Employee Benefits 5Th Edition Martocchio Solutions Manual Full Chapter PDF

Chapter 06 - Employer-Sponsored Disability Insurance, Life Insurance, and Workers' Compensation Programs
Solution Manual for Employee Benefits 5th

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9780078029486
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Chapter 06 Employer-Sponsored Disability Insurance, Life Insurance, and Workers'
Compensation Programs
I. Learning Objectives (use PP 6.2)

1. Origins of disability and life insurance programs
2. Differences between short-term and long-term disabilities
3. Types of life insurance – term, universal, accidental death and dismemberment
4. Workers’ compensation insurance objectives
5. Types of workers’ compensation claims
II. Disability Insurance

A. Overview (use PP 6.3)
1. Replaces income for employees who become unable to work on a regular basis
because of illness or injury and is more encompassing than workers’ compensation
2. Benefits apply to both work-related and nonwork-related illnesses and injuries
3. One of every three employees will probably have at least one disability that lasts at
least 90 days
4. Companies that do NOT self-insure or get coverage from state funds may purchase
insurance policies from one or more insurance carriers
a. Insurance policies specify the amount of money it will pay for particular
disabilities
b. Companies pay insurance carriers a premium (a negotiated amount) to establish
and maintain each policy
5. Two forms of disability insurance (use PP 6.4)
a. Short-term
i. Which covers disabilities that last less than 6 months
ii. Considers disability as an inability to perform any and every duty of one’s
occupation
b. Long-term
i. Which covers disabilities that last 6 month to life
ii. Defines a disability as an inability to engage in any occupation for which the
individual is qualified by reason of training, education, or experience
6. Short-term and long-term plans may overlap, NOT replace, coverage with the
disability benefits mandated by Social Security
7. These company-sponsored plans generally supplement legally-required benefits
8. Sick leave policies are separate from disability leave policies
a. Sick leave compensates employees when they are absent due to occasional minor
6-1
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illnesses or injuries
b. Sick leave benefits are paid from the regular payroll
B. Origins of Disability Insurance and Workers’ Compensation Insurance (use PP 6.5)
1. Began in late 1800s because
a. America’s shift from an agrarian to an industrialized economy
b. Companies were NOT overly concerned with health and safety measures
c. Employees had little or no recourse if disabled on the job
2. Workers’ compensation programs were created by state government, rather than the
federal government
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3. First workers’ compensation law was passed in 1911

4. By 1920, all but 6 states had instituted workers’ compensation laws
5. Two principles behind workers’ compensation:
a. Employer is absolutely liable for providing benefits to employees for occupational
disabilities or injuries that result, regardless of fault
b. Employers should assume the costs of occupational injuries and accidents
6. Prior to 1960s, there were three forms of disability insurance
a. Establishment funds, created by employers to provide minimal cash payments to
disabled employees
b. Individual disability insurance, which was offered by insurance carriers
c. Group disability insurance
7. Initial forms were primitive because they
a. Paid lump sum benefits
b. The amount was generally the same regardless of age or the severity of illness or
injury
C. Coverage and Costs of Disability Programs (use PP 6.6)
1. In 2011,
a. 38% of private sector workers participated in an employer sponsored short-term
disability plan and 32% participated in a long-term disability plan
b. Among full-time workers,
i. 46% participated in a long-term disability plan
ii. 41% participated in a short-term disability plan
c. Among part-time workers,
i. 15% participated in a long-term disability plan
ii. 6% participated in a short-term disability plan
d. On average, employers spent annually
i. $100 per employee to provide short-term disability insurance
ii. $80 per employee to provide long-term disability insurance
D. Short-Term Disability Insurance Programs (use PP 6.7)
1. Classified as an inability to performs one’s regular job duties, including
a. Recovery from injuries
b. Recovery from surgery
c. Treatment of an illness requiring any hospitalization
d. Pregnancy/child birth (Pregnancy Discrimination Act of 1978)
2. Most plans pay employee
a. 50% to 67% of pre-tax salary on a monthly or weekly basis
b. Some pay 100%
3. Benefits paid for up to 6 months (26 weeks)
4. Most companies set a monthly maximum benefit amount
5. Example: Employee earns $130,000 ($10,833 monthly), company pays 66.67% with
a monthly maximum of $5,000, without the maximum cap, the employee would earn
$7,225 (.667 X $10,833), with cap employee loses $2,225 ($7,225 - $5,000) a month
6. Preexisting condition clause
a. Similar to health insurance plans
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b. Preexisting condition is a mental or physical disability for which medical advice,

