HRM textbook

438 PART 4 COMPENSATION
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
benefits.
RETIREMENT 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.