Benefits Services

13
Benefits and Services
Source: NES Rentals.

LEARNING OBJECTIVES Company s
1. Name and define each of the main pay for time Strategic Goals
not worked benefits.
2. Describe each of the main insurance benefits.
3. Discuss the main retirement benefits.
4. Outline the main employees services benefits.
Employee Competencies
5. Explain the main flexible benefit programs. and Behaviors Required
for Company to Achieve
These Strategic Goals
ensation
Comp
L
ike many companies recently, NES Rentals Holdings
Developm nd
Em ations
e nt
Rel
a
Inc. wants to make cost control part of its strategy.
ploye
Training
NES (www.nesrentals.com) rents and sells construction HR Policies and Practices
e
equipment, such as the aerial lifts that roadside crews Required to Produce
use to lift workers to repair traffic lights.1 It s a competitive Employee Competencies
business, and the question was, where could they cut costs, and Behaviors
St r
without undermining their reputation for great products
En eg
e r
tne meca
nt
d
at
vi
no i
an
and service?
mt lP
iu r c tnem na c
d
eR lageL
WHERE ARE WE NOW . . .

We ve now covered two of the three pay
plan components salary (or wages) and
incentives. The main purpose of this chapter
is to discuss employee benefits. We discuss
four main types of plans: supplemental pay
benefits (such as sick leave and vacation pay),
insurance benefits (such as workers
compensation), retirement benefits (such
as pensions), and employee services (such as
child-care facilities). Because legal considera-
tions loom large in any benefits decision,
we cover applicable federal laws and their
implications for managers. This chapter
completes our discussion of employee
compensation. The next chapter, Chapter 14
(Ethics and Employee Rights), starts a new
part of this book, and focuses on another
Access a host of interactive learning aids at important human resource task managing
www.mymanagementlab.com to help strengthen employee relations.
your understanding of the chapter concepts.
MyManagementLab 423
424 PART 4 COMPENSATION
THE BENEFITS PICTURE TODAY

What are your benefits? is the first thing many applicants ask. Benefits indirect
financial and nonfinancial payments employees receive for continuing their
employment with the company are an important part of just about everyone s
compensation.2 They include things like health and life insurance, pensions, time
off with pay, and child care assistance.
Virtually all employers offer some health insurance coverage.3 Employee benefits
account for between 33% 40% of wages and salaries (or about 28% of total payrolls).
Legally required benefits (like unemployment insurance) are the most expensive
benefits costs, followed by health insurance. Figure 13-1 summarizes the breakdown
of benefits as a percentage of employee compensation.
Health care benefit costs are rising. Health benefit costs rose 8% in 2011 and an
estimated 8.5% in 2012, making total 2012 health benefit costs per employee well
over $9,500.4 Employers contend that the new Patient Protection and Affordable Care
Act will raise this more, as we will see.
Employees understand the value of health benefits. In one survey, 78% of
employees cited health care benefits as most crucial to retaining them; 75% cited
compensation. But the same survey found that only 34% are satisfied with their
health care benefits.5
Policy Issues
Employers therefore need to design benefits packages carefully. The list of policy issues
includes what benefits to offer, who receives coverage, whether to include retirees in the
plan, whether to deny benefits to employees during initial probationary periods, how
to finance benefits, cost-containment procedures, and how to communicate benefits
options to employees.6
Legal issues loom large. Federal laws mandate some benefits (such as Social
Security) while other benefits are at the employer s discretion (see Table 13-1).
However, federal law also impacts discretionary benefits such as vacation leave.
And employers must adhere to the laws of the states in which they do business.
For example, California requires most state contractors to provide domestic partner
benefits for employees.7
There are many benefits and various ways to classify them. We will classify them as
(1) pay for time not worked (such as vacations), (2) insurance benefits, (3) retirement
benefits, and (4) services. We will start our discussion with pay for time not worked.
But in any case, the benefits should make sense in terms of supporting the employer s
strategy, as the accompanying Strategic Context feature illustrates.
FIGURE 13-1 Relative Legally required

Importance of Employer Costs 8.2%
for Employee Compensation, Retirement & savings
March 2011 3.5%
Sourc.e: www.bls.gov/news.release/ Insurance
ecec.nr0.htm, accessed June 1, 2011.
(including health)
8.0%
Supplemental pay
2.7%
Paid leave
6.8%
Wages and salaries
70.7%
CHAPTER 13 BENEFITS AND SERVICES 425
TABLE 13-1 Some Required and Discretionary Benefits

Benefits Required by Federal Benefits Discretionary
or Most State Law on Part of Employer*
Social Security Disability, health, and life insurance

Unemployment insurance Pensions
Workers compensation Paid time off for vacations, holidays, sick leave,
personal leave, jury duty, etc.
Leaves under Family Medical Leave Act Employee assistance and counseling programs,
family friendly benefits for child care, elder care,
flexible work schedules, etc., executive perquisites
*
Although not required under federal law, all these benefits are regulated in some way by federal law,
as explained in this chapter.
THE STRATEGIC CONTEXT

NES Rentals
As with a company s salary and incentive plans, its benefits plan must make sense
in terms of, and support, the firm s strategy. As we saw in Chapters 11 and 12,
managers must align each component of the employer s total rewards program so
that each contributes in a meaningful way to fostering the employee behaviors that
the company needs to achieve its strategic goals.
Seeking to cut costs while maintaining its reputation for great products and
service, NES Rentals sent their employees home. Today, three-fourths of their
customer support, collections, finance, and other back-office workers at
their Chicago office work from home at least part of the week.8 They therefore no
longer have dedicated desks, but share space when in the office. The CEO says the
results have been good. Productivity has increased 20%. Employee turnover
dropped from 7% in 2009 to virtually non-existent in 2010. NES is leasing
40% less office space, and will save $100,000 in real estate expenses. And he
estimates NES s total savings from instituting this new telecommuting benefit at
about $350,000 annually. Introducing an employee benefit turned out to be a
smart way to support NES s strategy.9
1 Name and define each

PAY FOR TIME NOT WORKED
of the main pay for time Pay for time not worked also called supplemental pay benefits is the most costly
not worked benefits. benefit, because of the large amount of time off that most employees receive. Common
time-off-with-pay include holidays, vacations, jury duty, funeral leave, military
duty, personal days, sick leave, sabbatical leave, maternity leave, and unemployment
insurance payments for laid-off or terminated employees.
Unemployment Insurance
All states have unemployment insurance (or compensation) laws. These provide
benefits if a person is unable to work through no fault of his or her own. The
benefits derive from a tax on employers that can range from 0.1% to 5% of taxable
payroll in most states. An employer s unemployment tax rate reflects its rate of
employee terminations. Although they all follow federal guidelines, states have their
benefits supplemental pay benefits unemployment insurance

Indirect financial and nonfinancial payments Benefits for time not worked such as (or compensation)
employees receive for continuing their unemployment insurance, vacation and Provides benefits if a person is unable
employment with the company. holiday pay, and sick pay. to work through some fault other than his
or her own.
Unemployment insurance/
compensation laws provide
short-term benefits to people
who lose their jobs through
no fault of their own.
Source: Greta Pratt/Corbis Images.
own unemployment laws. Unemployment tax rates are rising in many states. For
example, prior to the recent recession, Maryland s unemployment insurance tax
rate was 0.3% or lower. The rate now averages 2.2% to 13.5% per employee,
depending upon the employer s claim history.10
Firms aren t required to let everyone they dismiss receive unemployment
benefits only those released through no fault of their own. Thus, strictly speaking, a
worker fired for chronic lateness can t legitimately claim benefits. But many managers
take a lackadaisical attitude toward protecting their employers. Employers therefore
spend thousands of dollars on unemployment taxes that would not be necessary
if they protected themselves.
The main rule is to keep a list of written warnings. Beyond that, the checklist in
Table 13-2 can help protect employers. Actions like these should enable you to
demonstrate that the dismissal resulted from the person s inadequate performance.
(Those you fire during their initial 90-day probation are eligible for unemployment,
so follow that checklist for them, too.)
TABLE 13-2 An Unemployment Insurance Cost-Control Checklist

Do You:
n Keep documented history of lateness, absence, and warning notices
n Warn chronically late employees before discharging them
n Have rule that 3 days absence without calling in is reason for automatic discharge
n Request doctor s note on return to work after absence
n Make written approval for personal leave mandatory
n Stipulate date for return to work from leave
n Obtain a signed resignation statement
n Mail job abandonment letter if employee fails to return on time
n Document all instances of poor performance
n Require supervisors to document the steps taken to remedy the situation
n Document employee s refusal of advice and direction
n Require all employees to sign a statement acknowledging acceptance of firm s policies and rules
n File the protest against a former employee s unemployment claim on time (usually within 10 days)
n Use proper terminology on claim form and attach documented evidence regarding separation
n Attend hearings and appeal unwarranted claims
n Check every claim against the individual s personnel file
n Routinely conduct exit interviews to produce information for protesting unemployment claims
Vacations and Holidays

