Employee Benefits Required By Law Essay, Research Paper
The legally required employee benefits
constitute nearly a quarter of the benefits package that employers provide.
These benefits include employer contributions to Social Security, unemployment
insurance, and workers? compensation insurance. Altogether such benefits
represent about twenty-one and half percent of payroll costs.
Social Security
Social Security is the federally
administered insurance system. Under current federal laws, both employer
and employee must pay into the system, and a certain percentage of the
employee?s salary is paid up to a maximum limit. Social Security is mandatory
for employees and employers. The most noteworthy exceptions are state and
local government employees.
The Social Security Act was passed
in 1935. It provides an insurance plan designed to indemnify covered individuals
against loss of earnings resulting from various causes. This loss of earnings
may result from retirement, unemployment, disability, or the case of dependents,
the death of the person supporting them. Social Security does not pay off
except in the case where a loss of income through loss of employment actually
is incurred. In order to be eligible for old age and survivors insurance
(OASI) as well as disability and unemployment insurance under the Social
Security Act, an individual must have been engaged in employment covered
by the Act. Most employment in private enterprise, most types of self-employment,
active military service after 1956 and employment in certain nonprofit
organizations and governmental agencies are subject to coverage under the
Act. Railroad workers and United States civil service employees who are
covered by their own systems and some occupational groups, under certain
conditions, are exempted form the Act. The Social Security Program
is supported by means of a tax levied against an employee?s earnings which
must be matched buy the employer. Self-employed persons are required to
pay a tax on their earnings at a rate, which is higher than that paid by
employees but less than the combined rates paid by employees and their
employers.
In order to receive old age insurance
benefits, a person must have reached retirement age and be fully insured.
A full-insured person is one who must have earned at least $50 in a quarter
for a period of 40 quarters. It is possible for an individual who dies
or becomes totally disabled at an early age to be classified as fully insured
with less than 40 quarters. To receive old age insurance benefits, covered
individuals must also meet the test of retirement. To meet this test, persons
under 70 cannot be earning more than an established amount through gainful
employment. This limitation of earnings does not include income from sources
other than gainful employment such as investments or pensions. Social security
retirement benefits consist of those benefits which individuals are entitled
to receive in their own behalf, called the primary insurance amount, plus
supplemental benefits for eligible dependents. These benefits can be determined
from a prepared table. There are also both minimum and maximum limits to
the amount that individuals and their dependents can receive.
The Social Security program provides
benefit payments to workers who are too severely disabled to engage in
gainful employment. In order to be eligible for such benefits, an individual?s
disability must have existed for at least 6 month and must be expected
to continue for at least 12 months. Those eligible for disability benefits
must have worked under Social Security for a t least 5 out of the 10 years
before becoming disabled. Disability benefits, which include auxiliary
benefits for dependents, are computed on the same basis as retirement benefits
and are converted to retirement benefits when the individual reaches the
age of 65.
The survivors? insurance benefits represent
the form of life insurance that is paid to members of a deceased person?s
family who meet the requirements for eligibility. As in the case of life
insurance, the benefits that the survivors of a covered individual?s receive
may be far in excess of their cost to this individual. Survivors of individuals,
who were currently insured, as well as those who were fully insured at
the time of death, are eligible to receive certain benefits, provided that
the survivors meet other eligibility requirements. A currently insured
person is one who has been covered during at least six out of the thirteen
quarters prior death.
Many people think of Social Security as
a retirement program. But, retirement benefits are just one part of the
Social Security program. Some of the Social Security taxes person pays
go toward survivors insurance. In fact, the value of the survivors insurance
he/she has under Social Security is probably more than the value of his/her
individual life insurance. When someone who has worked and paid into Social
Security dies, survivor benefits can be paid to certain family members.
These include widows, widowers, children, and dependent parents. Anyone
earns survivors insurance by working and paying Social Security taxes.
When someone dies, certain members of his/her family may be eligible for
survivors? benefits if the person worked, paid Social Security taxes and
earned enough credits. You can earn a maximum of four credits each year.