diagnosis, care or treatment was received during a designated period preceding
the beginning of the disability insurance coverage, which is generally any time
prior to enrollment in the plan
7. Waiting Periods
a. Generally two
i. Preeligibility
ii. Elimination period
b. Preeligibility period
i. Similar to health plan
ii. Spans from the employee’s hire date to the date they are eligible for coverage
in the disability plan
c. Elimination period
i. Refers to the minimum amount of time an employee must wait after becoming
disabled before the benefit payment begin
ii. Employees are responsible for paying a limited amount
iii. Employers prefer disability insurance policies with longer elimination periods
because the premiums is lower
iv. Most common amount of time is three months, but can range from one month
to a year
8. Exclusion Provisions
a. List the particular health conditions NOT covered by the disability plan
b. Self-inflicted injuries are almost always excluded
c. Mental illnesses or disabilities due to chemical (drug & alcohol) dependencies are
generally excluded, which might be covered by employee assistance programs
E. Long-Term Disability Insurance (use PP 6.8)
1. Two-Stage Definition
a. Long-term disability
i. Referred to illnesses or accidents that prevented an employee from performing
his own occupation, based on the employee’s education, training, or
experience, over a designated period
ii. Covers only total disabilities
b. Partial disabilities inclusion
i. Provides supplemental benefits to cover a portion of income loss associated
with part-time employment
ii. For example, long-term disability plans would become effective when part-
time employment falls below a designated level expressed as a percentage of
income prior to the qualifying event, say 75% to 80%
iii. Includes partial disabilities
iv. Allows totally disabled employees to work part-time and still collect some
disability benefits
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2. Characteristics
a. Maximum benefits usually equal 50% to 70% of monthly pre-tax salary (subject to
a maximum) and the monthly maximum may be as high as $5,000
b. Benefits are subject to an elimination period of anywhere from 6 months to one
year
c. Benefits usually only become active after an employee’s sick leave and short-term
disability benefits have been exhausted
d. Benefits payments usually continue until retirement or for a specified number of
months
e. Payments usually equal a percentage of predisability earnings
F. Funding Disability Insurance Programs (use PP 6.9)
1. Pertains to both short-term disability and long-term disability plans
2. Three options
a. Independent insurance companies
b. Partial self-funding (mainly for long-term)
i. Employers pay claims from their assets in a trust fund for a limited period or
for a maximum amount
ii. Employers purchase stop-loss insurance to cover the claims that exceed the
self-funding limit
c. Full self-funding, through company assets or administrative-services-only plans
3. Partial versus full self-funding, 2 considerations
a. The size of the employee group
i. Larger groups help employers predict the probability of disability occurrences
ii. Larger groups enable more accurate predictions
iii. Predictions of tolerable disability events support partial or full self-funding
b. Estimating exposure or liability for disability claims
i. Exposure refers to the anticipated amount of annual disability claims
ii. Employers consider their tolerance for risk when choosing between partial and
full funding
III. Relationship Between Company-Sponsored Disability Plans and Benefits Laws

