Benefit Plan Design Analysis
Select and profile an organization for the benefit plan
Extraordinary and above average people are recruited by ABC. Their task force possesses a number of exceptional skills and many of them are graduates of top universities or possess professional qualifications. One of the most interesting things about ABC is that it is continually trying to make the organization host to an increasingly global platform that employs people coming from various nationalities and cultures. This way, it makes sure that the creme de la creme of the task force is employed in the organization that is not afraid of taking on challenges. Also, the organization then comes up to their expectation by providing a healthy and competitive corporate culture.
Staff that is new to the ABC organization undergoes a series of sessions whose themes range from personal mentoring to formal training. The training is imparted by their colleagues who have gathered ample experience over the years and are now willing to transfer it on to the new recruits. Throughout their work life, the employees are constantly encouraged to take on more challenges and are provided with the environment that can encourage them to go above and beyond their usual list of tasks and responsibilities. This organizational attitude inculcates confidence and courage in their employees, making them risk takers and teaching them valuable insights about decision making. Also, an employee working at a certain department in the company is encouraged to try on various other departments by proving his experimental abilities and by making decisions confidently (Fronstin, 2008).
Part 2: Statement of the issue
Prior to the recent years, the ABC organization has offered to the employees, the employee benefit plans that are standard in nature which implies that the characteristics of the plan does not change with employee to employee but is the same for everyone. It was formulated by the organization by keeping in mind the concept of an average employee and an average family whose needs were quantified to be incorporated into the standard plan (Fronstin, 2008).
However, as the ABC organization has gone increasingly global and the employees that are employed come from various backgrounds and settings, the provision of one-size-fits-all employee benefit plans are not effective anymore. Also with the coming of new technologies, it is easier for the organization to anticipate and quantify the various needs of various employees which then facilitates the organization in providing its task force with an employee benefit plan that is flexible in nature and takes into account various needs of the employee that are specific to each staff (Fronstin, 2008).
Many surveys and research studies have been carried out to identify the acceptance of benefit plans that have been made flexible and they have indeed proved to be popular as they provide the task force with the option to choose the benefits they require while also assisting the employer organization in managing the costs of the benefit plan. However, the idea of flexible benefit plans is not a new one and has been around for a number of years.
When it comes to the usage however, it has seen a steady increase in the recent years. They are offered to the employee according to the rating or the credit the staff has been given by the employer. Credits that are not used are typically transferred to a spending account of health care, cashed or transferred to the next period or other such options are used. The organization identifies the amount that is to be contributed to the benefit plan, commonly premised on a certain fixed amount for every employee is a particular percentage of the staff’s salary.
It is more challenging to manage benefit plans that are flexible and there is also a possibility that they might not be available for organizations that do not employ more than a hundred employees. The plans also may be chosen unwisely, which is a possibility when the employees do not have enough awareness or the information to make the right selection. Such a choice can also lead to employees being inadequately protected and ultimately, they may have to bear losses instead. One other drawback of these benefit plans is that if one does not expend the entire value by each year end of the plan, the remaining money is given up. This point is generally known as “Use it or lose it.”
Part 3: Literature Review
The benefit plan of the employees at ABC are designed with the objective of fostering the financial security by means of providing insurance against unforeseen circumstances and to increase the standards of living by offering the emphasized services. Programs that benefit employees also contribute to the financial stability by means of assisting in income security and by enhancing social welfare that improves the standard of economy in general (Fronstin, 2008).
The employee benefit mechanism in the U.S. is collaboration between the government, people and the corporations. Many of the benefits based on the employment, for instance health insurance and pensions are offered by the organizations voluntarily. These voluntary benefits are supported by the government that assists in offering the organization preferential tax treatment. However, benefits such as workers’ salary, medical leave, unemployment insurance, social security, family leave are compulsory to be provided by the organization. Also, other examples of government assistance include programs that provide individuals with financial security, such as retirement schemes, tax exempt, death benefits etc. (Fronstin, 2008).