The number of credits you need depends on your age when you die. The younger
a person is, the fewer credits he or she needs to have family members be
eligible for survivors? benefits. But nobody needs more than forty credits
to be eligible for any Social Security benefits.
Under a special rule, benefits can be paid
to your children and your spouse, who is caring for the children, even
if you do not have the number of credits needed. They can get benefits
if you have credit for one and one-half years of work in the three years
just before your death. When you die, Social Security survivors benefits
can be paid to your:
(a) Widow or widower – full benefits at
age 65 or older (if born before 1938) or reduced benefits as early as age
60. A disabled widow or widower can get benefits at 50 ? 60. The surviving
spouse?s benefits may be reduced if he or she also receives a pension from
a job where Social Security taxes were not withheld. Widow or widower -
at any age if he or she takes care of your child under age 16 or disabled
who get benefits. (b) Unmarried children under age 18 or up to age 19 if
they are attending elementary or secondary school full time. Your child
can get benefits at any age if he or she was disabled before age 22 and
remained disabled. Under certain circumstances, benefits also can be paid
to you stepchildren, grandchildren, or adopted children. (c) Dependent
parents at 62 or older.
Some people find Social Security taxes
an unwelcome deduction from the family?s earnings. They are thinking about
how they could use the money to pay bills or plan for their children’s
college education. But the illness or injury–or even the death–of a parent
in a family with young children can suddenly make Social Security a very
important part of the family’s survival. Those paycheck deductions for
Social Security taxes could make it possible for the family to stay together.
For example, some families can get as much as $2,000 a month when the worker
is disabled. This fact sheet focuses on benefits paid to the children when
one or both parents become disabled, retire or die. When people think of
Social Security benefits, they usually think of older men and women who
are retired or who are widows or widowers. If you find it difficult to
picture a small child as a Social Security beneficiary, you may be surprised
to learn that 3.8 million children receive approximately $1.4 billion each
month because one or both of their parents are disabled, retired or deceased.
Those dollars are helping provide the necessities of life for the family
members and helping make it possible for those children to complete high
school. When a parent becomes disabled or dies, Social Security benefits
help stabilize the young family’s financial future.
The child can be the worker’s biological
child, adopted child or stepchild. The child also could be a dependent
grandchild. To get benefits, a child must have a parent(s) who is disabled
or retired and entitled to Social Security benefits, or have a parent who
died after having worked long enough in a job where he or she paid Social
Security taxes. The child also must be under age 18; be 18-19 years old
and a full-time student (no higher than grade 12); or be 18 or older and
disabled. The disability must have started before age 22. Normally, benefits
stop when the child reaches age 18 unless he or she is disabled. Five months
before the beneficiary’s 18th birthday, we send the child a notice that
benefits will end at age 18, unless he or she is a full-time student at
a secondary (or elementary) school. If the beneficiary is under age19 and
still attending a secondary or elementary school, he or she must notify
us by completing a statement of attendance. The benefits then will continue
until he or she graduates or until two months after becoming age 19, which
ever comes first. If a child who is receiving Social Security benefits
is in the mother’s (or father’s) care, the parent may be able to receive
benefits until the child reaches age 16. The child’s benefits continue,
but the parent’s benefits stop unless he or she is age 60 or over and is
receiving benefits as a widow or widower or is age 62 or older and receiving
retirement benefits.
Within a family, each child may receive
up to one-half of the worker’s full retirement or disability benefit, or
75 percent of the deceased parent’s basic Social Security benefit. However,
there’s a limit to the amount of money that can be paid to a family. The
family maximum payment is determined as part of every Social Security benefit
computation and can be from 150 to 180 percent of the worker’s full benefit
amount. If the total amount payable to all family members exceeds this
limit, each person’s benefit is reduced proportionately (except the worker’s)
until the total equals the maximum allowable amount. As an example of monthly
benefits, let’s say Tom Brown earns $30,000 a year, is age 35, married
and has one child. Tom is severely injured in a car accident and is found
to be eligible for Social Security disability benefits. Tom, his wife and
their child receive $1,640 each month. As another example of how Social
Security benefits can help the young family, Sara was age 45 and earning
$50,000 when she died, leaving her husband and two children. The husband
and children receive $2,370 each month based on Sara’s earnings record.
