HURS107 – Week 4: Employee Benefits

Lesson 1: History of Employee Benefits

What are employee benefits?
Employee benefits are “non-salary compensation that can vary from company to
company” (Doyle, 2018, para. 3). Benefits are “indirect and non-cash payments within a
compensation package and are provided by organizations in addition to salary to create
a competitive package for the potential employee” (para. 3).

History of employee benefits?

Employee benefits date back over 400 years (How Did We Get Here…, 2018, para 1). In
1949, the U.S. Supreme Court upheld a lower court ruling that pensions and other
employee benefits were a “mandatory subject of bargaining under the National Labor
Relations Act” (Introduction to the Human Resources…, 2015, para. 4). This ruling
reduced political pressure from organized labor and other groups to “enhance
government-provided retirement and health care benefits” (para. 4).
Employee benefits has evolved from simple pension plans to total rewards benefits
programs that include life insurance and wellness plans. Please read the following
article entitled “How Did We Get Here? A History of Benefits” written for Evive
Health. After reading the article, focus on the following:

 How have employee benefits evolved over time?

Click the link below to read the article: How Did We Get Here? A History of Benefits

 your response here

Type


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Article Takeaways
Employee benefits has origins dating back as far as 1636 with retirement income for
armed militias in Plymouth. The first group health plan was offered in 1910 by
Montgomery Ward & Co. It wasn’t until the 1940s that offering health insurance was
the norm. Other innovative benefits such as 401k and social security retirement benefits
would follow suit and be used to recruit and retain employees.
Factors Influencing the Choice of Benefit Packages
There are a number of factors that affect employer and employee preference in
determining a benefits package.
Employer Factors
 Relationship to Total Compensation Costs: Compensation managers consider
employee costs as part of the total benefits package costs. However, benefit cost
is only one part of the total benefits package.
 Costs Relative to Benefits: This involves benefit administrators focusing more
on a cost-centered approach. This approach requires working with insurance
carriers and the forecasts of anticipated costs for benefits. Management
determines if the costs are within budget.
 Competitor Offerings: The organization must decide if they want to have a
benefits policy that leads, lags, or is competitive in the market.
 Role of Benefits in Attraction, Retention, and Motivation: Benefit
administrators’ main focus is to select packages that attract, retain, and motivate
employees.
 Legal Requirements: Employers want benefit packages that are compliant with
all local, state, and federal laws.
 Absolute and Relative Compensation Costs: The total package must be cost
competitive. The impact on total costs must be considered when selecting
different benefit options.
o (Milkovich, 2017).
Employee Factors
Employee preferences for benefits is determined by individual needs. “These needs
arise out of feelings of perceived equity or inequity” (Milkovich, 2017, p. 456).

 Equity: This involves the employee perception of fairness compared to what

other employees receive.
 Personal Needs of Employees: Factors such as age, sex, marital status and
number of dependents impact benefit choices. For example, an older employee
may be less concern with dependent care assistance than a younger employee.
o (Milkovich, 2017).

Lesson 1 Complete!
You completed the first lesson of this lecture. Please scroll down to complete the Check
Your Knowledge activity, in which you answer four True/False questions. You will
have unlimited attempts to do this activity, so do not worry if you do not get it correct
the first time. This is a non-graded activity.
Check your Knowledge #1
True or False: Benefits are “indirect and non-cash payments within a compensation
package.
(They are provided by organizations in addition to salary to create a competitive
package for the potential employee)
True or False: In 1949, the U.S. Supreme Court upheld a lower court ruling that
pensions and other employee benefits were a “mandatory subject of bargaining under
the National Labor Relations Act.”
(This ruling reduced political pressure from organized labor and other groups to
“enhance government-provided retirement and health care benefits)
True or False: The first group health plan was offered in 1910 by Walmart.
(The first group health plan was offered in 1910 by Montgomery Ward & Co.)
True or False: Employee preferences for benefits is determined by individual needs.
(Employee preferences for benefits is determined by individual needs. “These needs
arise out of feelings of perceived equity or inequity)
True or False: Legal requirements is a factor that affects employer preference in
determining a benefits package.
(Employers want benefit packages that are compliant with all local, state, and federal
laws.)