A. Four Benefit Laws that Influence the Design and Implementation of Company-
Sponsored Plans (use PP 6.10)
1. Age Discrimination in Employment Act of 1967 (ADEA)
2. American’s With Disability Act of 1990 (ADA)
3. Employee Retirement Income Security Act of 1974 (ERISA)
4. States workers’ compensation and Social Security disability regulations
B. ADEA (use PP 6.11)
1. Older Workers Benefit Protection Act (OWBPA), which is the 1990 amendment to
the ADEA, generally bans the termination of an employee’s long-term disability
benefits for active employees based on age
2. OWBPA applies the equal benefit or equal cost principle
a. Employers must offer benefits to older workers that are at least equal to younger
workers, unless
b. Employers may reduce the level and duration given to younger workers
6-5
c. However, employers may NOT use costs to legally exclude workers’ disabled at
an older age for long-term disability benefit when workers disabled at a younger
age receive these benefits
3. An ADEA safe harbor allows employers to reduce the duration of long-term
disability benefits as long as the level of benefits are the same for all workers with
the same disability
4. An employer may choose to lessen the amount of time during which disabled older
employees may receive long-term disability benefit, as long as all employees with
the same disability are subject to the shorter time period
C. ADA (use PP 6.12)
1. Prohibits discriminatory employment practices against qualified individuals with
disabilities
a. A qualified individual with a disability is a person who possesses the necessary
skills, experience, education and other job-related requirements, and regardless
of reasonable accommodation, can perform the essential functions of a job
b. The Sixth and Seventh Circuit Courts have maintained that recipients of long-term
disability benefits are NOT qualified individuals with the rights to raise ADA
claims
2. U.S. Equal Employment Opportunity Commission (EEOC) oversees administration
and enforcement of ADA
a. Has ruled that employers may lawfully offer different benefits under disability
retirement plans
b. Has ruled that disability retirement plans provide lifetime income for an employee
unable to work because of illness or injury, without regard to the employee’s age
3. Employers violate the ADA when they do NOT extend coverage to qualified
individuals with disabilities or when they provide less favorable treatment, like
a. Exclusion of eligible qualified employees from participation in disability
retirement plans
b. Requiring a longer preeligibility period for qualified individuals with disabilities
than for nondisabled employees
D. ERISA (use PP 6.13)
1. Regulates the establishment and implementation of company-sponsored benefits
practices
a. Disability insurance
b. Health insurance
c. Life insurance
d. Pensions
2. Most Titles of ERISA apply to pension and health insurance plans
3. Titles I, II, & III apply to non-pension benefits (more in Chapter 4)
4. Title I contains provisions that provide employees protections for benefits rights:
a. Reporting and disclosure
b. Fiduciary responsibilities
c. Administration and enforcement
5. Title II sets forth the IRC provisions pertaining to the taxation of employee benefits
and pension plans
6-6
6. Title III addresses the administration and enforcement of ERISA

E. State Workers’ Compensation and Social Security Disability Regulations (use PP 6.14)
1. Employees may receive long-term disability benefits from public disability programs
and company-sponsored programs
2. Companies that self-fund or private insurance companies may include an offset
provision that reduces company-sponsored benefits by subtracting a particular
percentage of these disability benefits from workers’ compensation and Social
Security disability plans
IV. Life Insurance (use PP 6.15)

A. Overview
1. Designed to protect family members from the loss of income caused by the death of
am employee, by paying them a specified amount
2. Most benefit amount equals some multiple of the employee’s salary
3. Employees can purchase additional coverage
4. Most company-sponsored insurance plans also include accidental death and
dismemberment claims
5. Individuals can purchase individual life insurance policies from independent
insurance agents, or group life insurance through their employer
6. Group plans
a. Allow all participants covered by the policy from coverage while employers
assume the burden of financing the plan either partly or entirely
b. Permit a larger set of individuals to participate in a plan at a lower cost per person
B. Origins of Life Insurance
1. Industrialization, government-imposed wage freezes during WW II and IRS favorable
tax codes led to the rise of Social Security
2. Workers’ compensation and private disability insurance led to the advent of life
insurance
C. Coverage and Costs of Life Insurance in 2011
1. U.S. companies offered life insurance to
a. 73% of full-time employees
b. 14% of part-timers
2. On average, employers spent $80 annually per employee to provide life insurance
coverage
D. Types of Life Insurance Programs
1. Three kinds
a. Term life
b. Whole life
c. Universal life
2. Term life
a. The most common type offered by employees
b. Provides protection to employees' beneficiaries only during a limited period based
on a specified number of years or maximum age when the policy expires
c. No benefits are received by anyone when the policy expires
6-7
d. In order to continue coverage employee must renew the policy and make premium
payments while below the maximum allowed age of coverage
3. Whole life
a. Pays beneficiaries’ a specified amount upon the death of the employee
b. Policies do NOT expire until payment to beneficiaries
c. Is more expensive than term life
d. Combines insurance protection with savings because portion of the money paid to
meet the premium is available in the future plus interest earned on this amount
4. Universal life
a. Provides protection to employees’ beneficiaries based on the insurance feature of
term life insurance
b. A more flexible savings or cash accumulation plan
E. Group Term Life Insurance
1. Generally, companies must cover at least 10 full-time employees who are members of
a group of employees
2. Employers offer two plans (use PP 6.16)
a. Contributory
b. Noncontributory
3. Contributory plans
a. Employees pay the entire insurance premium, or
b. They share the cost with the employer
4. Noncontributory plans
a. The employer pays the entire premium for coverage within designated limits
b. Most group plans offered this way because the employer enjoys substantially
higher tax benefits than for contributory plans
F. Costs of Group Term Life Insurance (use PP 6.17)
1. Employers' costs for the purposes of U.S. Treasury Regulations Section 79 do NOT
refer to the actual annual premium amounts,
a. They are based on regulation established by the U.S. Code in a table titled
“Uniform Premiums for $1,000 of Group-term Life Insurance Protection”
b. This expresses the monthly cost for group term life insurance based on gender and
age (in five year brackets) (refer to Exhibit 6.1)
c. The process used to decide if to issue an insurance policy, under what terms, and
at what premium is called underwriting
i. Mortality tables indicate yearly probabilities of death based on such factors as
age and sex, established by the Society of Actuaries
ii. Values in the current Uniform Premiums table were adjusted to reflect the
lower mortality rates between 1988 – 2000
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G. Universal Life Insurance (use PP 6.18)