As has been mentioned, employee benefit plans are not a new phenomenon. In fact they go way back to the times of colonialism in America. Early examples of the profit sharing program of Gallatin Glassworks that was formulated in 1797, military retirement plan of Plymouth Colony settlers that was introduced in 1636, private employer programs on pension of American Express Company that came about in the year 1875, programs related to insurance of life, health and accident by Montgomery Ward in the year 1910 and in 1929, as well as the prepaid hospitalization program that was introduced by Baylor University Hospital (Fronstin, 2008).
What widened the coverage even more was the involvement of the federal government in the offering of such benefit plans. The Congress made compulsory the provision of preliminary retirement income in the year 1935 under its program on Social Security. Later in the year 1956, it further emphasized upon protecting the income of disabled employees and people who are dependent on them. In the year 1965, the Medicare program expanded to cover themes such as health insurance for the old and disabled. Even more so, organizations that voluntarily provided benefit programs became more in numbers as the government provided tax advantages to such organization. This was seen as an attractive incentive particularly in times when tax rates were rising (Fronstin, 2008).
The Role of
In recent times, the programs providing benefits to employees reflect the commitment of the nation to offer adequate levels of social and income security and provision of necessary facilities such as health care to employees, regardless of the employees being able, disabled, displayed, retired etc.
The survivability of a household can come under threat if the bread earner of the family passes away or becomes handicapped. When a family undergoes such circumstances, if an organization voluntarily provides insurance for long-term disability or other forms of life insurance, it can go a long way in eradicating the financial burden of the family. Other programs that can confer benefits on the employee and his/her family are savings program or pensions arising from employment.
Such programs offer financial security to the employees who aspire to get voluntary retirement when they come of age. There are other programs made compulsory by the government that offer income security to the employees. An income stream is provided by the , Survivors, and Disability Insurance (OASDI) program. The stream continues for life and the payments are fixed and regular. It is given to almost all the disabled and retired employees and their respective spouses. Also employees who have lost their employment or have become disabled can ask for impermanent insurance for unemployment or payments to compensate employees (Fronstin, 2008).
Almost all the people living in America are to gain benefit from one of the aforementioned income security schemes once in their lives. According to statistics, over fifty percent of the employees were working for organizations that offered them a retirement program in 2007. Almost eighty percent of such employees opted to participate in the retirement plan that was employment based (Copeland, 2008). In the same year, over thirty percent of the aged people who were married and around thirty five percent of single and elderly employees were benefiting from the income coming from an annuity of pensions that were employment based. This was identified by the EBRI estimates mentioned in the in 2008.
Almost universal coverage is provided by programs mandated by the government. Approximately one hundred and sixty million staff was covered by the in 2006. The number also included people who were self-employed. It also benefited around fifty million individuals including people who were suffering from a disability or were old. The program also stretched to benefit the employees’ dependents (Fronstin, 2008).
Access to Important Services
The employee benefit scheme of U.S. also aims to offer the employees (and their households in America) assurance of basic services, such as health care. A number of employees in America take part in programs related to health insurance that is provided for on their own by the employer organizations. However the coverage provided may vary from organization to organization with certain employers only offering health care coverage when acute care is required while some may also incorporate routine visits to the doctor.
A number of times, the dependents of the employees are also covered under the benefit plans. In the year 2007, over sixty percent of the population that was of sixty five years of age and below were protected under the health insurance plan that was employment based (Fronstin, 2008).
Certain organizations also provide health care benefits to employees who have retired from employment. In certain cases, the employees are only provided with health insurance when they have reached sixty five years of age and are retired. It is also the age when a person becomes covered under the Medicare program. Medicare is a benefit plan for the disabled and the elderly and is federally sponsored.
Over thirty five percent of the people who were of the age sixty five and above were covered under the health insurance plan that was employment-based in the year 2007. This was reported by the EBRI estimates in the Current Population Survey of 2008. The Medicare program, in the same year provided over ninety percent of the population of the elderly with health insurance. Nevertheless it was noticed that it still required a high number of expenses (Fronstin, 2008).
However, such programs that provide benefit to the employees are not restricted to providing only health insurance or income security. Other programs exist that offer a host of other benefits such as child care, legal help, educational assistance etc. Relocation expense compensation, product discounts and subsidized parking are all some other forms of employee benefits that can offer ease and a number of ways to cut costs for staff (Fronstin, 2008).