Lesson 2: Designing and Planning the Benefits Program

When designing a benefits program, management must determine which objectives are
the most important for their particular workforce. Employee input is also important to
developing a successful benefits program. Employee input enables companies to select
benefits that best meet their employees’ needs (Milkovich, 2017).
Employees have the opportunity to create benefit plans that will not only attract recruit
and retain employees, but also provide incentives for the company. Please watch the
4:15 – minutes video published on YouTube by Gregg Learning. After viewing the
video, consider the following questions:

 Organizations design benefit plans with what goal in mind?

 What is a flexible benefits plan?
Please click the link below to watch the video: Benefits Design

 your response here

Type

Video Takeaways
Benefit programs must be designed, administered, communicated, and measured. To
maximize the impact that employee benefits have on employee satisfaction and
retention, careful consideration must be given to designing benefit programs with the
overall organizational philosophy and strategy in mind. Organizations design benefit
plans with a goal of providing value for employees while remaining cost-effective for
the company.
As part of both benefits design and administration, employers may offer employees
choices in benefits. A flexible benefits plan is a program that allows employees to select
the benefits they prefer from options established by the employer. As a result of the
changing composition of the workforce, flexible benefits plans have grown in
popularity. Flexible benefits systems recognize individual employee situations differ
because of age, family status, and lifestyle (Milkovich, 2017).

Potential Design Issues

Employers must be equipped to handle potential design issues that may occur. Some of
the potential design issues include:

 Who receives coverage

 Financing of benefits
 Employee choice
 Cost containment
 Communication
(Milkovich, 2017).
Determining Who Receives Coverage
Companies must decide whether coverage should be extended to full-time, part-time or
both types of employees. In most instances, part-time employees have less benefit
options than full-time employees.
Another issue is determining if there will be a probationary period before employees
receive coverage. If so, companies must also determine the length of the probationary
period. “Companies view probationary periods as an opportunity to ensure they made
sound hiring decisions” (Milkovich, 2017, p. 218).
Financing
HR managers must also determine how to finance benefits. Financing may have a huge
role in determining who receives benefits. There are a few financing options companies
can choose: noncontributory financing, contributory financing and employee-financed.
Noncontributory financing is when the company pays the total cost of the benefits.
Contributory financing is when the employer and the company share the costs.
Employee-financed is when the employee pays the total costs. The majority of benefit
plans utilize contributory financing (Milkovich, 2017).
Employee Choice
HR managers must decide if employees will be able to choose some or all of their
benefits. When companies allow employees to choose from among a set of benefits, the
company is using a flexible benefits plan. An example of a benefit offered in a flexible
benefits plan is a Flexible Spending Account (FSA). FSAs allow employees to pay for
benefit expenses such as health care or childcare with pretax dollars (Milkovich, 2017).
If a company has a pre-established set of benefits such as medical insurance, their using
the core plus option plan. The core plus option plan contains two sets of benefits: core
benefits and optional benefits. Core benefits include: term life, health protection
coverage, and disability insurance. Employees also receive credits that equal 4 to 7
percent of their salary and it can be used to purchase optional benefits such as: dental
insurance, vision, additional life insurance, and paid vacation time (Milkovich, 2017).
Cost Containment
HR’s overall goal is to try to contain costs. This can be very difficult when it comes to
designing benefit plans. Due to the rising health care costs, employee benefits now
account for a substantial percentage of total compensation. “As a consequence,
employers face difficult trade-offs between employee benefits offerings and increases in
core compensation” (Milkovich, 2017).
Communication
“Companies should try to convey to employees the value they likely gain from having
benefits” (Milkovich, 2017, p. 218). One way this can be accomplished is by providing a
personal benefits summary. A personal benefits summary provides a breakdown of all
benefits selected and the costs for each benefit. Click the link below to view an example
of a personal benefits summary.

An effective benefits communication plan should have the following objectives:

 Create an awareness of and appreciation for the way current benefits improve
the financial security and the physical and mental well-being of employees.
 Provide a high level of understanding about the available benefits.
 Encourage the wise use of benefits.
(Milkovich, 2017, p. 218).