1. Combines features of term life insurance and whole life insurance
2. Created to provide more flexibility by allowing a policy owner to shift money
between insurance and savings components of the policy
3. Insurance company initially breaks down premium into insurance and savings
4. Policy owner makes adjustments to the amounts directed at each
5. Permits the cash value of investment to grow at a variable rate tied to market
6. Leads to changes in premium, benefits, and payment schedules
H. Accidental Death and Dismemberment Insurance (AD&D) (use PP 6.19)
1. Covers death and dismemberment as a result of accidents
2. Dismemberment refers to
a. Loss of two limbs or
b. Complete loss of sight
3. Generally does not pay survivor benefits in the case of death by illness
4. Premiums are generally lower than life insurance premiums since incidences of
death by accident are lower than death by natural causes
5. In the past AD&D was provided as extra provision
6. However, with shift to service sector, fewer hazards in the workplace, emphasis on
safety and training, accidental death has become less of a concern
7. Costs of providing mandatory workers’ compensation have risen
8. AD&D seen as cost prohibitive
9. Many organizations offer voluntary coverage and employees can pay the Premium if
they want to enroll
10. Employees older than 40 are more likely to die of natural causes and with an
aging workforce AD&D loses relevance
V. State Compulsory Disability Laws (Workers’ Compensation)

A. Overview
1. Workers’ compensation insurance programs are run by states and designed to cover
expenses incurred in employee work-related accidents and injuries
2. Six basic objectives (use PP 6.20)
a. To provide sure, prompt, and reasonable income and medical benefits to work-
accident victims, or income benefits to their dependents, regardless of fault.
b. To provide a single remedy and reduce court delays, costs, and workloads arising
out of personal injury litigation.
c. To relieve public and private charities of financial drains.
d. To eliminate payment of fees to lawyers and witnesses as well as time-consuming
trials and appeals.
e. To encourage maximum employer interest in safety and rehabilitation through
appropriate experience-rating mechanisms.
f. To promote the transparent study of causes of accidents (rather than concealment
of fault), reducing preventable accidents and human suffering.
6-9
B. Coverage of workers’ compensation programs (use PP 6.22)

