • REA
  • Sarbanes Oxley
  • Unemployment Compensation
genetic information non discrimination act gina
Genetic Information Non-Discrimination Act (GINA)
  • Protects individuals from having genetic information used:
    • In employment.
    • To impact health plan eligibility, enrollment, or premiums.
  • Limits exceptions for genetic testing to:
    • Wellness programming.
    • Physician’s request.
    • Checking biological effects of toxic substances in the workplace.
  • Covered under HIPAA
health insurance portability and accountability act hipaa
Health Insurance Portability and Accountability Act (HIPAA)
  • Limits exclusions for preexisting conditions.
  • Guarantees workers leaving a job with employer-sponsored health coverage the right to purchase coverage on their own.
  • Guarantees renewability as long as premiums are paid.
  • Makes health coverage portable.
health insurance portability and accountability act hipaa1
Health Insurance Portability and Accountability Act (HIPAA)
  • Classifies long-term care expenses as medical expenses.
  • Increases the tax deduction for medical expenses of self-employed individuals.
  • Provides tax exemptions on premature IRA withdrawals used for medical expenses.
  • Includes fraud and abuse provisions.
  • Requires employer to safeguard information and protect against data release and identify theft
hipaa privacy rule administrative duties
HIPAA Privacy Rule:Administrative Duties
  • Establish a system of consistently enforced sanctions.
  • Keep records for six years.
  • Establish written contracts with third parties who have access to protected information.
  • Review data protection and access
    • Filing systems restricted
    • Employee benefit information kept out of personnel files
    • System security
    • Data encryption
hipaa privacy rule administrative duties1
HIPAA Privacy Rule:Administrative Duties
  • Health Information Technology for Economic and Clinical Health (HITECH )
  • Establish systems for tracking protected health information.
  • Safeguards for protecting private information
  • PHI and ePHI definition-
    • Includes diagnosis, medical treatment and payment
    • Safeguards DOB, SS, sharing of health related information
    • Other reasons require release of information
  • Designate a privacy officer.
  • Establish a complaint mechanism.
  • Ensure that individuals cannot waive their rights.
  • Provide training to the workforce.
mental health parity act mhpa
Mental Health Parity Act (MHPA)
  • Employers are not mandated to have mental health coverage
  • Requires same dollar limits for mental health, substance abuse and medical benefits
  • Copays and deductibles must be the same
  • Annual and lifetime limits must be the same
  • Note preventative care requirement for depression and eating disorders as part of Health Care Reform Act


older worker s benefit protection act owbpa
Older Worker’s Benefit Protection Act (OWBPA)
  • Prohibits discrimination in employee benefits and includes specific requirements for waivers of claims.
  • Prohibits older workers from waiving their ADEA rights unless they are given 21 days to consider the agreement and consult an attorney; in group terminations, workers must receive 45 days.
  • Comply with ADEA
omnibus budget reconciliation act obra
Omnibus Budget Reconciliation Act (OBRA)
  • Reduced compensation limits in qualified retirement programs.
  • Triggered increased activity in nonqualified retirement programs.
pension protection act
Pension Protection Act
  • PPA made provisions of EGTRRA permanent
    • Catch up contributions
    • SIMPLE IRA and 401(k)
    • Roth 401K and 403b
    • Accelerating vesting schedules for DB and DC plans
      • 20% minimum at two years, 20% each year thereafter and 100% at end of six years (by year seven) OR
      • Cliff vest at three years
  • Automatic enrollment into a 401k plan with default contribution levels
retirement equity act rea
Retirement Equity Act (REA)
  • Provides legal protections for spousal beneficiaries of retirement plan participants.
  • Requires written spousal consent for:
    • Changes in retirement plan distribution elections.
    • Changes in spousal beneficiary designations.
    • In-service withdrawals.
sarbanes oxley act sox
Sarbanes-Oxley Act (SOX)
  • Requires administrators to notify plan participants of blackout periods for 401(k) or defined contribution plans.
  • Protects employees who report violations of federal security laws or fraud against shareholders.
  • Administered by DOL’s Employee Benefits Security Administration.
securities and exchange act
Securities and Exchange Act
  • Affects company stock option and purchase plans.
  • Requires:
    • Registration of all securities sold.
    • Disclosure and restriction of “insider” trading.
      • Black out periods
      • Special filings
  • Regulates discounts on stock purchase by employees
blackout notice requirements
Blackout Notice Requirements
  • Must be done in writing 30 days in advance and must contain:
    • Reasons for blackout.
    • Identification of affected rights and investments.
    • Expected beginning date and length of blackout.
    • Statement that individuals should evaluate the appropriateness of their current investment decisions.
uniformed services employment and reemployment rights act userra
Uniformed Services Employment and Reemployment Rights Act (USERRA)
  • Addresses employer’s obligation to employees on active military duty.
  • Prohibits discrimination in employment, job retention, and advancement (now included within EEOC including “hostile work environment”).
  • Allows military leave for up to five years with vesting toward retirement and paid time off.
  • Requires employees to give notice of their need for leave.
  • Emergency exigency
uniformed services employment and reemployment rights act userra1
Uniformed Services Employment and Reemployment Rights Act (USERRA)
  • Requires service members to notify employers of their intention to return to work.
  • Requires employers to make health coverage available to employees and covered dependents at the employees’ expense (including a 2% administrative fee).
    • Health care duration is for 24 months or length of military service, whichever is less.
according to userra employees called up for active duty are entitled to
According to USERRA, employees called up for active duty are entitled to