Most firms offer vacation leave benefits. About 90% of full time workers and 40% of
part timers get paid holidays, an average of 8 paid holidays off.11 The most common
U.S. paid holidays include New Year s Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Other common holidays include Martin
Luther King, Jr. Day, Good Friday, Presidents Day, Veterans Day, the Friday after
Thanksgiving, and the days before Christmas Day and New Year s Day.12 On average,
American workers get about 9 days of vacation leave after 1 year s employment, about
14 days after 5 years, and 17 after 10 years.13 Elsewhere, vacation allowances vary from 6
days in Mexico to 10 days in Japan to 25 days in Sweden and France.
Firms have to address several holiday- and vacation-related policy issues. They
must decide, of course, how many days off employees will get, and which days (if any)
will be the paid holidays. Other vacation policy decisions include:
* Will employees get their regular base pay while on vacation, or vacation pay based
on average earnings (which may include overtime)?
* Will you pay employees for accrued vacation time if they leave before taking their
vacations?
* Will you pay employees for a holiday if they don t come to work the day before
and the day after the holiday?
* And, should we pay some premium such as time and a half when employees
must work on holidays?
More firms are moving to a more flexible vacation leave approach. For example, IBM
gives each of its 350,000 plus employees at least 3 weeks vacation. However,
IBM doesn t formally track how much vacation each person takes. Instead, employees
simply make informal vacation arrangements with their direct supervisors.14
Wage surveys and Web sites like www.hrtools.com provide sample vacation policies
for inclusion in the firm s employee manual.
SOME LEGAL ASPECTS OF VACATIONS AND HOLIDAYS Although federal
law does not require vacation benefits, the employer must still formulate vacation
policy with care. As an example, many employers vacation policies say vacation pay
accrues, say, on a biweekly basis. By doing so, these employers obligate themselves to
pay employees pro rata vacation pay when they leave the firm. But if the employer s
vacation policy requires that a new employee pass his or her first employment
anniversary before becoming entitled to a vacation, the employee gets no vacation pay
if he or she leaves during that first year.
One frequent question is whether the employer can cancel an employee s scheduled
vacation, for instance, due to a rush of orders. Here it s important that the employer
formulate its vacation policy so it s clear that the employer reserves the right to require
vacation cancellation and rescheduling if production so demands.
Sick Leave
Sick leave provides pay to employees when they re out of work due to illness. Most
sick leave policies grant full pay for a specified number of sick days usually up
to about 12 per year. The sick days usually accumulate at the rate of, say, 1 day per
month of service.
Sick leave is problematical for employers. The problem is that while many employees
use their sick days only when sick, others use it whether sick or not. In one survey,
personal illnesses accounted for only about 45% of unscheduled sick leave absences.
Family issues (27%), personal needs (13%), and a mentality of entitlement (9%) were
other reasons cited.15 Absenteeism costs U.S. employers perhaps $100 billion per year,
with personal illness accounting for about a third of the absences.16
sick leave
Provides pay to an employee when he or she
is out of work because of illness.
COST-REDUCTION TACTICS Employers use several tactics to reduce excessive

sick leave absence. Some repurchase unused sick leave at the end of the year by
paying their employees a sum for each sick leave day not used. The problem is that
legitimately sick employees may come to work. Others have held monthly lotteries
in which only employees with perfect monthly attendance are eligible for a cash
prize. At Marriott, employees can trade the value of some sick days for other benefits.
Others aggressively investigate all absences, for instance, by calling the absent
employees at their homes.17
Many employers use pooled paid leave plans (or banks ).18 These plans lump
together sick leave, vacation, and personal days into a single leave pool. For example,
one hospital previously granted new employees 25 days off per year (10 vacation days,
3 personal days, and 12 sick days). Employees used, on average, 5 of those 12 sick days
(as well as all vacations and personal days).19 The pooled paid leave plan allowed new
employees to accrue 18 days to use as they saw fit. ( Catastrophic leaves short-term
illnesses causing absences for more than 5 consecutive workdays, and special absences
like bereavement leave were handled separately.) The pooled plan reduced absences.
Most firms don t include federal holidays in their paid time off banks. 20
Evidence-Based HR: Tracking Sick Leave

For many employers, sick leave is out of control simply because they don t measure it.
In one survey, only 57% of employers formally tracked sick days for their exempt
employees and only 46% tracked personal days.21 Three-fourths of the employers
could not even provide an estimate of what their sick pay was costing as a percentage
of payrolls. Therefore, before taking other cost control steps the employer should have
a system in place for monitoring sick leaves and for measuring their financial impact.
The accompanying HR as a Profit Center feature expands on this.
The same applies to controlling health care costs. Some estimate that 5% to 15%
of medical plans enrollees may include ineligible dependents such as ex-spouses.
Periodically auditing dependents can thus translate into significant health care
cost savings.22
HR AS A PROFIT CENTER
Cutting Absences at the Driver and Vehicle Licensing Agency
Government agencies are as (if not more) susceptible to excessive sick leave claims
as are private companies. So when she came in as a director of the United Kingdom s
Driver and Vehicle Licensing Agency, part of the Department of Transport,
Judith Whitaker saw that steps were needed to address the agency s sickness
absence rate.23 The rate had peaked at 14 days out per employee in 2005, at a cost
of about $20 million per year (£10.3 million). The rate was down to 12.5 days
by 2008, but was still too high.
The new director organized a multi-faceted human resource management
initiative to address the sick leave absence problem.24 The agency set a goal
of reducing absences by 30% by 2010. Agency directors received absence-
reduction goals, and their progress was tracked. The agency introduced new
policies and procedures dealing with special leave, rehabilitation support, and
keeping in touch with absentees. They introduced new policies to make it easier
for employees to swap work shifts, and introduced a guaranteed leave day
policy. They also introduced new smoking cessation classes and a weight
management program.
These and similar actions were apparently very successful. The average
annual sickness absence rate in 2010 was down to 7.5 days per employee.
Improved attendance probably contributed to a 7% productivity increase
in 2009 2010. This translates into a reduction in the agency s costs of about
$48 million dollars (£24.4 million).
Parental Leave and the Family and Medical Leave Act

Parental leave is an important benefit. About half of workers are women, and about
80% will become pregnant during their work lives. Furthermore, many people head
single-parent households. Under the Pregnancy Discrimination Act, employers must
treat women applying for pregnancy leave as they would any other employee requesting
a leave under the employer s policies. Beyond this, Congress passed, as noted, the
Family and Medical Leave Act of 1993 (FMLA). Among other things (see Figure 13-2),
the FMLA stipulates that:25
1. Private employers of 50 or more employees must provide eligible employees
(women or men) up to 12 weeks of unpaid leave for their own serious illness, the
birth or adoption of a child, or the care of a seriously ill child, spouse, or parent.
2. Employers may require employees to take any unused paid sick leave or annual
leave as part of the 12-week leave provided in the law.
3. Employees taking leave are entitled to receive health benefits while they are on
unpaid leave, under the same terms and conditions as when they were on the job.
4. Employers must guarantee most employees the right to return to their previous
or equivalent position with no loss of benefits at the end of the leave.
FIGURE 13-2 Your Rights

Under the Family and Medical
Leave Act of 1993 Your Rights
under the
Family and Medical Leave Act of 1993
FMLA requires covered employers to provide up to 12 the previous 12 months, and if there are at least 50
weeks of unpaid, job-protected leave to eligible employees within 75 miles. The FMLA permits
employees for certain family and medical reasons. employees to take leave on an intermittent basis or to
Employees are eligible if they have worked for their work a reduced schedule under certain circumstances.
employer for at least one year, and for 1,250 hours over
Upon return from FMLA leave, most employees must

Reasons for Taking Leave: be restored to their original or equivalent positions with
equivalent pay, benefits, and other employment terms.
Unpaid leave must be granted for any of the following The use of FMLA leave cannot result in the loss of any
reasons: employment benefit that accrued prior to the start of an
to care for the employee s child after birth, or placement employee s leave.
for adoption or foster care;
to care for the employee s spouse, son or daughter, or Unlawful Acts by Employers:
parent who has a serious health condition; or
for a serious health condition that makes the employee FMLA makes it unlawful for any employer to:
unable to perform the employee s job. interfere with, restrain, or deny the exercise of any
At the employee s or employer s option, certain kinds of right provided under FMLA.
paid leave may be substituted for unpaid leave. discharge or discriminate against any person for
opposing any practice made unlawful by FMLA or for
Advance Notice and Medical involvement in any proceeding under or relating
to FMLA.
Certification:
The employee may be required to provide advance leave
Enforcement:
notice and medical certification. Taking of leave may be
denied if requirements are not met. The U.S. Department of Labor is authorized to
investigate and resolve complaints of violations.
The employee ordinarily must provide 30 days advance
notice when the leave is foreseeable. An eligible employee may bring a civil action against
an employer for violations.
An employer may require medical certification to
support a request for leave because of a serious health FMLA does not affect any Federal or State law
condition, and may require second or third opinions (at prohibiting discrimination, or supersede any State or
the employer s expense) and a fitness for duty report to local law or collective bargaining agreement which
return to work. provides greater family or medical leave rights.
Job Benefits and Protection: For Additional Information:

For the duration of FMLA leave, the employer must If you have access to the Internet visit our FMLA
maintain the employee s health coverage under any website: http://www.dol.gov. To locate your nearest
group health plan. Wage-Hour Office, telephone our Wage-Hour toll-free
information and help line at 1-866-4USWAGE (1-866-487-9243):
a customer service representative is available to assist you with
referral information from 8am to 5pm in your time zone; or log
U.S. Department of Labor onto our Home Page at http://www.wagehour.dol.gov.
Employment Standards Administration
Wage and Hour Division
WH Publication 1420
Washington, D.C. 20210
Revised August 2001
Employers have expressed some dissatisfaction with the FMLA. In a survey of 416
human resource professionals, about half said they approved leaves they believed
were not legitimate, but felt they had to grant because of vague interpretations of the
law.26 Tracking leaves was another problem.27
FMLA leaves are usually unpaid, but they re not costless. The costs associated
with hiring temporary replacements, training them, and compensating for their lower
productivity can be considerable.
FMLA GUIDELINES Therefore, the manager who wants to avoid granting non-
required FMLA leaves needs to understand the FMLA. For example, to be eligible for
leave under the FMLA, the employee must have worked for the employer for at least
a total of 12 months and have worked (not just been paid, as someone might be if on
leave) for 1,250 or more hours in the past 12 consecutive months.28 If these do not
apply, no leave is required.
FIGURE 13-3 Online Request

for Leave Form
Source: www.opm.gov/FORMS/PDF_
FILL/opm71.pdf, accessed April 28,
2009.
Employers obviously need procedures for all leaves of absence (including those
awarded under the Family and Medical Leave Act). These include:
* Give no employee a leave until the reason for the leave is clear.
* If the leave is for medical or family reasons, the employer should obtain medical
certification from the medical practitioner.
* Use a standard form to record both the employee s expected return date and the
fact that, without an authorized extension, the firm may terminate his or her
employment (see Figure 13-3).
* One employment lawyer says employers should kind of bend over backward
when deciding if an employee is eligible for leave based on an FMLA situation.29
However, employers can require independent medical assessments before
approving paid FMLA disability leaves.30
Some employers are enriching their parental leave plans to make it more attractive for
mothers to return from maternity leave. Tactics include keeping in touch throughout
the maternity leave, offering flexible jobs with reduced travel and hours, giving mothers
fair access to bonuses and incentives, and facilitating longer leaves.31
Other laws apply to sick leaves. Under the Americans with Disabilities Act (ADA), a
qualified employee with a disability may be eligible for a leave if such a leave is necessary
to accommodate reasonably the employee. Under various state workers compensation
laws, employees may be eligible for leave in connection with work-related injuries.
Many states also have their own, more restrictive versions of the FMLA.32
Severance Pay
Many employers provide severance pay, a one-time separation payment when
terminating an employee. Severance pay makes sense. It is a humanitarian gesture,
and good public relations. In addition, most managers expect employees to give
them 1 or 2 weeks notice if they plan to quit, so it seems appropriate to provide
severance pay when dismissing an employee. Reducing the chances of litigation from
disgruntled former employees is another reason. Severance pay plans also help
reassure employees who stay on after a downsizing that they ll receive some financial
help if they re let go, too. In one survey of 3,000 human resource managers, 82%
of responding organizations reported having a severance policy.33
The reason for the dismissal affects whether the employee gets severance pay. About
95% of employees dismissed due to downsizings got severance pay, but only about a
third of employers offer severance when terminating for poor performance. It is
uncommon to pay when employees quit. The average maximum severance is 39 weeks
for executives and about 30 weeks for other downsized employees.34 About half of
employers surveyed give white-collar and exempt employees 1 week of severance pay
per year of service, and about one-third do the same for blue-collar workers.35 If the
employer obligates itself (for instance, in its employee handbook) to pay severance, then
its voluntary plan will have to comply with additional rules under ERISA.36
GUIDELINES In any event, there are several things to keep in mind when designing
the severance plan. These include:
* List the situations for which the firm will pay severance, such as layoffs resulting
from reorganizations. State that management will take other action as necessary.
* Require signing of a knowing and voluntary waiver/general release prior to remit-
tance of any severance pay, absolving the employer from employment-related
liability.
* Reserve the right to terminate or alter the severance policy.
severance pay
A one-time payment some employers
provide when terminating an employee.
* Make it clear that any continuing severance payments continue until only the
stated deadline or until the employee gets a new job, whichever occurs first.
* Remember that as with all personnel actions, employers must make severance
payments, if any, equitably.37
Supplemental Unemployment Benefits

In some industries such as auto making, shutdowns to reduce inventories or change
machinery are common, and laid-off or furloughed employees must depend on unem-
ployment insurance. As the name implies, supplemental unemployment benefits are
cash payments that supplement the employee s unemployment compensation, to help
the person maintain his or her standard of living while out of work. They generally
cover three contingencies: layoffs, reduced workweeks, and facility relocations.
2 Describe each of the main

INSURANCE BENEFITS
insurance benefits. Most employers also provide a number of required or voluntary insurance benefits,
such as workers compensation and health insurance.
Workers Compensation
Workers compensation laws aim to provide sure, prompt income and medical bene-
fits to work-related accident victims or their dependents, regardless of fault. Every state
has its own workers compensation law and commission, and some run their own
insurance programs. However, most require employers to carry workers compensation
insurance with private, state-approved insurance companies. Neither the state nor the
federal government contributes any funds for workers compensation.
HOW BENEFITS ARE DETERMINED Workers compensation can be monetary

or medical. In the event of a worker s death or disablement, the person s dependents
receive a cash benefit based on prior earnings usually one-half to two-thirds the
worker s average weekly wage, per week of employment. Most states have a time
limit such as 500 weeks for which benefits can be paid. If the injury causes a
specific loss (such as an arm), the employee may receive additional benefits based on
a statutory list of losses, even though he or she may return to work. In addition to
these cash benefits, employers must furnish medical, surgical, and hospital services as
required for the employee.
For workers compensation to cover an injury or work-related illness, one must
only prove that it arose while the worker was on the job. It does not matter that he or
she may have been at fault; if the person was on the job when the injury occurred, he
or she is entitled to workers compensation. For example, suppose you instruct all
employees to wear safety goggles when at their machines. One worker does not and
experiences an eye injury on the job. The company must still provide workers
compensation benefits.
Keep in mind that ADA provisions generally prohibit employers from inquiring
about an applicant s workers compensation history. Furthermore, failing to let an
employee who is on injury-related workers compensation return to work, or not
accommodating him or her, could lead to lawsuits under ADA.
CONTROLLING WORKERS COMPENSATION COSTS It is important to

control workers compensation claims (and therefore costs). The employer s insur-
ance company usually pays the claim, but the costs of the employer s premiums
reflect the amount of claims.38 Workers comp claims also tend to correlate with
injuries, so fewer claims is usually a good sign of fewer accidents.
There are several ways to reduce workers compensation claims. Screen out
accident-prone workers. Reduce accident-causing conditions in your facilities.
And reduce the accidents and health problems that trigger these claims for instance,
by instituting effective safety and health programs and complying with government
safety standards. Furthermore, although many workers compensation claims are
legitimate, some are not. Supervisors should therefore watch for typical fraudulent
claim red flags. These include vague accident details, minor accidents resulting
in major injuries, lack of witnesses, injuries occurring late Friday or very early
Monday, and late reporting.39
Other workers comp cost-control techniques include monitoring health care
providers for compliance with their fee schedules and auditing medical bills.40 Case
management is a popular cost-control option. It is the treatment of injured workers
on a case-by-case basis by an assigned manager, usually a registered nurse, who coordi-
nates with the physician and health plan to determine which care settings are the most
effective for quality care and cost. 41
Moving aggressively to support the injured employee and to get him or her back
to work quickly is important. The involvement of an attorney and the duration of the
claim both influence the workers claim cost.42 Many firms have rehabilitation
programs. These include physical therapy, and nursing assistance to help reintegrate
claim recipients into the workforce.
Hospitalization, Health, and Disability Insurance

Health insurance looms large in many people s choice of employer, because it is so
expensive. Hospitalization, health, and disability insurance helps protect employees
against hospitalization costs and the loss of income arising from off-the-job accidents
or illness. Many employers purchase insurance from life insurance companies, casualty
insurance companies, or Blue Cross (for hospital expenses) and Blue Shield (for physi-
cian expenses) organizations. Others contract with health maintenance organizations
or preferred provider organizations. The employer and employee usually both
contribute to the plan. Table 13-3 illustrates the prevalence of health-related benefits.
COVERAGE Most employer health plans provide at least basic hospitalization and
surgical and medical insurance for all eligible employees at group rates. Insurance is
TABLE 13-3 Percentage of Employers Offering Some Popular Health

Benefits Change Over Time
Yes (%) 2005 Yes (%) 2011
Prescription drug program coverage 97 96

Dental insurance 95 94
Mail order prescription program 90 91
PPO (preferred provider organization) 87 84
Chiropractic coverage 56 83
Mental health insurance 72 82
Vision insurance 80 76
Employee assistance program 73 75
Medical/Flexible spending account 80 73
HMO (health maintenance organization) 53 33
Source: Adapted from 2011 SHRM Employee Benefits Survey Report, p. 2. www.shrm.org/Research/SurveyFindings/
Articles/Documents/Emp_Benefits_Tables.pdf, accessed, June 1, 2011. Reprinted with permission from the Society
for Human Resource Management. All rights reserved.
supplemental unemployment benefits workers compensation

Provide for a guaranteed annual income Provides income and medical benefits
in certain industries where employers must to work-related accident victims or their
shut down to change machinery or due dependents regardless of fault.
to reduced work. These benefits are paid
by the company and supplement
unemployment benefits.
generally available to all employees including new nonprobationary ones regardless

of health or physical condition. Most basic plans pay for hospital room and board,
surgery charges, and medical expenses (such as doctors visits to the hospital). Some
also provide major medical coverage to meet the medical expenses resulting from
serious illnesses.
Most employers health plans also cover health-related expenses like doctors
visits, eye care, and dental services. Other plans pay for general and diagnostic visits
to the doctor s office, vision care, hearing aids, and prescription drugs. Disability
insurance provides income protection for salary loss due to illness or accident.
Payments usually start when normal sick leave payments end, and may continue until
age 65 or beyond. Disability benefits usually range from 50% to 75% of the
employee s base pay if he or she is disabled.
HMOS Many employers offer membership in a health maintenance organization

