Employee Benefits

TCHRA

2013

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 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

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

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

Conflicts

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

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

Total Compensation and the Organizational Life Cycle

Introduction Growth Maturity Decline

Wages and salaries

Competitive but conservative

Moderate At or above market

Pressure to reduce

Incentives Stock possibilities

Bonuses tied to objectives, stock options

Bonuses, incentive plans, stock options

Reduced bonuses, cost-saving incentives

Benefits Basic Moderate, with limited executive perks

Comprehen-sive, with expanded executive perks

Looking to limit benefit costs, “frozen” executive perks

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”

Conduct gap analysis

Review organizational strategy

Review compensation philosophy

Review employee needs

Review current benefits

Conducting a Benefit Needs Assessment

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

1. Mandated

2. Voluntary

Mandated

COBRA FMLA FUTA SUTA Workers comp Social Security FICA Medicare

Voluntary (Optional) BenefitsHealth and Welfare▫ Health care▫ Dental ▫ Vision▫ Section 125Other 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

A closer look at specific Benefit Programs

COBRA Regulations

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.

• 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.

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

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

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

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 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

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

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

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.

Medicare

• 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

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• 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

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’ 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 employerB. by the employeeC. jointly by the employer and employeeD. by Medicare

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)

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

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

Fiduciary role Employer sponsor must follow prudent

person rule Cannot take risks that a reasonably

knowledgeable, prudent investor would take under similar circumstances

Retirement plans

Defined Benefit Plans

• Benefit amount is based on a formula.

• Employer funds the plan and bears the risk.

• Insured by the PBGC.

Flat-dollar formula

Career-averageformula

Final-pay formula

Cash balance plan

Defined Contribution Plans

• Employees and employers pay a specific amount per person into the fund.

• Benefits are determined by fund performance.

Profit-sharing plans

Money purchase plans

401(k) / 403(b) plans

ESOPs

Other Tax-Deferred Plans

IRAs For individuals SEPs For self-employed individuals and

very small businesses SIMPLE For employees (with contributions

and matching) 403(b) plans For certain tax-exempt 501(c)(3)

organizations 457 plans For employees of states, state

agencies, and political subdivisions and certain tax-exempt organizations

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 contributions2013 catch up limit is $5,500

Rollovers

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?

A. SEPs

B. IRA

C. 457

D. 403(b)

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.

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)

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

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)

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

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

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?

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

Dental plans Vision care plans Prescription drug plans Employee assistance programs Alternative health care Cancer plans

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

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 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)

• 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)

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.

• 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.

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

Premium-only plans Employees receive favorable tax treatment on benefits

already offered. Flexible spending accounts

Pretax dollars are set aside to pay for dependent care or unreimbursed expenses.

“Use-it-or-lose-it” option now contains a grace period of two and one-half months at the end of the plan year.

No over the counter medications

Full cafeteria plans Benefit credits are used to purchase benefits. Unused credits can be cashed out.

Domestic Partners

If same sex couples married in state or jurisdiction which recognizes the marriage, favorable tax treatment regardless of state of residence.

Opposite sex couples not recognized, imputed income tax on value of benefits to employee.

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 and unpaid leave plans

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)

• 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 (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?

A. Employers must pay all health benefit costs for employees on leave.

B. Employees must return to a job with equivalent status, pay, and benefits.

C. A week containing a holiday does not count as a full week of FMLA leave.

D. Employees are eligible for FMLA leave after six months.

Income Replacement Protection

• Sick leave

• Short term disability

• Long term disability

• SSDI

Illness

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 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

Other benefits

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

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?

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

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

Wellness

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 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?

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?

A. The employee must return $250 to the company.

B. The employer may withhold $250 from the employee’s last paycheck.

C. The employee is entitled to the reimbursement as paid.

D. The employee becomes ineligible for COBRA coverage.

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

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)

Major Legislative and Regulatory actions

Regulatory Agencies and Programs

IRS

State Insurance

FASBIRC

SECDOL

State MandatesTreasury

Dept

Key laws affecting Benefits

ADEA COBRA EGTERRA ERISA FMLA GINA HIPAA IRC Mental Health Parity Act OWBPA

Patient Protection and Affordable Care Act

PBGC Pension Protection

Act REA Sarbanes Oxley Unemployment

Compensation

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)

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 (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

• 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 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)

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)

• 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)

Reduced compensation limits in qualified retirement programs.

Triggered increased activity in nonqualified retirement programs.

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)

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)

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 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

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)

Addresses employer’s obligation to employees on active military duty.

Prohibits discrimination in employment, job retention, and advancement.

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 (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

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)

• 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

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

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

• 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

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

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

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

Trends

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 ADEA Cliff vesting COBRA Consumer directed

health care Coordination of benefits Copayment Deferred compensation Defined benefit plan Defined contribution plan ERISA ESOP

Excess deferral FMLA FASB 529 plan Flexible spending account 401(k) plan 403(b) plan 457 plan Full cafeteria plan Fully insured plan

Terms, continued GINA Golden handcuffs Golden parachute Graded vesting Group term life

insurance HIPAA Health insurance

purchasing cooperative HMO HRA HSA Highly compensated

employee

In loco parentis Indemnity health care plans Indirect compensation IRA International social security

agreements (Totalization agreements)

Involuntary deductions Lifetime maximum benefit Long term care insurance Long term disability

Terms, continued

Managed care Medicare 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 Parachutes PBGC Pension Protection Act Perquisites Point of service

organization Preexisting condition PPO Premium only plan Profit sharing plan

Terms, continued

Qualified plan Qualified domestic

relations orders Qualifying event Rabbi trust Reasonable and

customary Roth 401(k)/403(b) plans Roth IRA SOX SIMPLE Section 125 plans SEC

Serious health condition Severance Short term disability Sick leave SEP Social Security Stop loss coverage Supplemental

unemployment benefits Top hat plan Total rewards Totalization agreements

Terms, continued

Unemployment compensation

USERRA Utilization review Vesting Voluntary deductions Work opportunity tax credit Work related disability Workers compensation

Contact information

Larry Morgan952-210-0742

Larry.morgan@orionhr.com