Lesson 2 Complete!
You have now completed the second lesson of this lecture. Please scroll down to
complete the Check Your Knowledge activity, in which you answer four True/False
questions. You will have unlimited attempts to do this activity, so do not worry if you
do not get it correct the first time. This is a non-graded activity.
Check your Knowledge #2
True or False: Benefit programs must be designed, administered, communicated, and
measured.
(To maximize the impact that employee benefits have on employee satisfaction and
retention, careful consideration must be given to designing benefit programs with the
overall organizational philosophy and strategy in mind.)
True or False: HR’s overall goal is to try to contain costs.
(As a consequence of trying to contain costs, employers face difficult trade-offs between
employee benefits offerings and increases in core compensation.)
True or False: A flexible spending account is an example of a core benefit plan.
(Core benefits are pre-established benefits such as term life, health protection coverage,
and disability insurance. An FSA is an example of a flexible benefits allow employees to
choose from among a set of benefits).
True or False: An effective benefits communication plan should encourage the wise use
of benefits.
(Encouraging the wise use of benefits will help with reducing the healthcare premium
costs to employers and employees)

Lesson 3: Legally Required Benefits – Social Security, Medicare,

Worker’s Compensation and Unemployment Insurance
Legally required benefits are benefits that employers are mandated by law to provide
employees. Historically, legally required benefits provided a form of social insurance
for employees. Social insurance programs were prompted by the rapid growth of
industrialization in the United States and the Great Depression of the 1930s. These
programs were designed to stabilize the well-being of dependent family members of
injured or unemployed individuals and enable retirees to maintain a minimum income
level (Milkovich, 2017).

Social Security Programs

When social security was first enacted in 1935, only 60 percent of all workers were
eligible. Today, 96% of American workers are covered (Milkovich, 2017). “The main
benefits under social security fall into four categories: (1) old age or disability benefits,
(2) benefits for dependents of retired or disabled workers, (3) benefits for surviving
family members of a deceased workers, and (4) lump-sum death payments” (Milkovich,
2017, p, 479).
Three sources fund Social Security:

 Workers contribute 85% through payroll taxes (FICA)

 Interest on the excess funds held by the Treasury pays 11%
  Current beneficiaries pay the remaining 3% through taxes on their benefits
(Amadeo, 2019).

Social Security Solvency

The solvency of the social security program has been a hot topic for years. The Social
Security Board of Trustees has warned that “the demographic changes that created the
surplus in Social Security would also lead to the Fund’s demise” (Amadeo, 2019, para.
11). This is due to baby boomers leaving the workforce.
Social Security and Medicaid/Medicare solvency has been major political issue for
decades. Congress has proposed bills that they say would increase the solvency of
Social Security, but they have failed to vote on the bills. Please watch the 2:07-minutes
video published on YouTube by Fox Business. After viewing the video, please consider
the following:

 Social Security and Medicare account for 42% of federal program spending in
2016.
 The Social Security Trust Fund is solvent through 2034.
Click the link below to watch the video: When will Medicare, Social Security trust funds
run dry?

Video Takeaways
Fox Business News’s Gerri Willis reports that medicare funds will run out in 2029 and
Social Security has only 17 years until insolvency, 2034. The President believes his
economic plan could help sustain the Social Security program. Social Security and
Medicaid accounted for 42% of the government’s expenditures in 2016. In 2016,
Medicare covered 56.8 million beneficiaries and Social Security provided benefits to 60.9
million.

Federal Insurance Contributions Act (FICA)

FICA is a federal payroll/employment tax used to fund Social Security and Medicare.
Both employees and employers are required to contribute to these funds. Employers
are required to withhold Social Security tax at 6.2 percent of your gross pay and
Medicare tax at 1.45 percent of your gross pay. Employers are required to match these
amounts (Social Security Administration Website, 2019).

Old Age Benefits

This program pays benefits based on how much credit the individual has earned
through eligible payroll contributions. Individuals can earn credit based on quarters of
coverage, which equals three consecutive months during the calendar year. Individuals
become full insured when they earn credit for 40 quarters of coverage, or 10 years of
employment, and remain fully insured during their lifetime (Milkovich, 2017).
Under the retirement program, full insured individuals may choose to receive benefits
as early as 62. However, choosing benefits early will result in a reduction of their
benefit amount. Congress has increase the full retirement age from 65 for people born in
1938 or later due to higher life expectancies. By 2022, the age for collecting Social
Security benefits will be 67 (Milkovich, 2017).

