Benefits 2Benefits 2

Voluntary BenefitsVoluntary Benefits

Health InsuranceHealth Insurance Traditional Health InsuranceTraditional Health Insurance Health Maintenance Organizations (HMOs)Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs)Preferred Provider Organizations (PPOs) Consumer-Driven Health Plan (CDHP)Consumer-Driven Health Plan (CDHP)

Health Savings Accounts etc.Health Savings Accounts etc.

Rising Cost of Health Rising Cost of Health BenefitsBenefits

Premiums for employer-sponsored health insurance rose an average of 6.1 Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year but percent in 2007, less than the 7.7 percent increase reported last year but still higher than the increase in workers’ wages (3.7 percent) or the overall still higher than the increase in workers’ wages (3.7 percent) or the overall inflation rate (2.6 percent).inflation rate (2.6 percent).

The 6.1 percent average increase this year was the slowest rate of premium The 6.1 percent average increase this year was the slowest rate of premium growth since 1999. Since 2001, premiums for family coverage have growth since 1999. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent.  has gone up 17 percent.  

The average premium for family coverage in 2007 is $12,106, and workers The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy.   the cost of a family policy.  

Covered workers on average pay 16 percent of the overall premiums for Covered workers on average pay 16 percent of the overall premiums for single coverage and 28 percent for family coverage – shares that have single coverage and 28 percent for family coverage – shares that have remained relatively stable over the past years. remained relatively stable over the past years. 

Henry J. Kaiser Family Foundation 2007Henry J. Kaiser Family Foundation 2007

Healthcare Cost Healthcare Cost ContainmentContainment

Health Maintenance Organizations (HMOs)Health Maintenance Organizations (HMOs) Organizations of physicians and health-care Organizations of physicians and health-care

professionals that provide a wide range of services professionals that provide a wide range of services to subscribers and dependents on a prepaid basis.to subscribers and dependents on a prepaid basis.

Preferred Provider Organization (PPO)Preferred Provider Organization (PPO) Is a group of physicians establish an organization Is a group of physicians establish an organization

that guarantees lower healthcare costs to the that guarantees lower healthcare costs to the employer.employer.

Allows employees to select their doctor of choice Allows employees to select their doctor of choice from a list of participating physicians.from a list of participating physicians.

Cost Containment (cont’d)Cost Containment (cont’d)

Consumer-Driven Health Plan (CDHP)Consumer-Driven Health Plan (CDHP) Is a high-deductible medical insurance plan Is a high-deductible medical insurance plan

financed by employer contributions to an financed by employer contributions to an employee’s limited individual healthcare employee’s limited individual healthcare spending accountspending account

Also known as:Also known as: Defined-contribution health plansDefined-contribution health plans Medical savings accounts (MSAs)Medical savings accounts (MSAs) Health savings accounts (HSAs)Health savings accounts (HSAs) Flexible spending accounts (FSAs)Flexible spending accounts (FSAs) Health reimbursement accounts (HRAs).Health reimbursement accounts (HRAs).

Employer Methods for Containing Health Care Costs•Preadmission certification for surgical procedures

•Financial incentives for outpatient surgery and testing

•Mail-order prescription drug program and medical drug discount cards

•Mandatory second opinions for surgical procedures

•Alternative approaches to health care treatment such as herbal therapy or homeopathy

•Educational programs encouraging health care consumers to assume more responsibility and accountability for the cost and quality of their health care

•Promoting Web sites or printed materials that list common conditions, treatment, drug prices, and effectiveness

•Implementation of step therapy programs

•Multitier hospital coverage networks that allow employees to choose from a variety of hospitals with small, moderate, and steep copayments at the point of service

•Use of variable copayments (for example, $10 for physician and $25 for specialists)

•Requiring employees to pay an additional cost if a working spouse refuses coverage from his or her employer

•Customized health care benefits design allowing employees to purchase riders to increase the level of benefits provided

•Promotion of wellness and employee assistance programs

•Automated benefits functions

•Dependent audits to rid benefit rolls of ineligibles

•Implementation of a disease management program

Domestic Partner BenefitsDomestic Partner BenefitsDomestic Partner (Apple Computer)Domestic Partner (Apple Computer)

A person over age 18 who shares living quarters with A person over age 18 who shares living quarters with another adult in an exclusive, committed relationship in another adult in an exclusive, committed relationship in which the partners are responsible for each other’s which the partners are responsible for each other’s common welfare.common welfare.