(HMO) as a hospital/medical insurance option. The HMO is a medical organization
consisting of specialists (surgeons, psychiatrists, and so on), often operating out of a
health care center. It provides routine medical services to employees who pay a
nominal fee. Employees often have gatekeeper doctors who must approve appoint-
ments with specialist doctors. The HMO receives a fixed annual fee per employee
from the employer (or employer and employee), regardless of whether it provides
that person service.
PPOS Preferred provider organizations (PPOs) are a cross between HMOs and
the traditional doctor patient arrangement: They are groups of health care providers
that contract with employers, insurance companies, or third-party payers to provide
medical care services at a reduced fee. 43 Unlike HMOs, PPOs let employees select
providers (such as doctors) from a relatively wide list, and see them in their offices,
often without gatekeeper doctor approval. The providers agree to provide discounts
and submit to certain controls, for example, on testing. Employers are shifting from
higher-cost HMOs to PPOs.44
MENTAL HEALTH BENEFITS The World Health Organization estimated that

more than 34 million people in the United States between the ages of 18 and 64 suffer
from mental illness.45 Mental illnesses represent about 24% of all reported disabilities,
more than disabling injuries, respiratory diseases, cardiovascular diseases, and cancer
combined.
Mental health costs are rising. Reasons include widespread drug and alcohol
problems, an increase in states that require employers to offer minimum mental
health benefits, and the fact that mental health claims tend to trigger other health care
claims. The Mental Health Parity Act of 1996 (as amended in 2008) sets minimum
mental health care benefits; it also prohibits employer group health plans from adopting
mental health benefits limitations without comparable limitations on medical and
surgical benefits.46
The Legal Side of Health Benefits

With the U.S. introducing new health insurance laws, federal influence over health
benefits will increase substantially in the next few years.
PROTECTION AND AFFORDABLE CARE ACT OF 2010 Signed into law by

President Obama in 2010, employers will face a number of deadlines under the new
Patient Protection and Affordable Care Act, unless Congress changes the law. For
example, employers must begin reporting the value of health care benefits on
employee s W-2 statements, contributions to health care flexible spending arrange-
ments will be limited to $2,500 as of January 1, 2013, and in 2018 a 40% excise tax on
high-cost health insurance plans goes into effect.47 Individual and group health plans
that already provide dependent coverage must expand eligibility up to age 26.48
Among many other things, the act encourages employers with 50 or more employees
to offer health insurance or pay a shared responsibility payment if the government

has to subsidize an employee s health care.
Employers in one recent survey by the consulting firm Mercer expected this act
to raise their health care expenses by from 2% to 5% in 2011.49 As the act phases in
over the next few years (assuming Congress makes no changes), the excise tax on
high-cost plans was the employers main cost concern. Other cost-raisers, the
employers told Mercer, include the expanded coverage for older children, the ban on
lifetime benefit dollar limits, the requirement that employers auto-enroll new hires
into a health plan, and the rule that employers must offer coverage to employees
including those working less than 30 hours per week (many of whom now have no
health benefits).50
COBRA COBRA the Consolidated Omnibus Budget Reconciliation Act

requires most private employers to continue to make health benefits available to sep-
arated employees and their families for a time, generally 18 months after separation.51
The former employee must pay for the coverage.
Employers ignore COBRAs regulations at their peril. Most importantly, you don t
want separated employees to leave and be injured, and then claim you never told
them they could have continued their insurance coverage. Therefore, when a new
employee first becomes eligible for your company s insurance plan, the person must
receive (and acknowledge receiving) an explanation of his or her COBRA rights. And,
all employees separated from the company should sign a form acknowledging that
they received and understand those rights. Figure 13-4 provides a COBRA checklist.
OTHER LAWS Other federal laws are pertinent. For example, among other
things, the Employee Retirement Income Security Act of 1974 (ERISA) sets mini-
mum standards for most voluntarily established pension and health plans in
private industry.52 The Newborn Mother s Protection Act of 1996 prohibits employers
health plans from using incentives to encourage employees to leave the hospital
after childbirth after less than the legislatively determined minimum stay. Employ-
ers who provide health care services must follow the privacy rules of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA).53 Employers must
provide the same health care benefits to employees over the age of 65 that they
do to younger workers, even though the older workers are eligible for federal
Medicare health insurance. Under the Americans with Disabilities Act, the plan
generally shouldn t make distinctions based on disability. And, as explained earlier,
the Pregnancy Discrimination Act requires employers to treat women affected
by pregnancy, childbirth, or related medical conditions the same as any other
employees not able to work, with respect to all benefits. Under the Genetic Infor-
mation Nondiscrimination Act of 2008 (GINA), employers need to be vigilant
about even apparently innocent situations. For example, if a health plan adminis-
trator learns that a member s mother passed away from breast cancer and makes a
note to send a card, making the note and sending the card could conceivably
be held as violations of the act.54
Trends in Employer Health Care Cost Control

Employers are endeavoring to rein in health care costs. Many retain cost-containment
specialists to help reduce such costs. And most negotiate more aggressively with
their health care insurance providers.55 Most cost-control efforts necessarily start
by instituting methods for measuring and tracking health care costs.56
health maintenance organization (HMO) preferred provider organizations (PPOs)

A prepaid health care system that generally Groups of health care providers that contract
provides routine round-the-clock medical with employers, insurance companies, or
services as well as preventive medicine in a third-party payers to provide medical care
clinic-type arrangement for employees, who services at a reduced fee.
pay a nominal fee in addition to the fixed
annual fee the employer pays.
FIGURE 13-4 COBRA Detailed record keeping is crucial for COBRA compliance. The following checklist is designed
Record-Keeping Compliance to ensure that the proper records are maintained for problem-free COBRA compliance.
Checklist
Yes No
Source: Reprinted from Do you maintain records so that it is easily determined
www.HR.BLR.com with permission who is covered by your group health care plan?
of the publisher Business and Legal
Resources, Inc., 141 Mill Rock Road Do you record terminations of covered employees as
East, Old Saybrook, CT © 2004. BLR® soon as terminations occur?
(Business and Legal Resources, Inc.).
Do you track reduction of hours of employees covered
by group health care plans?
Do you track deaths of employees covered by group
health care plans?
Do you track leaves of absence of employees covered
Do you track Medicare eligibility of employees covered
Do you track the disability status of employees covered
Do you track retirees covered by group health care plans?
Do you maintain current addresses of employees?
Do you maintain current addresses of individuals

receiving COBRA benefits?
Do you require employees to provide a written
acknowledgment that they have received notice of their
COBRA rights?
Do you have a system to determine who has paid
COBRA premiums on time?
Do you have a system to determine who has obtained
other group health coverage so that they are no longer
eligible for COBRA under your plan?
Do you maintain a telephone log of calls received about

COBRA?
Do you maintain a record of changes in your plan?
Do you maintain a record of how premiums are calculated?
Do you maintain a log of those employees who are

denied COBRA coverage?
Do you maintain a log of why employees are denied
COBRA coverage?
For many employers, deductibles and co-pays are the low-hanging fruit in health
care cost control. For example, 22% of employers imposed deductibles of at least
$1,000 in 2011 for in-network services, up from 8% in 2008.57 Even more 44%
imposed such deductibles for out-of-network services.58 Consumer-driven health
plans (CDHPs) are increasingly popular. These are high-deductible plans that give
employees access to, for instance, a health savings account. (The Medicare Modern-
ization Act of 2003 allows employers to establish tax-free health savings accounts
(HSA).)59 After the employer, employee, or both deposit pretax (and thus tax
sheltered) pay in the employees HSAs, employees or their families can use their HSA
funds to pay for low dollar (not catastrophic) medical expenses.60 The assumption
is that this will motivate employees to utilize less expensive health care options, and
thus avoid big deductibles.61 Employers generally offer CDHPs as an option to
traditional plans, such as PPOs.62 We ll address other important cost-control trends.
COMMUNICATION AND EMPOWERMENT Most importantly, make sure

employees know the costs of their medical benefits.63 As one expert said, the biggest
criticism of managed care . . . is that the health care consumer has little financial stake
in treatment decisions. 64 So, for example, periodically send a statement to each

employee listing the employer s costs for each health benefit. Online selection lets
employees choose the best of the employer s health care offerings, based on input
from other employees concerning matters like doctor visits and specialists.
WELLNESS PROGRAMS Many illnesses are preventable. In one study employers

who undertook prevention programs aimed at cardiovascular disease . . . reported an
average 28% reduction in sick leave, [and] a 26% reduction in direct health-care
costs. 65 Many employers therefore offer preventive services.66 Clinical prevention
programs include things like mammograms, immunizations, and routine checkups.
Walgreens recently purchased two companies that provide on-site health care services
such as mammograms for employers.67 Health promotion and disease prevention
programs include seminars and incentives aimed at improving unhealthy behaviors.68
Top wellness program trends include obesity management, stress management, senior
health improvement, and tobacco cessation programs.69 Incentives, for instance,
$50 $100, can boost wellness program participation, but may backfire.70 Whirlpool
gives nonsmoker discounts on health care premiums worth about $500. It suspended
39 workers it caught smoking outside the plant after claiming on their benefits enrollment
forms that they were not tobacco users.
CLAIM AUDITS It makes little sense to initiate cost cuts when employers are paying
out thousands or millions of dollars in erroneous claims. Unfortunately, with health
care plans increasingly complicated, it s easier for errors to occur. Human resource
consultants Towers Perrin conducted a survey of claims payments. The industry
standard for percentage of claims errors is 3%, but Towers Perrin found the actual
percentage of claims with financial errors were about 6.3%. The industry standard for
percentage of claims dollars actually paid in error was 1%; the actual percentage
of claims dollars paid in error were 3.4%. So, setting standards for errors and then
aggressively auditing all claims may be the most direct way to reduce employer health
care expenses.71
LIMITED PLANS Some employers are offering limited-benefit health care insurance
plans. Unlike health care plans that may have lifetime coverage limits of $1 million or
more, these mini medical plans have annual caps of about $2,000 $10,000 per year.
The advantage, of course, is that the premiums are correspondingly lower.72
OUTSOURCING Benefits management ranks high on the list of HR activities that