Survivor Benefits
The Social Security Administration calculates survivor benefits based on an individual’s
employment status and the survivors’ relationship to the deceased. Survivor benefits
are paid to dependents, unmarried children of the deceased, and a spouse of the
deceased who is caring for a child. A widow or widower at least 60 or a parent at least
62 who was dependent of the deceased employee is entitled to survivors’ benefits if the
deceased worker was full insured (Milkovich, 2017).

Disability Benefits
Social Security Disability Insurance (SSDI) pays benefits to seriously disabled workers
and family members if they become disabled before reaching retirement age and are not
able to work. Disability benefits are available to disabled workers who are unable to
work as a result of a serious medical or mental impairment that lasts at least 12 months.
In order to receive benefits, 40 credits must have been earned, with 20 credits being
earned in the last 10 years. If an individual is younger and has not worked long enough
when they become disabled and have low income and assets, they can apply for
Supplemental Security Income (SSI) (Milkovich, 2019).
SSDI and SSI have many similarities but the eligibility requirements are different. Please
watch the 2:26-minutes video below published on YouTube by Lawrence & Associates.
After viewing the video, you should be able to differentiate between SSDI and SSI.
Please click the link below to watch the video: https://youtu.be/NUctTf0X65Q

Video Takeaways
Social Security Disability Insurance (SSDI) is for people who qualify based on work
credits. Work credits are based on age and length of time working. SSDI benefits are
more than SSI benefits. Supplemental Security Income (SSI) is for people over 65 years
old and did not earn enough income to meet their basic needs. If under 65, the
individual must be disabled and does not earn enough income to meet their basic
needs. Both programs require that the claimant prove they are severely disabled and
cannot work a job for more than 8 hours a day, 5 days a week, or earn more than $1100
per month.

Medicare
The Social Security Medicare Program provides insurance coverage for nearly all U.S.
citizens age 65 or older. The insurance coverage includes hospitalization, convalescent
care, and major doctor bills. The Medicare Program includes five features:
  Medicare Part A - Hospital insurance that covers both inpatient and outpatient
hospital care services. Social security beneficiaries, retirees, voluntary enrollees,
and disabled individuals are all entitled to Medicare Part A.
 Medicare Part B – Voluntary supplemental insurance medical insurance that
covers 80 percent of medical services and supplies after the deductible has been
paid. Medicare Part A automatically qualifies an individual to enroll in
Medicare Part B.
 Medigap – Voluntary supplemental insurance to pay for services not covered in
Parts A and B
 Medicare Part C: Medicare Advantage – Choices in health care providers, such as
through HMOs and PPOs
 Medicare Part D: Medicare Prescription Drug Benefit – Prescription drug coverage
(Milkovich, 2017).

Workers’ Compensation
Workers’ compensation insurance programs are run by states individually. It is
designed to cover expenses incurred in employee work-related accidents. The maritime
workers’ compensation program is mandated by the Longshore and Harbor Workers’
Compensation Act. Federal civilian employees receive workers’ compensation
protection under the Federal Employees’ Compensation Act. Workers’ compensation
laws cover almost all employees in the Unites States, except for some agricultural
workers and small businesses with fewer than a dozen regular employees. Coverage for
domestic workers is either mandatory or voluntary, depending on the state (Milkovich,
2017).
Click the link below to see a state by state comparison of workers’ compensation laws
on the National Federation of Independent Business Website:
Workers’ Compensation Laws – State by State Comparison

Workers’ Compensation Fraud

Workers’ compensation fraud is any lie or misrepresentation made by an employer,
employee, or provider to benefit themselves financially. One to two percent of all
workers’ compensation payments are fraudulent.
Types of workers’ compensation fraud include:

 Employees or employers making up or exaggerating an injury or illness.