A standard definition of domestic partnership contains A standard definition of domestic partnership contains the following:the following:

A minimum age requirementA minimum age requirement A requirement that the couple live togetherA requirement that the couple live together A specification of financial interdependenceA specification of financial interdependence A requirement that relationship be a permanent oneA requirement that relationship be a permanent one A requirement that each not be a blood relativeA requirement that each not be a blood relative

Payment for Time Not Payment for Time Not WorkedWorked

Sick leaveSick leaveSick leaveSick leave

Severance paySeverance paySeverance paySeverance pay Paid holidaysPaid holidaysPaid holidaysPaid holidays

Vacations with payVacations with payVacations with payVacations with pay

Time Not Time Not WorkedWorked

Other Discretionary BenefitsOther Discretionary Benefits

Supplemental Unemployment Benefits (SUBs)Supplemental Unemployment Benefits (SUBs) A plan that enables an employee who is laid off A plan that enables an employee who is laid off

to draw, in addition to unemployment to draw, in addition to unemployment compensation, weekly benefits from the compensation, weekly benefits from the employer that are paid from a fund created for employer that are paid from a fund created for this purpose.this purpose.

SUB benefits are considered deferred SUB benefits are considered deferred compensation and not current earnings.compensation and not current earnings.

The fund is derived from employer contributions The fund is derived from employer contributions based on the total hours of work performed by based on the total hours of work performed by employees.employees.

Retirement BenefitsRetirement Benefits

Pensions: Defined Benefits Plans Defined Contribution Plans

Cash Balance Plan (Hybrid)

Retiree Health Care

401k and 403b IRA and SEP IRA

Trends Affecting Trends Affecting RetirementRetirement

• The number of people age 65 and older tripled to about 34 million between 1940 and 1995.

• According to U.S. census projections, people age 65 and older are expected to number 86 million by 2050, an increase of 51 million since 2000.

• In 1960, 45.4 percent of male workers over age 65 were still in the labor force; in 1990, only 27.4 percent were still working. While the labor force participation rates of women between ages 55 and 64 have been rising, further increases are not expected.

• Eight baby boomers turn 50 every ten minutes.

• The U.S. net national savings rate was relatively stable at about 7 percent of GDP from 1951 to 1980. It has collapsed since 1980, most recently dropping to less than 1 percent of GDP.

• In 1900, the average life expectancy in the U.S. was 48; today, it is 80 for women and 75 for men. Virtually all of these gains can be attributed to improvements in public health and safety, such as clean water, refrigeration, seat belts, and routine vaccinations.

Types of Pension PlansTypes of Pension Plans

Contributory planContributory plan Contributions to a Contributions to a

plan are made jointly plan are made jointly by employees and by employees and employers.employers.

Noncontributory planNoncontributory plan Contributions to a Contributions to a

plan are made solely plan are made solely by the employer.by the employer.

Defined-benefit planDefined-benefit plan The amount an The amount an

employee is to receive employee is to receive upon retirement is upon retirement is specifically set forth.specifically set forth.

Defined-contribution Defined-contribution planplan

The basis (amount) an The basis (amount) an employer contributes employer contributes to the pension fund is to the pension fund is specified.specified.

Contemporary Pension Plan Contemporary Pension Plan OptionsOptions

401(k) Savings 401(k) Savings PlansPlans

Defined Defined ContributionContribution

A tax-deferred A tax-deferred savings plan.savings plan.

Employees save Employees save through payroll through payroll deductions.deductions.

