RMI 2101 Topic 10 Latest Update Graded A+

RMI 2101 Topic 10 Latest Update Graded A+ Employee Benefits Any type of compensation other than direct current salary or wages Reasons why firms offer employee benefits -Attract and retain capable employees -Tax advantages -Productivity and better employee relations -Employer can take advantage of group insurance Non-Contributory Benefit Financing Employer pays for the full cost of the plan. The employee is covered without making a financial contribution. Contributory Benefit Financing Employer and employee share in the cost of the plan Disability Insurance Employer pays the full cost: Premium is not taxable to the employee, but the benefit is taxable to the employee if they become disabled Health Insurance Premium is entirely income tax free for the employee Advantages to Group Insurance -Rates are generally lower than Individual Insurance -For the same level of P*, group insurance is less expensive per employee -No individual underwriting -Commissions tend to be lower -Employer helps collect the money Adverse Selection AKA - anti selection or negative selection Demand correlates to risk Information is only know to the insured Impact on price could lead to collapse of insurance pool, product Methods to Control Adverse Selection 1. Should exist for reasons other than the purchase of insurance 2. Waiting period 3. Pre-existing conditions exclusions (PCEs) 4. A minimum group size 5. Minimum participation requirements 6.Steady flow of persons through the group Cafeteria/Flexible Benefits Plan Any kind of employee benefits plan that allows employees to choose between types and levels of benefits and possibly cash Care Plus Plan Every employee receives a basic core of benefits. May also receive flex- credits or flex $ Flexible Spending Accounts Healthcare FSA Childcare (dependent care) FSA Transportation spending account ALL ARE USED FOR TAX BREAKS Dependent Care FSA Cover childcare