 Employees pretending that they got injured on the job, but got injured elsewhere.
 Employers lying about job safety.
 Employers misclassifying employees as independent contractors when they
should have an employee classification.
  Health care providers exaggerating injuries or illnesses so they can charge
money.
(Leonard, 2019)

Unemployment Insurance
The Social Security Act of 1935 founded a federal and state unemployment insurance
program for individuals that became unemployed through no fault of their own. The
unemployment insurance program applies to almost all employees in the United States,
with the exception of most agriculture and domestic workers. Individuals must meet
the following criteria to qualify for unemployment benefits:

 Not have left a job voluntarily

 Be able and available for work
 Be actively seeking work
 Not have refused an offer of suitable employment
 Not be unemployed because of a labor dispute. There is an exception to this in a
few states.
 Not be terminated because of gross violations of conduct within the workplace.
(Milkovich, 2017).
Individuals that meet the unemployment compensation eligibility criteria receive
weekly benefits. Benefit amounts vary by state and are financed by federal and state
taxes paid by employers under the Federal Unemployment Tax Act. Please watch the
2:00 – minutes video below published on YouTube by Gregg Learning. After viewing
the video, you should be able to answer the following regarding unemployment
compensation:

 What is unemployment compensation?

 How is the unemployment insurance program funded?
 How long can an employee receive unemployment benefits?
Please click the link below to watch the video: Unemployment Compensation

 your response here

Type

Video Takeaways
Unemployment compensation is money that substitutes for wages or salary, paid to
recently unemployed workers under a program administered by a government or labor
union. Each employer pays an employment tax that is based on an ‘experience rate,”
which reflects the number of claims filed by workers who leave employment. Under
normal circumstances, an employee who is out of work and actively looking for
employment can receive up to 26 weeks of pay at the rate of 50% to 80% of normal pay.

Lesson 3 Complete!
You completed the third lesson of this lecture. Please scroll down to complete the
Check Your Knowledge activity, in which you answer four True/False questions. You
will have unlimited attempts to do this activity, so do not worry if you do not get it
correct the first time. This is a non-graded activity.

Check your Knowledge #3

True or False: The Social Security Act was enacted in 1935.
(The Social Security Act of 1935 is a law enacted by the 74th United States Congress and
signed into law by President Franklin D. Roosevelt. The law created the Social Security
program as well as insurance against unemployment)
True or False: FICA is used to fund the unemployment insurance program.
(Three sources fund Social Security: FICA, interest on the excess funds held by the
Treasury pays 11%, and current beneficiaries pay the remaining 3% through taxes on
their benefits.)
True or False: Medicare Part D provides prescription coverage.
(Medicare Part D is an optional United States federal-government program to help
Medicare beneficiaries pay for self-administered prescription drugs through
prescription drug insurance premiums)
True or False: Workers’ compensation insurance programs are run by states
individually.
(Benefits are usually paid by a private insurance company or state-
run workers' comp fund.)
True or False: Agriculture workers are eligible for unemployment benefits.
(Workers’ compensation laws cover almost all employees in the Unites States, except for
some agricultural workers and small businesses with fewer than a dozen regular
employees.)
Lesson 4: Legally Required Benefits – Health Care Insurance,
Retirement Insurance, FMLA
In this lesson, we will continue with legally required benefits. As you recall, legally
required benefits are programs that employers are mandated by law to provide
employees. In this lesson, we will cover health care insurance, retirement insurance,
and FMLA.

Health Care Insurance

Health care insurance coverage was mandated by the Patient Protection and Affordable
Care Act of 2010. It also set minimum standards for health insurance. Starting in 2016,
companies with at least 50 employees were required to offer affordable health
insurance. When the Affordable Care Act (ACA) was first enacted, it required all
individuals to acquire health insurance as well. If either the individual or employer did
not have or provide insurance, they would be faced with a penalty on their tax return.
However, beginning in tax year 2019, individuals will not be forced to pay a penalty for
not having health insurance (Milkovich, 2017).
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
COBRA was enacted to provide employees with the opportunity to continue receiving
their employer-sponsored medical insurance temporarily when coverage is lost due to a
qualifying event such as a layoff. All employers with 20 or more employees must
comply with COBRA. An employer may also charge individuals up to 102% of the
premium for coverage. The coverage lasts for 18 months but can be extended up to 36
months (Milkovich, 2017).