employers outsource. For example, in one survey, 94% outsourced management of
flexible spending accounts, 89% outsourced defined contribution plans, 72% outsourced
defined benefit plans, and 68% outsourced the auditing of dependents.73
OTHER COST-CONTROL OPTIONS Employers are taking other steps. One is

using defined contribution health care plans. Here each employee gets a specific dollar
amount allotment to use for co-payments or discretionary medical costs, rather than a
specified health care benefits package with open-ended costs.74 As noted, outsourcing
health care plan administration and employee assistance and counseling to outside
companies for a fee are other options.75 Many employers reduce subsidized health
benefits for their future retirees.76 Small firms are joining benefits purchasing alliances,
banding together to purchase health care benefits. Other employers are encouraging
medical tourism, which means asking employees to have non-urgent medical proce-
dures abroad, where costs are lower.77 One simple method is just to ensure that any
dependents enrolled are actually eligible for coverage.78
Long-Term Care
With baby-boomers in their 60s, long-term care insurance for things like nursing
assistance to former employees in their old age is a key employee benefit. The Health
Insurance Portability and Accountability Act of 1996 lets employers and employees
deduct the cost of long-term care insurance premiums from their annual income taxes,
making this benefit more attractive.79 Employers can also provide insurance benefits for
several types of long-term care, such as adult day care, assisted living, and custodial care.
Life Insurance
In addition to hospitalization and medical benefits, most employers provide group life
insurance plans. Employees can usually obtain lower rates in a group plan. And group
plans usually accept all employees including new, nonprobationary ones regardless
of health or physical condition.
In general, there are three key personnel policies to address: the benefits-paid
schedule (the amount of life insurance benefits is usually tied to the employee s
annual earnings), supplemental benefits (continued life insurance coverage after
retirement, for instance), and financing (the amount and percent the employee
contributes).
Accidental death and dismemberment coverage provides a lump-sum benefit in
addition to life insurance benefits when death is accidental. It also provides benefits in
case of accidental loss of limbs or sight.
Benefits for Part-Time and Contingent Workers

About 19 million people work part-time (less than 35 hours a week). The recession,
more phased retirements, a desire to better balance work and family life, and more
women in the workforce help explain this phenomenon. In any case, most firms
provide holiday, sick leave, and vacation benefits to part-timers, and more than 70%
offer some form of health care benefits to them.80 Again, employers should take care
to not misclassify part-timers as independent contractors. 81
3 Discuss the main retirement

RETIREMENT BENEFITS
benefits. The first contingent of baby-boomers turned 65 in 2011, and many didn t wait until
then to retire. This presents two challenges for employers. First (as we explained
in Chapter 10, Employee Retention), employers are taking steps to entice older workers
to keep working in some capacity.82 Second, retirement funding is a big issue. We ll
focus here on retirement benefits, including federal Social Security and employer
pension/retirement plans like the 401(k).
Social Security
Most people assume that Social Security provides income only when they are older
than 62, but it actually provides three types of benefits. The familiar retirement benefits
provide an income if you retire at age 62 or thereafter and are insured under the Social
Security Act. Second are survivor s or death benefits. These provide monthly payments
to your dependents regardless of your age at death, again assuming you are insured
under the Social Security Act. Finally, there are disability payments. These provide
monthly payments to employees who become disabled totally (and to their dependents)
if they meet certain requirements. The Social Security system also administers
the Medicare program, which provides health services to people age 65 or older.
Full retirement age for non-discounted social security benefits traditionally was 65
the usual age for retirement. It is now 67 for those born in 1960 or later.83
A tax on the employee s wages funds Social Security (technically, Federal Old Age
and Survivor s Insurance ). As of 2011, the maximum amount of earnings subject to
Social Security tax was $106,800; the employer pays 6.2% and the employee pays 4.2%.84
Pension Plans
Pension plans provide income to individuals in their retirement, and just over half of
full-time workers participate in some type of pension plan at work.
We can classify pension plans in three basic ways: contributory versus noncon-
tributory plans, qualified versus nonqualified plans, and defined contribution versus
defined benefit plans.85 The employee contributes to the contributory pension plan,
while the employer makes all contributions to the noncontributory pension plan.
Employers derive certain tax benefits (such as tax deductions) for contributing to
qualified pension plans (they are qualified for preferred tax treatment by the IRS);
nonqualified pension plans get less favorable tax treatment. (As with all pay plan
components, employers should ensure retirement benefits support their strategic
needs. For example set guiding principles such as assist in attracting employees and
assist in retaining knowledgeable employees. )86
With defined benefit plans, the employee s pension is specified or defined
ahead of time. Here the person knows ahead of time the pension benefits he or she
will receive. How is this possible? There is usually a formula that ties the person s
pension to (1) a percentage of (2) the person s pre-retirement pay (for example, to an
average of his or her last 5 years of employment), multiplied by (3) the number of
years he or she worked for the company. Due to tax law changes and other reasons,
defined benefit plans now represent a minority of pension benefit plans.87
Defined contribution plans specify ( define ) what contribution the employee
and employer will make to the employee s retirement or savings fund. Here the
contribution is defined, not the pension. With a defined benefit plan, the employee can
compute what his or her retirement benefits will be upon retirement. With a defined
contribution plan, the person only knows for sure what he or she is contributing to the
pension plan; the actual pension will depend on the amounts contributed to the fund
and on the success of the retirement fund s investment earnings. Defined contribution
plans are popular among employers today due to their relative ease of administration,
favorable tax treatment, and other factors. Portability making it easier for employees
who leave the firm prior to retirement to take their accumulated pension funds with
them is easier with defined contribution plans.
401(K) PLANS The most popular defined contribution plans are based on section
401(k) of the Internal Revenue Code, and called 401(k) plans. The employee author-
izes the employer to deduct a sum from his or her paycheck before taxes, and to invest
it in the bundle of investments in his or her 401(k). The deduction is pretax, so the
employee pays no tax on those dollars until after he or she retires (or removes
the money from the 401(k) plan). The person can decide to deduct any amount up
to the legal maximum (the IRS sets an annual dollar limit now about $15,000). The
employer arranges, usually with an investment company such as Fidelity Investments,
to administer the 401(k) plan and to make investment options available to the plan.
The options typically include mutual stock funds and bond funds. As the recent
downturn intensified, more employees made hardship withdrawals from their
401(k) plans (on which no taxes are due, for a time).88
Employers must choose their 401(k) providers with care. The employer has a fidu-
ciary responsibility to its employees; it must monitor the fund and its administration.89
group life insurance pension plans portability

Provides lower rates for the employer Plans that provide a fixed sum when Instituting policies that enable employees
or employee and includes all employees, employees reach a predetermined retirement to easily take their accumulated pension
including new employees, regardless age or when they can no longer work due funds when they leave employer.
of health or physical condition. to disability.
401(k) plan
Social Security defined benefit plan A defined contribution plan based on section
Federal program that provides three types A plan that contains a formula for 401(k) of the Internal Revenue Code.
of benefits retirement income at the age of 62 determining retirement benefits.
and thereafter, survivor s or death benefits
payable to the employee s dependents defined contribution plan
regardless of age at time of death, and A plan in which the employer s contribution
disability benefits payable to disabled to employees retirement savings funds
employees and their dependents. These is specified.
benefits are payable only if the employee
is insured under the Social Security Act.
Firms such as Vanguard, Fidelity,

and others can establish online,
fully Web-based 401(k) plans
even for small firms with
10 to 50 employees.
Source: Fotolia LLC.
Furthermore, changing 401(k) providers can be grueling. 90 In addition to trustwor-

thiness, the 401(k) plan provider should make it easy to enroll and participate in the
plan.91 Firms such as Vanguard, Fidelity, and others can establish Web-based 401(k)
plans with online tools such as an asset allocation planner even for small firms.
It s also crucial that employers monitor 401(k) housekeeping issues. For example, the
IRS recently reported the top 10 most common violations that 401(k) plans encounter,
including late deposits and incorrect employer matching contributions.92
Under the Pension Protection Act of 2006, employers who sponsor plans that
facilitate both automatic enrollment and allocation to default investments (such as
age-appropriate lifestyle funds ) reduce their compliance burdens.93 Post-2008
stories, like that of David, a 47-year-old engineer, suggest prudence. His adviser said
that if we saved very aggressively, I might be able to retire in my early 70s. Such
experiences underscore the need for employee education, or perhaps directing funds
into (relatively) prudent default investments.94
OTHER DEFINED CONTRIBUTION PLANS The 401(k) plan is one example of a

savings and thrift plan.95 In any savings and thrift plan, employees contribute a
portion of their earnings to a fund, and the employer usually matches this contribution
completely or in part.
As discussed in Chapter 12 (Incentives), employers use a deferred profit-
sharing plan to contribute a portion of their profits in cash to a pension fund,
regardless of the level of employee contribution (income taxes on those contribu-
tions are deferred until the employee retires or leaves the employer). An employee
stock ownership plan (ESOP) is a qualified, tax-deductible defined contribution
plan in which employers contribute stock to a trust for eventual use by employees
who retire.
CASH BALANCE PENSION PLANS One problem with defined benefits plans is
that to get your maximum pension, you generally must stay with your employer
until you retire the formula, recall, takes the number of years you work into
consideration. With defined contribution plans, your pension is more portable you
can leave with it at any time, perhaps rolling it over into your next employer s
pension plan. Without delving into all the details, cash balance plans are a hybrid;
they have defined benefit plans more predictable benefits, but the portability advan-
tages of defined contribution plans.96 The employer contributes a percentage of
employees current pay to the employees pension plans every year, and employees
earn interest on this amount.97
Pension Planning and the Law

