Topic 13 PDF

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Mandated Benefits Compulsory benefits given law 1. Unemployment State Unemployment Insurance or SUI Federal program Administered state and state law SUI i. Weekly cash benefit during periods of involuntary unemployment ii. Through fault of your 1. Not fired, not quitting, not retirement, not returni...

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Mandated Benefits – Compulsory  benefits given by law 1. Unemployment – State Unemployment Insurance or SUI  Federal program  Administered by state and state law  SUI i. Weekly cash benefit during periods of involuntary unemployment ii. Through “no fault of your own” 1. Not fired, not quitting, not retirement, not returning to school  Purpose i. Safety net for unemployed workers ii. Stabilize economy during recession iii. Encourages employers to stabilize employment  Eligibility i. Earn qualifying wages ii. Be able to work and be available for work iii. Actively seek work iv. Satisfy a waiting period  Financing i. Primarily employer payroll taxes ii. Employee taxes (some states – PA included) iii. Employer pays most of this  Issues i. Inadequate benefits ii. States inadequately funded iii. Waste, fraud, and administrative burdens 2. Workers compensation  Covers occupational disease and work-related accidents  “arising out of” or “in the course of employment”  system is on a state by state basis  prior to workers compensation, injured employees had to sue employer to gain compensation  result- the employer could successfully deny legitimate claims  compromise between employer and employee  employer is held absolutely liable for injuries  employee cannot sue employer  employer pays in some cases where there is no negligence  employee receives swift and certain payments  features of State Law i. virtually all wages and salaried employees are covered 1. except some minor exceptions ii. four types of benefits 1. loss of income benefits

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2. medical expenses 3. rehabilitation 4. survivor benefits iii. premiums are usually experience related to employers iv. make injuries part of cost of production v. provides incentives to control losses; safety types of income benefits i. income depends on degree of disability ii. income benefits – usually in terms of a percentage of lose wages 1. 66% or 2/3 of income four classes of disability i. permanent total 1. EX: brain damage 2. Never going to go away ii. Temporary total 1. Ex: broken bones 2. Will heal fully eventually iii. Temporary partial 1. Ex: sprained ankle 2. Can still do some work but limited iv. Permanent Partial 1. Ex: hurt back, cut off fingers 2. Can still do work, but compromised How employers can comply with the law? i. Purchase workers compensation insurance from private insurer ii. Self-insure in some cases iii. Purchase from state fund of federal agency Issues i. Occupational disease – EX: stress 1. Long latency period 2. Difficult to prove cause ii. Many suspicious claims 1. EX: “your back hurts and you can’t work” a. Company can hire a private investigator to follow people around and see if they’re telling the truth or not iii. Medical costs are very high iv. Many employees still sue 1. After one year, employee gets to pick their own doctor 2. Typically happens when employer wants employee to come back to work

3. Introduction to Social Security  Social Security was enacted in 1929  Medicare enacted in 1965  Social Security is the largest government program in the world  O.A.S.D.H.I. i. Old Age, Survivor, Disability, Health Insurance ii. In order to qualify, must earn a minimum amount in at least 40 quarters (10 years) to be fully insured 1. Earn at least $1,200 per quarter  O.A.  Old Age i. Retirement benefits ii. Amount based on earnings iii. Normal retirement age is 65-67 (depending on DOB)  S  survivor i. Coverage for the survivor of a fully insured worker – spouse or dependent ii. It has never been indexes from inflation since 1935 1. They receive $250 in benefits 2. Costs about $400 to get those benefits out  D  disability i. award could be more if spouse or dependents are involved ii. Definition is strict  not as liberal as regular disability policies  H.I.  Health Insurance – medicare i. Part A  Hospital Benefits 1. Inpatient in hospital 2. Post hospital home care 3. Hospice care 4. Coverage fee  pay a deductible of about $2,000 per year ii. Part B  medical benefits (everything besides hospitalization) 1. Monthly premium of about $105 2. Cover most non-hospital expenses EXCEPT: a. Preventative Care i. Routine physicals ii. Routine foot, eye, and ear care b. Immunizations c. Prescriptions d. Hospitals 3. WHY doesn’t it cover these things? a. It wouldn’t be smart in financial terms because the longer old people live, the more money they cost iii. Part C  DOES NOT EXIST 1. Taken out in 1990 2. REMEMBER THE PENNY iv. Part D  Prescriptions 1. Effective in 2006

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2. Participants must enroll and pay monthly premium and a portion of each prescription 3. Also must have part in A and B to be elgible 4. Doughnut hole a. Split doughnut into three parts b. FIRST PART - initial coverage by plan c. MIDDLE PART (THE HOLE) – deductible that sits in the middle, little or no coverage d. THIRD PART – coverage kicks back in, catastrophic coverage e. Obamacare made a doughnut hole with a very small hole i. That’s why old people liked it so much Funding of social security i. Payroll tax for employer and employee ii. 6.2% for OASDI up to wage base level 1. $127,000 in 2017  the most salary they can tax iii. 1.45% for HI (medicare) 1. unlimited salary they can tax 2. no wage base iv. 7.65% total (6.2%+1.45%) is known as FICA taxes v. EXAMPLE 1. $70,000 salary in one year 2. (70,000*6.2%)+(70,000*1.45%)= $5355 in FICA taxes 3. $150,000 salary in one year 4. (127,000*6.2%)+(150,000*1.45%)= $10,049 in FICA taxes vi. In theory, held consistent (1990 was the last hike in tax rate) vii. However, the wage base has been increasing – increases revenue viii. Social Security benefits are taxed as income when received (federal income taxes) Future Issues for Social Security i. System flawed – pay as you go opposed to being funded – as normal insurance vehicles are – creating future funding issues ii. Privatization of the system 1. Would your decisions outperform the government? 2. George Bush said he would do this but didn’t 3. Opt out of Social Security and invest the money somewhere else...