Retirement/Pension Plans
Pensions are ranked as one of the most important benefits (Milkovich, 2017). In fact,
studies show that “employees with employer-provided retirement plans are more likely
to have sufficient savings for a comfortable retirement than those who do not have these
plans” (Milkovich, 2017, p. 480). Two of the most common types of retirement plans are
defined benefit plans and defined contribution plans. Defined benefit plans cost
employers more so this plan is rarely being offered to employees today. Please watch
the two videos below published on YouTube by Gregg Learning to learn more about
these two types of retirement plans. After viewing the video, you should be able to
compare a defined benefit plan to a defined contribution plan.
Click the links below to watch the videos:
Defined Benefit Plan (3:08-minutes) - Defined Benefit Plans
Defined Contribution Plan (3:24-minutes) - Defined Contribution Plans
Video Takeaways
A defined benefit pension plan is a plan that provides an annuity to eligible employees
upon their retirement with the amount paid per year based on a formula that usually
includes a company-determined percentage, the number of years worked, and either
the last salary or some average of previous years’ salaries. The annuity is either a
specified dollar amount each month or is based on a formula that usually involves
multiplying the number of years an employee worked at a company by a designated
percentage by the employee’s last or highest salary. Defined contribution plans are a
plan in which the employer specifies where the money will be deposited and often
gives the employee the power to decide how the money will be invested with the
retirement income being a function of how well money put into the plan was invested.
A 401(k) plan, named after the section of the IRS code that permits these plans, allows
employees to defer receiving some of their compensation until retirement. The money
contributed by the employee is taken out of the person’s paycheck pretax, and it
accumulates tax free until the person retires. Only when a person begins withdrawing
the funds upon retirement is he taxed.

Family & Medical Leave Act

“The Family and Medical Leave Act of 1993 applies to all employers having 50 or more
employees and entitles all eligible employees to receive unpaid leave up to 12 weeks
per year for specified family or medical reasons” (Milkovich, 2017, p. 480). A revision
to the FMLA was made in March 2014 that gave eligible employees in same-sex
marriages the same ability as all spouses to use FMLA.

Lesson 4 Complete!
You completed the fourth lesson of this lecture. Please scroll down to complete the
Check Your Knowledge activity, in which you answer four True/False questions. You
will have unlimited attempts to do this activity, so do not worry if you do not get it
correct the first time. This is a non-graded activity.

Check your Knowledge #4

True or False: Health care insurance was mandated by the Affordable Care Act.
True or False: An annuity is an example of a defined contribution plan.
True or False: 401(k) is an example of a defined contribution plan.
True or False: FMLA entitles all eligible employees to receive unpaid leave up to 12
weeks per year for specified family or medical reasons.
Lesson 5: Discretionary Benefits
Origins of Discretionary benefits
Discretionary benefits are employee benefits that are not mandated by law. Several
factors contributed to the rise of discretionary benefits. In fact, the rise in pension plans
was a direct result of the rise in discretionary benefits. The first pension plan in the
United States was established in 1759 to benefit widows and children of Presbyterian
ministers. In 1875, the American Express Company established a formal pension plan.
Because of government-imposed wage freezes during World War II, companies
invested in discretionary benefits as an alternative to pay increases as a motivational
tool (Milkovich, 2017). Today, discretionary benefits make up around 23 percent of
employers’ total payroll costs. They fall into three categories: protection programs, paid
time off and other services.

Protection Programs
Three discretionary protection programs include disability insurance, life insurance,
and retirement program.
Disability Insurance
Disability insurance replaces income for employees who are unable to work because of
sickness or accidents. “At all working ages, the probability of being disabled for at least
90 consecutive days is much greater than the chance of dying while working; one of
every three employees will have a disability that lasts at least 90 days” (Milkovich, 2017,
p. 484).
There are two types of employer-sponsored disability insurance: short-term disability
insurance and long-term disability insurance. Please watch the 2:25 – minutes video
below published on YouTube by Gregg Learning to learn more about these two types of
employee-sponsored disability insurance. After viewing the video, compare and
contrast short-term and long-term disability insurance.
Click the link below to watch the video: Short and Long Term Disability Insurance

 your response here

Type

Video Takeaways
A short-term disability plan is an insurance plan that pays a specified portion of an
employee’s salary when the employee is out of work for a limited time due to a
disability. Long-term disability (LTD) insurance plan that typically starts after a
specified period of time (6 to 12 weeks, for example) from the time of a disability and
pays a portion of the employee’s salary until retirement age. These plans pay a
percentage of the employee’s salary during the time the employee is out of work due to
a disability.
Life Insurance
Employer-provided life insurance protects employees’ families by paying a specified
amount to an employee’s beneficiary upon their death. There are three kinds of life
insurance: term life, whole life and universal life. Term life insurance provides
protection for a limited amount of time and maxes out at a certain age. Whole life
insurance is similar to term life but the plans do not terminate until payment is made to
the beneficiaries. Whole life policies are more expensive then term life policies.
Universal life insurance combines features from both term and whole life and money
can be moved between the insurance and savings features (Milkovich, 2017).
Retirement Programs
In lesson 4, we discussed how retirement programs can be legally required benefits.
However, they can also be discretionary. In most cases, employees opt to either
participate or not participate in retirement plans. They also have the option to choose
the amounts they would like to contribute, frequency, and option investment strategies.