No one wants to wake up and discover that his or her pension has vanished. Therefore,
federal laws regulate pension planning and administration. As a rule, it is impossible to
formulate a plan without expert help.
The Employee Retirement Income Security Act of 1975 (ERISA) is the basic law.
It requires that employers have written pension plan documents and adhere to certain
guidelines, such as regarding who is eligible for the employer s plan.98 ERISA protects
the employer s pension or health plans assets by requiring that those who control the
plans act responsibly. The Department of Labor says that the primary responsibility
of fiduciaries is to run the plan solely in the interest of participants and beneficiaries.
Other laws are pertinent. Employers (and employees) want their pension contri-
butions to be qualified, or tax deductible, so they must adhere to the pertinent
income tax codes. Under labor relations laws, the employer must let its unions partici-
pate in pension plan administration. The Job Creation and Worker Assistance Act
provides guidelines regarding what rates of return employers should use in computing
their pension plan values.
PBGC ERISA established the Pension Benefits Guarantee Corporation (PBGC)

to oversee and insure a pension if a plan terminates without sufficient funds.
The PBGC guarantees only defined benefit plans, not defined contribution plans.
Furthermore, it will only pay an individual a pension of up to a maximum of about
$54,000 per year for someone 65 years of age with a plan terminating in 2011.99
So, high-income workers may still see most of their expected pensions evaporate
if their employers go bankrupt.
MEMBERSHIP REQUIREMENTS When does the employee become eligible for a

pension? Under the Tax Reform Act of 1986, an employer can require that an
employee complete a period of no more than 2 years service to the company before
becoming eligible to participate in the plan. However, if it requires more than 1 year
of service before eligibility, the plan must grant employees full and immediate vesting
rights at the end of that period.
VESTING Vested funds are the money employer and employee have placed in the
latter s pension fund that cannot be forfeited for any reason. The employees contri-
butions are always theirs, of course. However, until the passage of ERISA, the
employers contribution in many pension plans didn t vest until the employee retired.
So, you could have worked for a company for 30 years and been left with no pension
if the company went bust 1 year before you were to retire. That generally can t happen
today, given the PBGC s guarantees.
Employers can choose one of two minimum vesting schedules (employers can
allow funds to vest faster if they wish). With cliff vesting, the period for acquiring a
nonforfeitable right to employer matching contributions (if any) is 3 years. So, the
employee must have nonforfeitable rights to these funds by the end of 3 years. With the
savings and thrift plan cash balance plans Pension Benefits Guarantee
Plan in which employees contribute a portion Plans under which the employer contributes Corporation (PBGC)
of their earnings to a fund; the employer a percentage of employees current pay Established under ERISA to ensure that
usually matches this contribution in whole to employees pension plans every year, pensions meet vesting obligations; also
or in part. and employees earn interest on this amount. insures pensions should a plan terminate
without sufficient funds to meet its vested
deferred profit-sharing plan Employee Retirement Income Security Act obligations.
A plan in which a certain amount of profits (ERISA)
is credited to each employee s account, Signed into law by President Ford in 1974
payable at retirement, termination, or death. to require that pension rights be vested
and protected by a government agency,
employee stock ownership plan (ESOP) the PBGC.
A qualified, tax-deductible stock bonus plan
in which employers contribute stock to a
trust for eventual use by employees.
second (graded vesting) option, pension plan participants must receive nonforfeitable
rights to the matching contributions as follows: 20% after 2 years, and then 20% for
each succeeding year, with a 100% nonforfeitable right by the end of 6 years.
Pensions and Early Retirement

To trim their workforces or for other reasons, some employers are encouraging employees
to retire early. Many of these plans take the form of early retirement window arrange-
ments for specific employees (often age 50*). The window means that for
a limited time, the employees can retire early. The financial incentive is generally a
combination of improved or liberalized pension benefits plus a cash payment.
Early retirement programs can backfire for two reasons. Some are too successful.
When Verizon Communications offered enhanced pension benefits to encourage
what it hoped would be 12,000 employees to retire, more than 21,000 took the plan.
Verizon had to replace 16,000 managers.100
Discrimination is the other potential problem. Unless structured properly, older
employees can challenge early retirement programs as de facto ways for forcing them
to retire against their will. Although it is generally legal to use incentives to encourage
individuals to choose early retirement, the employee s decision must be voluntary.
The Older Workers Benefit Protection Act (OWBPA) imposes limitations. The
employee s waiver must be knowing and voluntary, and give the employee ample time
to think over the agreement and to seek legal advice, among other things.
Improving Productivity through HRIS

Online Benefits Management Systems
Left un-automated, benefits administration can require the employer to devote
hundreds of human resource professionals hours to answering employees questions
about comparative benefits and updating employees benefits information.101
Typical employee questions include, In which option of the medical plan am
I enrolled? and If I retire in 2 years, what will be my monthly retirement income?
Tasks like that cry out for online self-service benefits management applications.
BENELOGIC For example, when the organization that assists Pennsylvania school
districts with their insurance needs decided to help the school boards automate their
benefits administration, they chose a company called Benelogic.102 The solution,
called the Employee Benefit Electronic Service Tool, lets users manage all aspects
of benefits administration, including enrollment, plan descriptions, eligibility, and
premium reconciliation, via their browsers.103
Benelogic hosts and maintains the Web support application on its own servers,
and creates customized, Web-based applications for each school district. The system
facilitates Web-based employee benefit enrollment, and provides centralized call
center support for benefit-related questions. It even handles benefits-related payroll,
HRIS, and similar functions by collaborating with companies like ADP (for payroll)
and Oracle PeopleSoft (which services many of the school boards human resource
information systems). Each school board employee accesses the Benelogic site via a
link on his or her own board s Web site.
BENEFITS WEB SITES Employers everywhere are adding new services to their
own benefits Web sites. In addition to offering things like self-enrollment, the insur-
ance company USAAs Web site (www.usaa.com) helps employees achieve better work
life balance. For example, click on the today, I m feeling . . . menu. Here employees
can respond to a list of words (such as stressed ). From there, they see suggestions
for dealing with (in this case) stress. Go to my child is behaving badly, and the
employee gets access to resources like guide to addressing child behavior prob-
lems. 104 Boeing s Pay & Benefits Profile site gives employees real-time information
about their salary and bonuses, benefits, pension, and even special services such as
child care referrals.105
4 Outline the main employees

PERSONAL SERVICES AND FAMILY-FRIENDLY
services benefits. BENEFITS
Although time off, insurance, and retirement benefits account for the lion s share
of benefits costs, most employers also provide various services benefits. These include
personal services (such as legal and personal counseling), family-friendly services
(such as child-care facilities), educational subsidies, and executive perquisites (such as
company cars for its executives).
Personal Services
Many employers provide access to the sorts of personal services that employees some-
times need. These include credit unions, legal services, counseling, and social and
recreational opportunities. (Some employers use the term voluntary benefits to cover
personal services benefits that range from things like pet insurance to automobile
insurance.106) We ll look at a few of these.
EMPLOYEE ASSISTANCE PROGRAMS Employee assistance programs

(EAPs) provide counseling and advisory services, such as personal legal and financial
services, child and elder care referrals, adoption assistance, mental health counseling,
and life event planning.107 EAPs are increasingly popular, with more than 60%
of larger firms offering such programs. One study found that personal mental health
was the most common problem addressed by employee assistance programs, followed
by family problems.108
For employers, EAPs produce advantages, not just costs. For example, sick family
members and problems like depression account for many of the sick days employees
take. Employee assistance programs can reduce such absences by providing expert
advice on issues like elder care referrals.109 Few but the largest employers establish their
own EAPs. Most contract for the necessary services with vendors such as Magellan
Health Services and CIGNA Behavioral Health.110
In either case, employers and managers need to keep several issues in mind. Everyone
involved with the EAP, including supervisors, secretaries, and support staff, must
understand the importance of confidentiality. Also, ensure files are locked, access is limited
and monitored, and identifying information is minimized. Be aware of legal issues.
For example, in most states counselors must disclose suspicions of child abuse to state
agencies. Define the program s purpose, employee eligibility, the roles and responsibilities
of EAP and employer personnel, and procedures for using the plan. And ensure the
vendors you use fulfill professional and state licensing requirements.
Family-Friendly (Work Life) Benefits

