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Employment Benefits

Employment Benefits. Business Organizations II LAP 202 Mike Brigner, J.D. Fringe Benefits. Some Mandated By Law: Social Security : 3 types SS Retirement for age 62, 65 & rising (FICA tax to Employer and Employee) SSI (Supplemental Income) SSD (Social Security Disability)

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Employment Benefits

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  1. Employment Benefits • Business Organizations II • LAP 202 • Mike Brigner, J.D.

  2. Fringe Benefits • Some Mandated By Law: • Social Security: 3 types • SS Retirement for age 62, 65 & rising • (FICA tax to Employer and Employee) • SSI (Supplemental Income) • SSD (Social Security Disability) • Unemployment insurance • (Was OBES. Now JFS, Jobs & Family Services) • Workers’ compensation insurance (OBWC) • (Some law firms do nothing but S.S. or Workers’ Comp representation)

  3. Fringe Benefits • Not Mandated By Law: • Health Insurance (Note: Mass, Hawaii & every European country has mandatory health insurance) • Accident and Disability Insurance (AD&D) • Life Insurance • Retirement Plans • Stock Options • Perks • These all may be included in “Cafeteria Plan” for employee to choose from. Usually deemed taxable compensation.

  4. Employee Welfare Benefit Plans • Why offer? • Tax benefit to employer • Contributions by employee & employer • Required by law? • Reporting and disclosure requirements • (Complex, most local law firms don’t handle) Commonly called health insurance plans Also includes disability benefits, life insurance, dental, child care, legal services plans.

  5. Federal Laws re Health Ins. • HIPPA: Health Insurance Portability Act • New employer must cover pre-existing conditions • NOTE: Pregnancy IS a pre-existing conditn • COBRA: Continuation of Benefits • If employer has over 20 employees • Upon leaving, employee may continue health insurance up to 3 years at own cost

  6. ERISA • Employee Retirement Income Security Act • “Every Ridiculous Idea Since Adam” • Complex, but the key to almost all pension plans • (Few local law firms doing ERISA work)

  7. Tax Benefits of ERISA-Qualified Retirement Plans & IRAs • Deductible contributions for employers & employees • Employees not taxed on contributions made for them by employer • Earnings on plan assets grow tax-free until distributed • Many plans (401k) permit employees to contribute own money on pre-tax basis

  8. ERISA Qualified Retirement Plans • Defined Benefit Plans • Sets certain pension benefit amount received each month • Tax-deferred contributions • So employee pays no taxes now on contributions • Instead, employee is taxes when receiving benefits, when tax bracket should be lower

  9. ERISA Qualified Retirement Plans • Defined Benefit Plans (cont’d) • Plus: Employee can plan on definite retirement income • Minus: Costly for employer to administer • Minus: Employee gets one set amount, unless COLA provided • Minus: Employer may borrow pension $, then go bankrupt & employees have 0

  10. ERISA Qualified Retirement Plans • Defined Contribution Plans • Sets amount employer will contribute into participant’s account each year • Profit sharing plans -- 401(k) plans • ESOPs --Profit-sharing plans • Also tax-deferred contributions • Where is $? Invested in stock market

  11. ERISA Qualified Retirement Plans • Defined Contribution Plans (cont’d) • Minus: Less certain retirement income for employee • Minus: Employer can terminate plan. No new $ added, but you keep what you have • Plus: Less costly for employer • Plus: Portable • Plus: Available for loans: buying home, medical emergency, educational purposes

  12. ERISA Qualified Retirement Plans • Individual Retirement Accounts (IRAs) • SEP-IRAs • Roth IRAs • Keogh Plans • 401(k) Plans

  13. Qualified Plan Reporting Requirements • (http://www.irs.gov/forms_pubs) • Determination letter (to assure “qualified” status) • Form 8717 (User Fee) • Original IRS Filing (Form 5300) • Form 5300 • Copy of Plan • Annual IRS Filing • Form 5500

  14. Employment Benefits • Concluded • Thank you • Mike Brigner, J.D.

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