A. higher limits for salary deferral contributions.

B. credited service for retirement plan purposes.

C. lower copayments and deductibles for continued family medical benefits.

D. an early vesting schedule for retirement benefits.

some states have additional rights not on exam
Some states have additional rights(Not on exam)
  • Minnesota Parental Leave Act
    • Similar to FMLA
    • 20 or more employees
    • Six weeks
  • Minnesota COBRA
    • Two or more employees
    • Shorter time frames
    • If divorced or disabled, longer extensions
  • Minnesota School Conference Leave
  • Employee sick leave allowed for relatives
  • Minnesota Bone Marrow Leave
federal vs state laws
Federal vs. State Laws
  • Generally, federal law supersedes state laws
  • Not necessarily true with Employee Rights
  • Most favorable given to employee
  • Examples:
    • Minimum wage
    • COBRA and state health insurance continuation
tax and accounting treatment
Tax and Accounting Treatment
  • FASB decides how financial firms should report financial information to shareholders.
    • Requires companies to treat employee stock options as an expense on financial statements beginning in 2005.
  • IRS implements and interprets tax legislation:
    • Revenue rulings
    • Private-letter rulings
international issues sphr only
International issues – SPHR only
  • Standardization vs. localization
  • Culture
  • Home vs. host country expenses
  • Competitive labor market
  • Nationalized programs
  • Laws and regulations
  • Collective bargaining
  • Paid time off
  • Maternity / paternity
  • Special allowances
  • Taxation
  • Expatriation and repatriation issues
  • Totalization agreements
evaluating the total compensation system
Evaluating the Total Compensation System
  • Is it in compliance?
  • Is it compatible with the mission and strategy?
  • Does it fit the corporate culture?
  • Is it internally equitable?
  • Is it externally competitive?
  • Do employees understand the programs?
  • Do employees understand the value?
required communication
Required Communication
  • ERISA requires:
    • Summaries of the plan description, annual report, and material modifications.
    • Filing Form 5500 with the DOL.
  • Other required communications include:
    • COBRA Notice
    • CHIPs
    • ACA notifications re: grandfather status, dependents covered to age 26, well woman care, etc.
    • HIPAA privacy notice
    • Continuation of benefits’ notice.
    • Explanation of stock options (SEC regulation).
    • Posting of all required federal and state employment laws such as FMLA, GINA, etc.
other employee communication
Other Employee Communication
  • Communication plans
    • Written compensation philosophy, policies, practices, procedures, and announcements, as well as open enrollment periods, benefit fairs, etc.
  • Direct communication
    • Confidential communication with HR or a manager
  • Health Care Reform Act providing greater coverage and controls
  • Continued movement toward cost containment
  • Consumer Driven Health Care
  • Employee education and awareness
  • Total reward statements
  • Baby boomers will be influential
  • Trend away from defined benefit plans and retiree medical
key terms to know
Key Terms to know


Cliff vesting


Consumer directed health care

Coordination of benefits


Deferred compensation

Defined benefit plan

Defined contribution plan



Excess deferral



529 plan

Flexible spending account

401(k) plan

403(b) plan

457 plan

Full cafeteria plan

Fully insured plan

terms continued
Terms, continued


Golden handcuffs

Golden parachute

Graded vesting

Group term life insurance


Health insurance purchasing cooperative




Highly compensated employee

In loco parentis

Indemnity health care plans

Indirect compensation


International social security agreements (Totalization agreements)

Involuntary deductions

Lifetime maximum benefit

Long term care insurance

Long term disability

terms continued1
Terms, continued

Managed care


Medicare carve out

Mental Health Parity Act

Modified duty program

Money purchase plan

Non-duplication of benefits

Non-qualified deferred compensation

Older Worker Benefit Protection Act

Out of pocket maximum

Paid time off bank



Pension Protection Act


Point of service organization

Preexisting condition


Premium only plan

Profit sharing plan

terms continued2
Terms, continued

Qualified plan

Qualified domestic relations orders

Qualifying event

Rabbi trust

Reasonable and customary

Roth 401(k)/403(b) plans

Roth IRA



Section 125 plans


Serious health condition


Short term disability

Sick leave


Social Security

Stop loss coverage

Supplemental unemployment benefits

Top hat plan

Total rewards

Totalization agreements

terms continued3
Terms, continued

Unemployment compensation


Utilization review


Voluntary deductions


Work opportunity tax credit

Work related disability

Workers compensation

contact information
Contact information

Larry Morgan