Paid Time Off

The second type of discretionary benefit is paid time off. Paid time off policies
compensate employees when they are not performing their primary work duties. The
major types of paid time off are holidays, vacation, sick leave, personal leave, jury duty,
funeral leave, military leave, clean-up/preparation or travel time, rest periods, lunch
period, sabbatical leave, and volunteerism (Milkovich, 2017).
Please watch the 3:35 – minutes video below published on YouTube by Gregg Learning
to learn more about paid time off benefits. After viewing the video, answer the
following questions in the text box below:

 Define paid time off benefits?

 What are some of the advantages of PTO plans?
Click the link below to watch the video: Paid Time Off Benefits

 your response here

Type

Video Take-aways
Time-off benefits represent a significant portion of total benefit costs. Employers give
employees paid time off for a variety of circumstances. Paid lunch breaks and rest
periods, holidays, and vacations are common. But time off is given for many other
purposes as well, including various leaves of absence.
A growing number of employers have made use of a paid-time-off (PTO) plans. These
plans combine all sick leave, vacation time, and holidays into a total number of hours or
days that employees can take off with pay. Many employers have found PTO plans to
be more effective than other means of reducing absenteeism, scheduling time off,
increasing employee understanding of leave policies, and assisting with recruiting and
retention.

Other Services
Employers now offer several discretionary service options for employees such as
Employee Assistance Programs (EAPs), tuition reimbursement, and wellness programs.
Employee Assistance Programs (EAPs)
“Employee assistance programs are voluntary work-based programs that offer free and
confidential assessments, short-term counseling, referrals, and follow-up services to
employees who have personal and/or work-related problems” (Office of Personnel
Management Website, 2019). EAPs address issues such as alcohol and substance abuse,
stress, grief, family problems, and psychological disorders. Please watch the 1:34 –
minutes video below published on YouTube by Gregg Learning to learn more about
employee assistance programs. After viewing the video, you should be able to define
employee assistance programs and list two features of EAPs.
Click the link below to watch the video: Employee Assistance Programs

Type your response here

Video Takeaways
To help employees cope with mental health issues, substance abuse, and life challenges,
companies offer Employee Assistance Programs (EAPs). Employee assistance programs
(EAPs) are a resource for employees dealing with personal problems, including services
such as attorney consultation, child-care and elder-care options, budget information,
addiction recovery, and family counseling. EAPs were started in the 1970s, primarily to
provide a resource for managers dealing with employees who had or appeared to have
substance abuse problems.
Today, an employee can use an EAP to consult an attorney, find out about child-care
and elder-care options, get information on budgeting, and seek family counseling.
Managers who suspect that an employee has a substance abuse or other personal
problem can refer that employee to the company’s EAP.
Tuition Reimbursement
Tuition reimbursement programs pay employees back fully or partially for expenses
incurred while attending school. Depending on the employer, conditions for
reimbursement may apply. Some of those conditions are:

 The courses taken or degree sought must be applicable to the employer.

 There is a cap on the amount that will be reimbursed.
 Students must meet a grade requirement to be reimbursed.
(Milkovich, 2017, p. 443).
Wellness Programs
In the 1980s, employees began sponsoring wellness programs to promote and maintain
physical and psychological health. Wellness programs can focus on smoking cessation,
stress management, weight control, nutrition, etc. Smoking cessation programs aim to
help employees quit smoking. Stress management programs help employees cope with
stress. Weight control and nutrition programs educate employees about proper
nutrition and weight loss (Milkovich, 2017).

Lesson 5 Complete!
You completed the fifth lesson of this lecture. Please scroll down to complete the Check
Your Knowledge activity, in which you answer four True/False questions. You will
have unlimited attempts to do this activity, so do not worry if you do not get it correct
the first time. This is a non-graded activity.