Several trends have changed the benefits landscape. There are more households where
both adults work, more one-parent households, more women in the workforce, and
more workers older than age 55. And, there s the time bind people working more,
without the time to do all they d like to do. The issues involve working men, as well as
women.111
These pressures have led many employers to bolster their family-friendly
(or work life) benefits. (The number of Americans who have never married is rising,
and the newer work life benefits terminology recognizes the need to improve all
employees work life situations, not just those with families.)112 These benefits include
child care, elder care, fitness facilities, and flexible work schedules benefits that help
employees balance their family and work lives.113 We ll look at some examples.
early retirement window employee assistance program (EAP) family-friendly (or work life) benefits
A type of offering by which employees are A formal employer program for providing Benefits such as child care and fitness
encouraged to retire early, the incentive employees with counseling and/or treatment facilities that make it easier for
being liberal pension benefits plus perhaps programs for problems such as alcoholism, employees to balance their work
a cash payment. gambling, or stress. and family responsibilities.
Software giant SAS Institute,

Inc., offers generous employee
benefits. The North Carolina
firm keeps turnover at 4% in an
industry where 20% is typical,
partly by offering family-friendly
benefits like paid maternity
leave, day care on site,
lunchtime piano concerts,
massages, and yoga classes
like this one.
Source: Fotolia LLC.
SUBSIDIZED CHILD CARE Fulfilling work responsibilities while raising a family

is a challenge, particularly for single parents. Most working people make private pro-
visions to take care of their children. For example, relatives accounted for 48% of all
child care providers in one study.114 Organized day care centers accounted for
another 30% of child care arrangements, and nonrelatives accounted for most of the
remaining arrangements.
Employers who want to reduce the distractions associated with finding reliable
child care can help in various ways. Some employers simply investigate the day care
facilities in their communities and recommend certain ones to employees. Other
employers set up company-sponsored and subsidized day care facilities, both to
attract employees and to reduce absenteeism. For example, Abbott Laboratories built
a $10 million child care center at its headquarters north of Chicago, daytime home
to about 400 children of Abbott employees.115
By establishing subsidized day care, employers assumedly can benefit in several
ways. These include improved recruiting results, lower absenteeism, improved
morale, favorable publicity, and lower turnover. But, good planning is required. This
often starts with a questionnaire to employees to answer questions like, What would
you be willing to pay for care for one child in a child care center near work?
SICK CHILD BENEFITS One study found that unexpected absences climbed to about
2.4% of payroll hours recently, with a cost per absence to employers of about $700 per
episode (for temp employees and reduced productivity, for instance). More employers are
thus offering emergency child care benefits, for example, when a young child s regular
babysitter is a no-show. Texas Instruments built a Web database its employees use to find
last-minute child care providers. Others, like Canadian financial services company CIBC,
are expanding their on-site child care centers to handle last-minute emergencies.116
ELDER CARE The responsibility for caring for an aging relative can affect
the employee s performance.117 One study found that, to care for an older relative,
64% of employees took sick days or vacation time, 33% decreased work hours, 22%
took leaves of absence, 20% changed their job status from full- to part-time, 16% quit
their jobs, and 13% retired early. One survey found that about 120 million Americans
are now caring for or in the past cared for an adult relative or friend.118
So, more employers are providing elder care services. For example, the United Auto
Workers and Ford Motor Company provide elder care referral services for Ford s salaried
employees. The service provides a detailed assessment of the elderly relative s needs and
recommendations on the care that would be best.119 The National Council on Aging has
a Web site to help elders and caregivers find benefit programs: www.benefitscheckup.org.
FAMILY-FRIENDLY BENEFITS AND THE BOTTOM LINE It s not easy to

evaluate the profitability of such programs. The costs are clear. For example, a few
years ago Aetna found it saved $400,000 just by making employees at its Blue Bell,
Pennsylvania, office buy their own coffee and tea.120
Measuring the program s positive consequences isn t so simple. Family-friendly
firms such as SAS routinely turn up on best companies to work for lists. This almost
undoubtedly makes it easier to recruit and retain good employees. Employees may
even willingly forego somewhat higher pay for services like built-in day care. And
some of the advantages to the employer are indirect. For example, employees who
experience work family conflict may experience anger that affects performance, a
situation family-type benefits may improve.121
The bottom line is that employers are carefully reviewing these benefits. Even Google,
long known for offering benefits that blow almost every other employer s away (free buses
from the city, on-campus day care, and restaurants) has been cutting back of late.
Other Job-Related Benefits

Employers provide various other job-related benefits. Some provide subsidized
employee transportation, such as increased mileage allowances or mass transit
discounts.122 Google s Web site lists benefits such as adoption assistance, the Google
Child Care Center, free shuttle service from San Francisco, on-site dry cleaning,
backup child care assistance, and on-site physician and dental care. Home Depot offers
a nose to tail coverage pet health insurance program. Ben & Jerry s gives employees
three pints of ice cream to take home every day.
EDUCATIONAL SUBSIDIES Educational subsidies such as tuition refunds are

popular benefits. Payments range from all tuition and expenses down to a flat limit
of several hundred dollars per year. One survey found that about 72% of the
579 employers surveyed paid for college courses related to an employee s present job.
Many employers also reimburse non job-related courses (such as a Web designer
taking an accounting class) that pertain to the company business.123 Many employers
provide college programs, taught on the employer s premises. We ve seen that other
educational programs include remedial work in basic literacy.
The problem is that you may be paying your best employees to leave. Researchers
studied how employer-sponsored part-time college education reimbursements
influenced job mobility. They focused on the U.S. Navy s tuition assistance program.
Taking tuition assistance significantly decreased the probability the person stayed
in the Navy.124
DOMESTIC PARTNER BENEFITS When employers provide domestic partner

benefits to employees, it generally means that employees same-sex or opposite-sex
domestic partners are eligible to receive the same benefits (health care, life insurance,
and so forth) as do the husbands, wives, or legal dependents of the firm s other
employees.125 For example, Northrop Grumman Corp. extends domestic partner
benefits to the 9,500 salaried workers at its Newport News shipyard.126
Executive Perquisites
When you reach the pinnacle of the organizational pyramid or close to the top
you will find, waiting for you, the Executive Perk. Perquisites (perks, for short) usually
only go to top executives. Perks can range from substantial (company planes)
to relatively insignificant (private bathrooms).
Most perks fall between these extremes. These include management loans (which
typically enable senior officers to exercise their stock options); financial counseling
(to handle investments); and relocation benefits, often including subsidized mort-
gages, purchase of the executive s current house, and payment for the actual move.
As we noted in Chapter 11 (Strategic Pay Plans), publicly traded companies must now
itemize all executives perks (if they total more than $100,000).
5 Explain the main flexible

FLEXIBLE BENEFITS PROGRAMS
benefit programs. Employees prefer choice in their benefits plans. In one survey of working couples, 83%
took advantage of flexible hours (when available); 69% took advantage of the flexible-
style benefits we ll discuss next; and 75% said that they prefer flexible benefits plans.127
The online job listing service Jobtrak.com asked college students and recent graduates,
Which benefit do you desire most? Thirty-five percent sought flexible hours; 19%,
stock options; 13%, more vacation time; and 12%, a better health plan. Most of the
preferred benefits had to do with lifestyle issues rather than financial ones.128
Given this, it is prudent to survey employees benefits preferences, perhaps using
a form like that in Figure 13-5. In any case, employers should provide for choice when
designing benefits plans.
The Cafeteria Approach

One way to provide a choice is with an aptly named cafeteria benefits plan. (Pay special-
ists use flexible benefits plan and cafeteria benefits plan synonymously.) A cafeteria
plan is one in which the employer gives each employee a benefits fund budget, and lets
the person spend it on the benefits he or she prefers, subject to two constraints. First,
the employer must of course limit the total cost for each employee s benefits package.
Second, each employee s benefits plan must include certain required items for
example, Social Security, workers compensation, and unemployment insurance.
Employees can often make midyear changes to their plans if, for instance, their
dependent care costs rise and they want to divert contributions.129 IRS regulations
require formal written plans describing the employer s cafeteria plan, including
benefits and procedures for choosing them.130
TYPES OF PLANS Cafeteria plans come in several varieties. To give employees
more flexibility in what benefits they use, about 70% of employers offer flexible spend-
ing accounts for medical and other expenses. This option lets employees pay for certain
FIGURE 13-5 Online Survey of

Employees Benefits Preferences
Source: http://data.grapevinesurveys.
com/survey.asp?sid=20062143964099,
accessed April 29, 2009.
(Continued)
FIGURE 13-5 (Continued)
benefits expenses with pretax dollars (so the IRS, in effect, subsidizes some of the
employee s expense). To encourage employees to use this option without laying out
cash, some firms are offering debit cards that employees can use at their medical
provider or pharmacy.131 Core plus option plans establish a core set of benefits (such as
medical insurance), which are usually mandatory for all employees. Beyond the core,
employees can then choose from various benefits options.132
Benefits and Employee Leasing

As we ll explain in Chapter 18, many businesses particularly smaller ones don t have
the resources or employee base to support the cost of many of the benefits we ve
discussed in this chapter. That s one big reason they turn to employee leasing.
In brief, employee leasing firms (also called professional employer organizations or
staff leasing firms) assume all or most of the employer s human resources chores.
In doing so, they also become the employer of record for the employer s employees,
by transferring them all to the employee leasing firm s payroll. The leasing firm thus
becomes the employees legal employer, and usually handles employee-related activi-
ties such as recruiting, hiring (with client firms supervisors approvals), and paying
taxes (Social Security payments, unemployment insurance, and so on).
Insurance and benefits are usually the big attraction. Even group rates for life or
health insurance can be quite high when only 20 or 30 employees are involved. That s
where the leasing firm comes in. Remember that the leasing firm is the legal employer
of your employees. The employees therefore are absorbed into a much larger insurable
flexible benefits plan/cafeteria

benefits plan
Individualized plans allowed by employers
to accommodate employee preferences
for benefits.
group, along with other employers former employees. As a result, a small business
owner may be able to get insurance for its people that it couldn t otherwise afford.
Flexible Work Schedules