1. Employers must fund according to state guidelines
2. Participation compulsory in all states except for New Jersey, South Dakota, and Texas
where employers are not required to provide workers' compensation insurance.
3. Rejecting laws causes employers to lose common law defense of contributory
negligence
4. Contributory negligence legally refers to
a. Behavior that contributes to one’s own injury or loss and fails to meet the
standard of prudence that one should observe for one’s own good
b. Contributory negligence of plaintiffs is frequently pleaded in defenses to
charges of negligence
c. Grew out of distrust of juries, which have usually been more sympathetic to
plaintiffs in personal injury lawsuits
5. Maritime workers within U.S. borders and federal civilian employees are covered by
their own workers’ compensation programs
6. The maritime workers’ compensation program is mandated by the Longshore and
Harborworkers’ Compensation Act
7. Federal civilian employees receive workers’ compensation protection under the
Federal Employees’ Compensation Act
8. Workers’ compensation laws cover virtually all employees in the United States,
except for domestic workers, some agricultural workers, and workers in small
businesses with fewer than a stipulated number of employees
C. Cost of workers’ compensation insurance (use PP 6.23)
1. In 2011 employers generally paid $820 annually per private sector employee for
workers’ compensation protection
2. The annual amount was substantially higher for workers in goods-producing
industries at $1,420, and substantially lower for employees in service-providing
industries at $700
3. There is wide variation in the cost of workers’ compensation from state to state
D. Workers’ compensation claims (use PP 6.24)
1. Employees can make three kinds of claims for workers’ compensation benefits
a. Injury claim, usually defined as a claim for a disability that has resulted
from an accident during the course of fulfilling work duties, such as a fall,
an injury from equipment use, or a physical strain from heavy lifting
i. Repetitive strain injury - employees who work long hours at
computer keyboards or assembly lines, performing the same task
over and over again, frequently complain of numbness in the fingers
and neck as well as severe wrist pain
ii. Bureau of Labor Statistics survey indicates that repetitive strain
injuries represent a substantial amount of all nonfatal occupational
injuries
b. Occupational disease claim, results from a disability caused by an ailment
associated with a particular industrial trade or process
c. Generally, the following occupational diseases are covered under workers’
compensation programs:
6-10
i. Pneumoconioses, which are associated with exposure to dusts

ii. Silicosis from exposure to silica
iii. Asbestos
iv. Radiation illness
d. Death claim, asks for compensation for a death that occurs in the course of
employment or is caused by compensable injuries or occupational diseases
e. Workers file claims to the state commission charged with administering
the workers’ compensation program
f. Typically, one state agency oversees the administration of the program
and disburses benefits to the individuals whose claims have been deemed
meritorious
g. Another agency within a state, such as a board of workers’ compensation
appeals, resolves conflicts such as claim denials that may arise when
claimants are dissatisfied
h. In recent years, workers’ compensation claims have risen dramatically in
both the number of claims and the claims’ amounts
i. In December 2011 workers’ compensation cost nearly 18 percent of all
legally required benefits for all civilian employees
E. Types and amounts of workers’ compensation benefits (use PP 6.24)
1. Unlimited medical care
a. Medical benefits usually provided without regard to the amount or time
over which the benefits will be paid
b. Medical fee schedules in most states specify the maximum amount paid
for particular medical procedures
2. Disability income
a. Compensates individuals whose work-related accidents or illnesses have at
least partially limited their ability to perform the regular duties of their
jobs
b. Benefit amounts depend on the nature of the disability
c. Workers’ compensation programs recognize four types of disabilities:
i. Temporary total
ii. Permanent total
iii. Temporary partial
iv. Permanent partial
d. Temporary total disabilities preclude individuals from performing
meaningful work for a limited period
e. Permanent total disabilities prevent individuals from ever performing any
work
f. Temporary partial disabilities allows individuals to perform limited
amounts of work until making a full recovery
g. Permanent partial disabilities limit the kind of work that individuals
perform on an enduring basis
h. Permanent partial disabilities fall into one of two categories
i. Workers’ compensation programs list specific scheduled injuries that
involve the loss of a member of the body including an arm, leg,
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finger, hand, or eye

