美国人力资源管理—福利管理-教学课件7.ppt

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1、Chapter 7Employer-Sponsored Disability Insurance and Life Insurance McGraw-Hill/IrwinCopyright 2011 The McGraw-Hill Companies,Inc.All rights reserved.LEARNING OBJECTIVESDisability and life insurance conceptsOrigins of disability and life insurance programsShort-term and long-term disabilityExplorati

2、on of a variety of different types of life insurance-term,universal life,and accidental lifeIts Used More Than You Think!Disability insurance typically applies to work and non work-related illness or accident,whereas workers compensation only applies to work-related illness or injury.One out of thre

3、e employees will experience a disability that lasts over 90 days over the course of their working lives.Employer-sponsored disability insurance is typically provided through a third party insurer who provides a policy for a set premium paid by the employer.The policy stipulates the terms and conditi

4、ons for disability eligibility and compensation.Types of Disability InsuranceShort-TermLess Than 6 MonthsInability to Perform Any of Occupations DutiesLong-Term6 Months to lifeInability to Perform Work Qualified For(Training,Education,Experience)Both short and long term disability insurance may dupl

5、icate public disability benefits mandated by the Social Security Act and state worker comp laws.Employer benefits typically supplement mandated benefits,not replace them.Sick leave policies cover minor illness and are funded as a payroll expense.Origins of Disability InsuranceLegislation was passed

6、to protect injured workers in an industrialized economy.Examples include the Occupational Safety and Health Act(OSHA),workers compensation and Social Security.These public programs were augmented by private plans to ensure adequate compensation for the injured worker.Beginning in the 1960s and conti

7、nuing private insurance companies began managing employee injury/disability risk for the employer.These private insurance companies could better manage liability by providing benefits on an income replacement basis.SHORT-TERM DISABILITYMost plans pay 50 to 66.67 percent of the employees pretax salar

8、y with a maximum amount per month regardless of monthly earningsShort term disability plans cover a limited period of time(typically 26 weeks)Plans typically include:pre-existing conditions clause,waiting periods(pre-eligibility and elimination periods),and exclusion provisions for designated health

9、 conditions (mental illness&chemical dependency).Definition:an inability to perform the duties of ones regular job including such short term conditions as:recovery from injuries or surgery,treatment for an illness that requires hospitalization,and pregnancy.LONG-TERM DISABILITYTwo Stage Definition:A

10、n illness or accident that prevents an employee from performing his or her“own occupation”over a designated period of time.After a designated period of time the definition broadens to“inability to perform work in any occupation or paid employment”.Most recently,both court cases and private insurers

11、have recognized partial disability inclusion allowing disabled employees to accept part time employment.Maximum benefits usually equal 50-70%of monthly pretax salary,subject to the maximum dollar amount.Most long term benefit plans are subject to a waiting period of 6 months to 1 year and usually be

12、comes active only after all other employee disability benefits have been exhausted.Benefits continue until retirement or for a specified number of months.FUNDING DISABILITY INSURANCE1.Employers may use an independent insurance company to provide disability benefits.2.Employers may support disability

13、 benefits through partial self-funding typically with the purchase of a stop-loss policy to cover claims that exceed company funding.3.Full self-funding from company assets either with or without a third party claims management company.Employee and Employer Tax ObligationsEmployers typically deduct

14、contributions to disability insurance programs as a business expense.The responsibility to withhold and pay taxes rests on who assumes responsibility for covering these loses.Both FICA and FUTA recognize payments to the disabled worker as taxable wages for six calendar months following the last date

15、 of service.Laws Which Influence Plan DesignAge Discrimination in Employment Act of 1967Americans with Disabilities Act of 1990Employee Retirement Income Security Act of 1974Workers Compensation and Social Security RegulationsThe Age Discrimination in Employment Act(ADEA)of 1967Older Workers Benefit

16、 Protection Act(1990)amendment to the ADEA generally bans the termination of an employees long-term disability benefits for active employees based on age.Provisions exist to provide to provide a“safe harbor”for employers who may reduce the duration of a long term disability benefit for a specific il

17、lness or condition regardless of age.The American With Disabilities Act of 1990Under the Act a qualified individual with a disability is a person who possesses the necessary skills,experience,education,et al.to perform the job with a reasonable accommodation.Several federal courts have ruled that re

18、cipients of long-term disability are not considered a qualified individual.Additionally,the EEOC,the entity the oversees administration&enforcement of the ADA may lawfully offer different benefits under disability retirement plans.Examples would be the exclusion of cost-of-living increases and also

19、to include offset provisions for other insured income benefits.The Employee Retirement Income Security Act of 1974Regulates the establishment and implementation of company-sponsored benefits.Areas covered by the act:Disability InsuranceHealth InsuranceLife InsurancePensionsAlso specific titles of th

20、e act apply to protection of plan beneficiaries and the protection of employee rights.STATE WORKERS COMPENSATION AND SOCIAL SECURITY DISABILITY REGULATIONSEmployees may receive long-term disability benefits from public as well as company sponsored disability programsCompanies and insurance companies

21、 may include an offset provision to reduce benefits from workers compensationLIFE INSURANCEProtects family members by paying a specific amount to employee beneficiaries upon the death of the employee.Typically a multiple of the employees salary.%of Employee Coverage 200875%of Full-Time Employees17%o

22、f Part-Time Employees Types of Life Insurance1)Term life insurance2)Whole life insurance3)Universal life insuranceGroup Term Life insuranceContributoryEmployees pay the entire insurance premium or share the cost with their employerNoncontributoryEmployer pays the entire premium for coverage within d

23、esignated limits(typically multiples of the employees base salary).Offer large tax incentive to employer.see Exhibit 7.2TAX TREATMENT GROUP LIFE INSURANCESection 79 Internal Revenue Service Code Employer can deduct premium as a business expense;however the deductible cost is determined by the Unifor

24、m Premium Tables see exhibit 7.4Employer CANNOT be beneficiary Employee pays taxes on coverage above$50,000 with some allowed exclusionsInsurance companies provide mortality tables to indicate the probability of death by established industry demographics.Combines features of term life insurance and

25、whole life insuranceCreated to provide more flexibility by allowing the policy owner to shift money between insurance and savings components of the policyInsurance company initially breaks down premium into insurance and savingsPolicy owner makes adjustments to the amounts directed at eachPermits th

26、e cash value of investment to grow at a variable rate tied to marketLeads to changes in premium,benefits,and payment schedulesUNIVERSAL LIFE INSURANCEAccidental Death and Dismemberment InsuranceCovers death or dismemberment as a result of an accident.Generally does not pay survivor benefits in the e

27、vent of a death.Premiums are generally lower because number of deaths by accident is lower than from natural causes.The use of this benefit has diminished due to prohibit cost(s)for employer and/or employee.Companies are more inclined to spend these benefit dollars on health insurance and retirement plans.Managing the risks and liabilities of disability insurance and workers compensation programs is a significant challenge to insurers and employer sponsors.Chapter 7Fundamental Concepts of Employer-Sponsored Disability and Life Insurance Programs