Part 4: Issue Analysis
It is imperative to take into account entirely the factors for taking the approach of formulating benefit plans that are flexible. In cases, when the type of the employer organization allows for limited flexibility then one possible course of action would be to cut back on costs and time expenditure by not resorting to an entirely flexible benefit scheme. In such a case, a rather restricted methodology of providing flexible plans can be pursued.
The said approach can also incorporate the provision of cash instead of allotting cards or conferring on the employees the option to purchase or sell off a leave. Instead, it might also take into account total reward or voluntary benefits statements. If an innovative plan comes up it should be examined within the setting of the currently applicable reward approach and ought to analyze the psychological along with the economic meaning of the future and current advantages to the employee. Usually, it takes about a period of twelve months to develop, apply and impart the flexible benefit plan to the employees (Fronstin, 2008).
Part 5: Issue Solutions
It is essential to quantify the possible usage of certain benefits when plans are being developed. This allows for the organizations to acquire the more appropriate amount of quotation available for the offering of each service. A challenge connected with the formulation of benefit plans that are flexible is the process of deciding and making choices in reality that alter the setting of the group in need of a certain service.
The plans are budgeted on the foundation of forecasted choices, such as when the taskforce make considerably various decisions, these are considered as adverse choices. In order for the plans to succeed, the comparative numbers of the plans ought to be decided in order to drive away any chance of adverse choices being made. Also, the arrangement should be made in such a way that the staff is not motivated to take up the less prudent alternatives which would prove to be a risk to their plan. Providing a fixed level of basic benefits assures a certain amount of protection or stability (Fronstin, 2008).
Organizations, before coming up with their benefit plans need to carry out a research of the profiles of their employees so that they can identify the type of benefits they would require and can take advantage from. By doing so, the employers can maximize the importance and meaning of the plan provided and can make the plan cost effective.
Part 6: Solution and its Implementation
Even though, a standard format for flexible plans does not exist, a number of basic advantages or services are common to most of the plans. Most of the employment benefit schemes outline the difference between the important benefits provided such as health care that are sponsored by the organization and benefits that are voluntary. These are then borne by the staff members. The benefits that are important to the plan are the ones that an individual expects from the best practice organization and if removed from the plan, might render the plan meaningless for the employee. Examples of core benefits include private medical insurance, personal accident insurance, life assurance, holidays and acute illness insurance etc. (Fronstin, 2008).
Part 7: Justification
An organization provides benefits to its taskforce for various factors. One of the most important reasons is that some benefits are to be provided as per law. Other reasons include Social Security which is a retirement program mandated by the federal authorities. It requires that equal contribution be made by both employers and employees, a percentage of 6.2% to be specific. For employees of Medicare, they are supposed to put in 1.45% of their earnings and their employer makes the same contribution. Law also requires that unemployment insurance be provided to the employees. As for worker’s compensation, it provides coverage in instances when the employee is met with an injury while working and is rendered unable to work either permanently or temporarily. The organization has to provide the entire cost to the employee. Apart from the legal compliance, organizations are interested in motivating and retaining their employees and thus, feel the need to provide adequate services to them that are in par with the industry practices. Providing such plans has also proved to have a marked effect on the motivation of employees that has a linkage with the productivity of the employees (Fronstin, 2008).
Lastly, these plans can be used to identify between various employees. For instance, employees who are hired on contract may not be offered all the benefits of the plans that are normally provided to a regular employee of the organization. Thus, the amount of benefits provided reflects upon the level of responsibility the person holds in the organization, the post and seniority of the employee etc.
Part 8: Reflection
Benefits play an integral part in assisting employees in their time of need. It is one way the organization can show its arguably most important assets that it cares for them. Also, it helps in alleviating uncertainty and insecurity from the lives of the employees and their families which enhances their motivation and productivity as a result. A number of benefit plans exist that can be provided to employees according to their requirement while some of them are fixed and follow a certain pattern. For organizations operating today, it is imperative that ample attention is given to their employees and providing their taskforce with flexible benefit plan is one way of showing that (Fronstin, 2008).
Fronstin, Paul. “Sources of Health Insurance and Characteristics of the Uninsured: Updated Analysis of the March 2008 Current Population Survey.” EBRI Issue Brief, no. 321 (Employee Benefit Research Institute, September 2008).