Employers may Employers may match a portion match a portion of employee of employee savings.savings.

Cash-Balance Pension Cash-Balance Pension PlansPlans

Employer contributes a Employer contributes a percentage of percentage of employee’s pay each employee’s pay each year.year.

Account balance earns Account balance earns interest each year.interest each year.

Experts predict it will Experts predict it will replace traditional replace traditional pension plans.pension plans.

Federal Regulation of Federal Regulation of Pension PlansPension Plans

Employee Retirement Income Security Act Employee Retirement Income Security Act (ERISA)(ERISA)

Private pension plans are subject to ERISA Private pension plans are subject to ERISA regulations that provides standards and regulations that provides standards and controls for pension plans:controls for pension plans:

Plans must comply IRS tax standards to qualify.Plans must comply IRS tax standards to qualify.

Plans must meet actuarial standards to qualify for Plans must meet actuarial standards to qualify for Pension Benefit Guarantee (PBGC) insurance.Pension Benefit Guarantee (PBGC) insurance.

Plans must meet Department of Labor standards Plans must meet Department of Labor standards for treatment of plan participants.for treatment of plan participants.

Federal Regulation of Federal Regulation of Pension PlansPension Plans

VestingVesting A guarantee of accrued benefits to participants at A guarantee of accrued benefits to participants at

retirement age, regardless of their employment status retirement age, regardless of their employment status at that time.at that time.

ERISA requires that plans must provide that employees ERISA requires that plans must provide that employees will have vested rights in their accrued benefits after will have vested rights in their accrued benefits after certain minimum-years-of-service requirements have certain minimum-years-of-service requirements have been met.been met.

Pension Plans and UnderfundingPension Plans and Underfunding Inadequate funds to cover retirement obligations along Inadequate funds to cover retirement obligations along

with pension plan failures could overwhelm the PBGC.with pension plan failures could overwhelm the PBGC.

Retiree Health BenefitsRetiree Health Benefits

Future retirees should expect to cover the costs of Future retirees should expect to cover the costs of their health care not covered by Medicare.their health care not covered by Medicare.

By 2031, companies are expected to pay less than By 2031, companies are expected to pay less than 10 percent of total medical expenses for retirees 10 percent of total medical expenses for retirees as part of actions already taken.as part of actions already taken.

About 20 percent of employers studied have About 20 percent of employers studied have eliminated retiree medical plans for new hires, eliminated retiree medical plans for new hires, and 17 percent will require new hires to pay the and 17 percent will require new hires to pay the full premium for coverage.full premium for coverage.

Watson Wyatt Worldwide 2002Watson Wyatt Worldwide 2002

Employee ServicesEmployee Services

Employee Assistance Programs (EAPs)Employee Assistance Programs (EAPs) Services provided by employers to help workers Services provided by employers to help workers

cope with a wide variety of problems that cope with a wide variety of problems that interfere with the way they perform their jobs.interfere with the way they perform their jobs.

Typically provide diagnosis, counseling, and referral for Typically provide diagnosis, counseling, and referral for advice or treatment for problems related to alcohol or advice or treatment for problems related to alcohol or drug abuse, emotional difficulties, and financial or drug abuse, emotional difficulties, and financial or family difficulties.family difficulties.

Child and Elder CareChild and Elder Care Care provided to a child or an elderly relative by Care provided to a child or an elderly relative by

an employee who remains actively at work.an employee who remains actively at work.