Flexible work schedules are increasingly popular.133 Single parents often find them
crucial for balancing work and family responsibilities. And for many millennial
employees, flexible work schedules provide a way to pursue their careers without
surrendering the quality of work life they desire. There are several flexible work
schedule options.
FLEXTIME Flextime is a plan whereby employees workdays are built around a core of
midday hours, such as 11:00 a.m. to 2:00 p.m. Workers determine their own starting
and stopping hours. For example, they may opt to work from 7:00 a.m. to 3:00 p.m.
or from 11:00 a.m. to 7:00 p.m. The number of employees in formal flextime
programs from 4% of operators to 17% of executive employees doesn t tell the
whole story. Many more employees, probably almost half, actually take advantage
of informal flexible work schedules.134 In practice, most employers hold fairly close to
the traditional 9:00 a.m. to 5:00 p.m. workday. Therefore, the effect of flextime for most
employees is to give them about 1 hour of leeway before 9:00 a.m. or after 5:00 p.m.
COMPRESSED WORKWEEKS Many employees, like airline pilots, do not work

conventional 5-day, 40-hour workweeks. Similarly, hospitals may want doctors and
nurses to provide continuing care to a patient, or manufacturers may want to reduce the
productivity lost whenever workers change shifts. Workers like these typically have
compressed workweek schedules. This means they work fewer days each week, but each
day they work longer hours. Nonconventional workweeks come in many flavors. Some
firms have 4-day workweeks, with four 10-hour days. Some workers in hospitals,
for instance work three 12-hour shifts, and then are off for the next 4 days.135
EFFECTIVENESS OF FLEXIBLE WORK SCHEDULE ARRANGEMENTS

Studies show that flexible work schedules have positive effects on employee produc-
tivity, job satisfaction, and employee absenteeism; the positive effect on absenteeism
was much greater than on productivity. Compressed workweeks positively affected
job satisfaction; absenteeism did not increase, and productivity was not positively
affected. Highly flexible programs were actually less effective than less flexible ones.136
Some experts argue that longer, 12-hour shifts may increase fatigue and accidents.
However, one report suggests 12-hour shifts can actually be safer, in some respects.
For example, 12-hour shifts reduce the general workplace confusion that often
occurs during shift changes, since there are fewer shift changes per day. To reduce
potential side effects, some employers install treadmills and exercise bikes, and special
light boxes that mimic daylight.
WORKPLACE FLEXIBILITY As anyone who has flown next to someone tapping

away on a laptop knows, employees are increasingly conducting business from non-
traditional settings, using technology like iPads and BlackBerry-type devices.137
Workplace flexibility means arming employees with the information technology
tools they need to get their jobs done wherever they are. For example, certain Capital
One Bank employees received mobile technology tools such as wireless access laptops
and BlackBerry-type cell phone devices. The program seems to have led to about a
41% increase in overall workplace satisfaction, a 31% reduction in time needed to get
input from peers, and a 53% increase in those who say their workplace enhances
group productivity.138
OTHER FLEXIBLE WORK ARRANGEMENTS Employers are taking other steps

to accommodate employees scheduling needs. Job sharing allows two or more people
to share a single full-time job. For example, two people may share a 40-hour-per-week
job, with one working mornings and the other working afternoons. About 22% of the
firms questioned in one survey indicated that they allow job sharing.139 Job sharing
can be particularly useful for retirement-aged employees. It allows them to reduce
their hours while enabling the company to retain their expertise.140 Work sharing
refers to a temporary reduction in work hours by a group of employees during
economic downturns as a way to prevent layoffs. Thus, 400 employees may all agree
to work (and be paid for) only 35 hours per week, to avoid a layoff of 30 workers.
REVIEW
MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com to
continue practicing and applying the concepts you ve learned.
CHAPTER SECTION SUMMARIES

1. Because benefits are so important to employees, it s Severance pay is a one-time payment some
important that all managers understand the benefits employers provide when terminating an employee.
picture today. In addition to the fact that benefits are
3. Most employers also provide a number of required or
very important to employees, the other big issue, of
voluntary insurance benefits. Workers compensation
course, is that benefits in general and health care costs in
laws aim to provide sure, prompt medical benefits to
particular are rising very fast. About 78% of employees
work-related accident victims or their dependents,
cite health care benefits as most crucial to retaining
regardless of fault. Hospitalization, health, and disability
them.
insurance costs are rising fast, and most employer health
2. Employers provide numerous pay for time not worked
plans provide at least basic hospitalization and surgical
benefits.
and medical insurance for eligible employees. Many
Unemployment insurance provides benefits if a employers provide these plans via preferred provider
person is unable to work due to some fault other organizations or health management organizations.
than his or her own. To avoid unnecessary When an employee is terminated or terminates his or her
unemployment taxes, the main rule is to keep a employment, it is essential that the employer make the
list of written warnings. person aware of his or her COBRA rights. The basic over-
American workers tend to get about 9 days of leave all trend in health care cost control is to take steps (for
after 1 year of employment. instance, in terms of communication and empowerment,
Sick pay provides pay to an employee when he or health savings accounts, and claims audits) to try to keep
she is out of work because of illness. Minimizing sick the rising cost of health care insurance under control.
leave pay is important, and here cost reduction 4. Particularly with stock markets volatile, retirement
tactics include repurchasing unused sick leave benefits are important to employees today. Social Secu-
or simply using paid leave plans that lump sick leave, rity is a federal program that provides retirement income
vacation, and holidays into one leave pool. at the age of 62 and thereafter, as well as other benefits.
In formulating parental leave policies, the employer Many employers make available pension plans; these
needs to keep in mind the Family and Medical Leave provide an income when employees reach retirement age
Act, which requires larger employers to provide up or when they can no longer work due to disability.
to 12 weeks of unpaid leave for family-related issues, Defined benefit plans contain a formula for determining
and the Americans with Disabilities Act. retirement benefits, while defined contribution plans
flextime workplace flexibility work sharing

A work schedule in which employees Arming employees with the information Refers to a temporary reduction in work
workdays are built around a care of midday technology tools they need to get their hours by a group of employees during
hours, and employees determine, within jobs done wherever they are. economic downturns as a way to prevent
limits, what other hours they will work. layoffs.
job sharing
compressed workweek Allows two or more people to share a single
Schedule in which employee works fewer full-time job.
but longer days each week.

Benefits Services

Uploaded by

Copyright:

Available Formats

Benefits Services

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Benefits Services

Uploaded by

Copyright:

Available Formats

13

Benefits and Services

Source: NES Rentals.

WHERE ARE WE NOW . . .

THE BENEFITS PICTURE TODAY

FIGURE 13-1 Relative Legally required

TABLE 13-1 Some Required and Discretionary Benefits

Social Security Disability, health, and life insurance

THE STRATEGIC CONTEXT

1 Name and define each

benefits supplemental pay benefits unemployment insurance

Source: Greta Pratt/Corbis Images.

TABLE 13-2 An Unemployment Insurance Cost-Control Checklist

Vacations and Holidays

COST-REDUCTION TACTICS Employers use several tactics to reduce excessive

Evidence-Based HR: Tracking Sick Leave

Parental Leave and the Family and Medical Leave Act

FIGURE 13-2 Your Rights

Upon return from FMLA leave, most employees must

Job Benefits and Protection: For Additional Information:

FIGURE 13-3 Online Request

Supplemental Unemployment Benefits

2 Describe each of the main

HOW BENEFITS ARE DETERMINED Workers compensation can be monetary

CONTROLLING WORKERS COMPENSATION COSTS It is important to

Hospitalization, Health, and Disability Insurance

TABLE 13-3 Percentage of Employers Offering Some Popular Health

Prescription drug program coverage 97 96

supplemental unemployment benefits workers compensation

generally available to all employees including new nonprobationary ones regardless

HMOS Many employers offer membership in a health maintenance organization

MENTAL HEALTH BENEFITS The World Health Organization estimated that

The Legal Side of Health Benefits

PROTECTION AND AFFORDABLE CARE ACT OF 2010 Signed into law by

to offer health insurance or pay a shared responsibility payment if the government

COBRA COBRA the Consolidated Omnibus Budget Reconciliation Act

Trends in Employer Health Care Cost Control

health maintenance organization (HMO) preferred provider organizations (PPOs)

Do you track retirees covered by group health care plans?

Do you maintain current addresses of employees?

Do you maintain current addresses of individuals

Do you maintain a telephone log of calls received about

Do you maintain a record of changes in your plan?

Do you maintain a record of how premiums are calculated?

Do you maintain a log of those employees who are

COMMUNICATION AND EMPOWERMENT Most importantly, make sure

in treatment decisions. 64 So, for example, periodically send a statement to each

WELLNESS PROGRAMS Many illnesses are preventable. In one study employers

OUTSOURCING Benefits management ranks high on the list of HR activities that

OTHER COST-CONTROL OPTIONS Employers are taking other steps. One is

Benefits for Part-Time and Contingent Workers

3 Discuss the main retirement

group life insurance pension plans portability

Firms such as Vanguard, Fidelity,

Source: Fotolia LLC.

Furthermore, changing 401(k) providers can be grueling. 90 In addition to trustwor-

OTHER DEFINED CONTRIBUTION PLANS The 401(k) plan is one example of a

Pension Planning and the Law

PBGC ERISA established the Pension Benefits Guarantee Corporation (PBGC)

MEMBERSHIP REQUIREMENTS When does the employee become eligible for a