Check your Knowledge #5

True or False: Disability insurance is a type of discretionary protection program.
(Discretionary benefits are employee benefits that are not mandated by law and include
disability insurance.)
True or False: Today, discretionary benefits make up around 10 percent of employers’
total payroll costs.
(Discretionary benefits make up around 23 percent of employers’ total payroll costs.)
True or False: PTO plans combine all sick leave, vacation time, and holidays.
(The major types of paid time off are holidays, vacation, sick leave, personal leave, jury
duty, funeral leave, military leave, clean-up/preparation or travel time, rest periods,
lunch period, sabbatical leave, and volunteerism)
True or False: Employee assistance plans were started in the 1980s.
(In the 1980s, employees began sponsoring wellness programs to promote and maintain
physical and psychological health.)
Conclusion
Benefit plans have evolved from pension plans to total reward plans. The components
of a benefit plan include legally required benefits and discretionary benefits. In order
for a benefit plan design to be successful, employers must get input from the employees
and most importantly, communicate the plan to employees.
In the next lecture, we will discuss technology in compensation and benefits.
You completed this lecture. Please return to blackboard.

References
Amadeo, K. (2019). Social Security Trust Fund, Its History, Solvency, and How
To Fix It. Retrieved from
https://www.thebalance.com/social-security-trust-fund-history-solvency-how-
to-fix-it-3305890.

Doyle, A. (2019). Types of Employee Benefits and Perks. Retrieved from

https://www.thebalancecareers.com/types-of-employee-benefits-and-perks-
2060433.
Fox Business. (2017, July 14). Retrieved from https://youtu.be/lGG9uRkaoxM.
(Referenced in Lesson 3)
Gregg Learning. (2015, September 4). Retrieved from
https://youtu.be/OQubN4NJNu8. Unemployment Compensation (Referenced in
Lesson 1)

Gregg Learning. (2018, September 20). Retrieved from

https://youtu.be/H9H5Y7nrcE8. (Referenced in Lesson 3)
Gregg Learning. (2018, September 20). Benefit Design Retrieved from
https://youtu.be/EE_XLyEi7Rg. (Referenced in Lesson 2)
Gregg Learning. (2018, September 24). Paid Time Off Benefits Short and Long-Term
Disability Retrieved from https://youtu.be/o_VV6tcf1MY. Paid Time Off (Referenced
in Lesson 5)

Gregg Learning. (2019, April 14). Short and Long-Term Disability Retrieved from
https://youtu.be/DQMsS3Lzn3Q. (Referenced in Lesson 5)
Gregg Learning. (2019, April 14). Employee Assistance Program Retrieved from
https://youtu.be/B6uzUlXznII. (Referenced in Lesson 5)
Gregg Learning. (2019, April 16). Defined Benefits Plan Retrieved from
https://youtu.be/wTRWd26q9lc . (Referenced in Lesson 4)
Gregg Learning. (2019, April 17). Defined Compensation Plan Retrieved from
https://youtu.be/nN0O7oSXgyA . (Referenced in Lesson 4)
How Did We Get Here? A History of Benefits. (2018, February 8). Retrieved from
https://goevive.com/latest/thinking/history-of-benefits/
Introduction to the Human Resources Discipline of Employee Benefits. (2015, June 27).
Retrieved from https://www.shrm.org/resourcesandtools/tools-and-
samples/toolkits/pages/employeebenefits.aspx
Lawrence & Associates. (2017, February 24). Social Security Disability FAQ Retrieved
from https://youtu.be/NUctTf0X65Q. (Referenced in Lesson 3).
Leonard, K. (2019). 7 Examples of Workers’ Compensation Fraud. Retrieved from
https://fitsmallbusiness.com/workers-compensation-fraud-examples/.
Milkovich, G. (2017). Compensation. New York, NY: McGraw-Hill.

National Federal of Independent Business. (2017). Retrieved from

https://www.nfib.com/content/legal-compliance/legal/workers-
compensation-laws-state-by-state-comparison-57181/.

Office of Personnel Management Website. Retrieved from

https://www.opm.gov/faqs

Social Security Administration Website. Retrieved from

https://www.ssa.gov/history/hfaq.html.