Work/Life Benefits: Balancing Work Work/Life Benefits: Balancing Work and Home Needsand Home Needs

• Child care/elder care referral services

• Time off for children’s school activities

• Employer-paid on-site or near-site child care facilities

• Flexible work hours scheduling

• Health club and wellness programs

• Employer-accumulated leave days for dependent care

• Subsidized temporary or emergency dependent care costs

• Extended leave policies for child/elder care

• Educational reimbursement

• Sick-child programs (caregiver on call)

• Work-at-home arrangements/telecommuting

• Partial funding of child care costs

• Part-time work schedules

AwardsAwardsAwardsAwards

Other Benefits and ServicesOther Benefits and Services

Recreational and Recreational and SocialSocial

Recreational and Recreational and SocialSocial

Credit UnionsCredit UnionsCredit UnionsCredit Unions

Food ServicesFood ServicesFood ServicesFood Services

Purchasing Purchasing AssistanceAssistance

Purchasing Purchasing AssistanceAssistance

Transportation Transportation PoolingPooling

Transportation Transportation PoolingPooling

On-Site Health On-Site Health ServicesServices

On-Site Health On-Site Health ServicesServices

Legal ServicesLegal ServicesLegal ServicesLegal Services

Financial Financial PlanningPlanning

Financial Financial PlanningPlanning

Housing and Housing and MovingMoving

Housing and Housing and MovingMoving

F1000 Firms Using Flexible F1000 Firms Using Flexible BenefitsBenefits

1987 1990 1993 1996 1999

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Organizing for High Performance, 2001

Choosing Benefits at NCR Choosing Benefits at NCR (2000)(2000)

MedicalMedical Opt outOpt out

-$4,800-$4,800Traditional Traditional BaseBase

HMOHMO

-$800-$800Enhanced Enhanced +$1,000+$1,000

PPO +PPO +$1,300$1,300

Long-Long-Term Term DisabilityDisability

Opt Out Opt Out

-$840-$84050%Salary50%Salary

BaseBase60% 60% SalarySalary

+$240+$240

70%Salary70%Salary

+$480+$480

Life Life InsuranceInsurance

NoneNone

BaseBase1 X Salary1 X Salary

+$240+$2402X Salary2X Salary

+$480+$4803X Salary3X Salary

+$720+$7204X Salary4X Salary

+$960+$960

401K401K NoneNone

-$1,800-$1,800

3% Match 5 3% Match 5 year vestyear vest

+$1,200+$1,200

6% Match 6% Match 5 year 5 year vestvest

BaseBase

6% Match 1 6% Match 1 year vestyear vest

+$900+$900

10%Match 10%Match No vestNo vest

+$2,400+$2,400

Paid Paid Parental Parental LeaveLeave

NoneNone

-$180-$1803-day3-day

BaseBase12 week 12 week

½ Salary½ Salary

+$540+$540

12 Week 12 Week Full SalaryFull Salary

+$1,800+$1,800

Perks to Attract and Retain

In North Texas, the Container Store – which ranked No. 4 in Fortune magazine's list of best places to work – offers employees on-site carwashes, dry cleaning and free yoga classes.

Texas Instruments Inc. provides on-site concierge service for its Dallas employees.

At Dallas-based Half Price Books, employees are allowed to borrow any of the books, music or movies in stock.

And employees at T. Boone Pickens' BP Capital LLC can use the office fitness room and book appointments with a personal trainer.

Dallas Morning News 2.21.07

Special ExtrasSpecial Extras

Game roomGame roomHome computersHome computersStock for spouseStock for spousePet friendlyPet friendlyPet day carePet day careHealth clubHealth clubChef – take home mealsChef – take home mealsNap roomNap roomSabbaticalsSabbaticalsBeer on FridayBeer on Friday

Concierge serviceConcierge serviceWash gym clothesWash gym clothesOil change in parking lotOil change in parking lotDental service in parking lotDental service in parking lotDry cleaningDry cleaningNo dress codeNo dress code42 kinds of drinks42 kinds of drinksGame ticketsGame ticketsCredit unionCredit unionDiscount club membershipDiscount club membership

Design benefits to align with overall Design benefits to align with overall compensation strategycompensation strategy

Benefits provide security for employees and Benefits provide security for employees and their familiestheir families

It is important to:It is important to: Provide benefits employees value and Provide benefits employees value and

appreciateappreciate Communicate value of benefits to employeesCommunicate value of benefits to employees

Summary and ConclusionsSummary and Conclusions