ii. Nonscheduled injuries refer to general injuries of the body that make
working difficult or impossible. Examples of nonscheduled injuries
include back and head damage
i. For either temporary or permanent total disabilities, an employee usually
receives two-thirds of his or her average weekly wage for a predetermined
period prior to the incident leading to disability
j. Three noteworthy exceptions are in Alaska, Iowa, and Michigan, which
pay 80 percent of spendable earnings
k. Most states limit the duration of benefits for all temporary disabilities,
with somewhat longer periods for temporary total disabilities than for
temporary partial disabilities
l. Payments for permanent total disabilities extend for the life of an injured
person
m. Most states calculate actual scheduled benefits as the product of the
specified number of weeks of benefits and the weekly benefit amount
based on pretax earnings at the time of injury
n. States rely on one of three approaches to pay benefits for permanent
partial disabilities of the unscheduled type
i. Impairment approach bases benefit amounts on the physical or
mental loss associated with an injury to a bodily function
ii. Wage-loss approach bases benefits on the actual loss of earnings that
results directly from nonscheduled injuries
iii. Loss of wage earning capacity approach factors in two important
issues that are likely to affect an injured worker’s ability to compete
for employment: human capital (e.g., work experience, age, and
education) and the type of permanent impairment
3. Death Benefits
a. Awarded in two forms – burial allowance and survivors’ benefits
i. Burial allowances reflect a fixed amount, varying by state
ii. Maximum burial allowances range from about $3,000 to about
$15,000
iii. Survivors’ benefits are paid to the spouses of deceased employees
and to any dependent children
iv. Assuming no dependent children, the minimum allowable weekly
payment to a spouse could be as little as $20 to slightly more than
$500
v. Benefits for children typically equal two-thirds of the deceased
parent’s wages each year until a designated maximum age
4. Rehabilitative Services
a. Covers physical and vocational rehabilitation
b. Available in all states
c. Claims for this benefit must usually be made within six months to two
years after the accident
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F. Employers’ Rights under Workers’ Compensation Programs

1. Participation in workers’ compensation programs and compliance with applicable
regulations protects employers from torts initiated by injured workers based on
the no-fault principles of these programs
2. Four possible exceptions to immunity from legal action
a. An employer’s intentional acts
b. Lawsuits alleging employer retaliation for filing a workers’ compensation
claim
c. Lawsuits against noncomplying employers
d. Lawsuits relating to “dual capacity” relationships
3. An employer’s intentional acts (use PP 6.25)
a. Most state courts consider intentional actions to harm employees as
reasonable cause for holding an employer liable
b. There are two kinds of lawsuits that allege an employer’s intentional acts
to harm employees
i. Deliberate and knowing torts, entail an employer’s deliberate and
knowing intent to harm at least one employee
ii. Violations of an affirmative duty take place when an employer fails
to reveal the exposure of one or more workers to harmful substances,
or when the employer does not disclose a medical condition typically
caused by exposure. In particular, failure to notify violates an
employer’s affirmative duty when the illness is either correctable at
the point of discovery or its progress may be stopped by removing
employees from further exposure
4. Retaliations against workers who filed workers’ compensation claims
a. Employees possess the right to sue employers who retaliate against them
for either filing workers’ compensation claims or pursuing their rights
established in workers’ compensation programs
b. Retaliation usually entails an adverse effect upon a worker’s status (e.g., a
demotion or pay cut) or termination of a worker’s employment
c. Employers possess the burden of proof
5. Employer noncompliance
a. Employers begin to fulfill their obligations by purchasing insurance from
state funds, private insurance carriers, or through self-insurance
b. Failure to carry workers’ compensation insurance may lead to one or more
consequences:
i. Lost immunity, making violators susceptible to common-law charges
(of contributory negligence or other torts)
ii. Monetary penalties, including fines and payment of unpaid
premiums
iii. Criminal penalties
iv. Liability for the full cost of workers’ compensation claims
c. Most states recognize two acceptable alternatives for employees to receive
remedy
6-13
i. First, they gain the right to initiate legal action against noncompliant
employers, as just described
ii. Second, most states extend workers’ compensation protection to
employees regardless of an employer’s compliance status
6. Dual capacity (use PP 6.25)
a. Legal doctrine that applies to the relationship between employers and
employees
b. A company may fulfill a role for an employee that is completely different
from its role as employer
c. Even though an employer meets its obligations under workers’
compensation laws, it may be susceptible to common-law actions
d. An employer’s immunity does not protect it from common-law actions by
employees when the company also serves a dual capacity that confers
duties unrelated to and independent of those imposed upon it as an
employer
e. Becoming injured, while using an employer’s product to perform work, is
another instance of dual capacity
7. Typical employers’ defense when employees challenge immunity (use PP 6.25)
a. Employer defenses rely on assertions that the causes of injuries or
illnesses were unrelated to work-related activities
i. Preexisting conditions (illnesses or injuries that occurred prior to
participation in an employer’s workers’ compensation program,
except for work-related illnesses or injuries that worsen the
preexisting conditions)
ii. Employee negligence (e.g., injuries sustained due to noncompliance
with clearly communicated safety procedures)
iii. Employee misconduct (e.g., injuries sustained from acts of
aggression against other employees)
iv. Safety violations by the employee
G. Financing workers’ compensation programs (use PP 6.26)
1. Employers generally subscribe to workers’ compensation insurance through
private carriers, or in some instances, through state funds
2. A third funding option, self-insurance, requires companies to deposit surety
bonds, thus enabling them to pay their own workers’ claims directly
3. Many employers select self-insurance when it is available because it gives them
greater discretion in administering their own risks
4. In most states, the insurance commissioner sets the maximum allowable workers’
compensation insurance premium rates for private insurance carriers
5. Rates are based on each $100 of payroll
6. States rely on ratemaking service organizations to set initial rates
7. Ratemaking service organizations collect data on workplace accidents and put
together rating manuals.
8. Rating manuals specify insurance rates based on classifications of businesses
9. Second-injury funds represent an important funding element of workers’
compensation programs
6-14
10. Coverage of preexisting conditions creates benefits for employers and qualified
individuals with disabilities
11. Employers should be less reluctant to hire a qualified individual with a disability
12. Qualified individuals should have fewer barriers to employment due to the cost
concerns of employers about preexisting conditions
H. Relationship between workers’ compensation and benefits laws (use PP 6.27 & 6.28)
1. Workers’ compensation laws may modify some of the provisions under the
Family and Medical Leave Act and COBRA
2. Family and Medical Leave Act (FMLA) provides employees with job protection
in cases of family or medical emergency
3. Companies must permit qualified beneficiaries to elect continuation coverage
under group health plans if they would lose coverage due to a qualifying event
4. A qualified beneficiary refers to any individual who is a beneficiary under the
group health plan as the
a. spouse of the covered employee
b. a dependent child of the covered employee. Qualified beneficiaries include
covered employees themselves when the qualifying event is termination of
employment (other than by reason of misconduct) or a reduction in work
hours
5. These modifications depend on an employer’s definition of “eligible employee”
for company-sponsored health insurance
6. Typically, employees maintain eligibility either until termination of employment
or only while actively employed for a specified minimum number of weekly
hours or on approved leave of absence
7. Companies may not refuse an employee’s request for FMLA leave to cover
absences for work-related illnesses or injuries
8. Employees are eligible to receive continued health care coverage during and
following a non-FMLA approved leave of absence for a work-related illness or
injury
9. In 1981, the Black Lung Benefits Act eliminated the presumption that any lung
disease was contracted on the job (in coal mines) as non work-related factors such
as genetic predisposition or exposure to carcinogens outside the workplace could
cause debilitating lung ailments. The PPACA repealed this provision and replaced
it with a presumption that a mine worker with 15 years or more of service who
suffers a lung disease contracted on the job
6-15
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Employee Benefits 5Th Edition Martocchio Solutions Manual Full Chapter PDF

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Chapter 06 - Employer-Sponsored Disability Insurance, Life Insurance, and Workers' Compensation Programs

Solution Manual for Employee Benefits 5th

I. Learning Objectives (use PP 6.2)

II. Disability Insurance

3. First workers’ compensation law was passed in 1911

b. Preexisting condition is a mental or physical disability for which medical advice,

III. Relationship Between Company-Sponsored Disability Plans and Benefits Laws

6. Title III addresses the administration and enforcement of ERISA

IV. Life Insurance (use PP 6.15)

G. Universal Life Insurance (use PP 6.18)

V. State Compulsory Disability Laws (Workers’ Compensation)

B. Coverage of workers’ compensation programs (use PP 6.22)

i. Pneumoconioses, which are associated with exposure to dusts

finger, hand, or eye

F. Employers’ Rights under Workers’ Compensation Programs

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