If you were like most people, you would
rather work than stay home. But working is a big step for a person with
a disability. Social Security and SSI have special rules called “work incentives”
to help you overcome some problems. These work incentives include cash
benefits while you work; Medicare or Medicaid while you work; help with
any extra work expenses you may have as a result of your disability; and
help with education, training and rehabilitation to start a new line of
work. Social Security disability insurance benefits are paid to people
with disabilities or to individuals who are blind who have worked under
Social Security and to their dependents. SSI disability benefits are paid
to people with disabilities or to individuals who are blind who have little
income and few resources. Social Security beneficiaries with low income
and few resources also may qualify for SSI. Although there are differences
between Social Security and SSI, the work incentives under both programs
are designed to accomplish the same objective: to provide support and assistance
while you attempt to return to work or as you enter the workforce for the
first time.
The disabled individual will receive his
or her full monthly Social Security benefit for a year after the individual?s
return to work. If he or she continues to work beyond that while still
disabled, the person?s eligibility for monthly cash benefits will continue
for at least another 36 months. The person usually can have a trial work
period of nine during which his or her benefits will not be affected by
your earnings regardless of how much you earn. A trial work month is any
month in which his or her total earnings are more than $200 or, if he or
she are self-employed, the person will earn more than $200 (after expenses)
or spend more than 40 hours in the person?s own business. Before the person
will start loosing benefits he or she can earn more than $500 a month.
Nearly every American–man, woman and
child–has Social Security protection, either as a worker or as a dependent
of a worker. Most women did not work outside the home. Today, the role
of women is far different. Nearly 60 percent of all women are in the nation’s
workforce. Many women work throughout their adult lives. Although Social
Security always has provided benefits for women, it has taken on added
significance. More women work, pay Social Security taxes and earn credit
toward a monthly income for their retirement. Working women with children
earn Social Security protection for themselves and their families. This
could mean monthly benefits to a woman and her family if she becomes disabled
and can no longer work. If she dies, her survivors may be eligible for
benefits. Although some women choose lifetime careers outside the home,
many women work for a few years, leave the labor force to raise their children,
and then return to work. Some women choose not to work outside their homes.
They usually are covered by Social Security through their husband’s work
and can receive benefits when he retires, becomes disabled or dies. Whether
a woman works, has worked or has never worked, it is important that she
knows exactly what Social Security coverage means to her. She also should
know about Social Security coverage for anyone she may hire as a household
worker or provider of childcare. She needs to know what to do if she changes
her name. And she needs to know that if she receives a pension for work
not covered by Social Security, her Social Security benefits could be affected.
Unemployment Compensation
Unemployment insurance provides workers,
whose jobs have been terminated through no fault of their own. Monetary
payments for a given period of time or until they find a new job. Unemployment
payments are intended to provide an unemployed worker time to find a new
job equivalent to the one lost without major financial distress. Without
employment compensation many workers would be forced to take jobs for which
they were overqualified or end up on welfare. Unemployment compensation
has also been justified in terms of providing the economy with consumer
spending during periods of economic adjustment.
Unemployment compensation is a form of
insurance designed to provide funds to employees who have lost their jobs
and are seeking other jobs. Title IX of the Social Security Act of 1935
requires employers to pay taxes for unemployment compensation. The law
was written in such a manner as to encourage individual states to establish
their own unemployment systems. If a state established its own unemployment
compensation system according to prescribed federal standards, the proceeds
of the unemployment taxes paid an employer go to the state. By 1937, all
states and the District of Columbia had adopted acceptable unemployment
compensation plans.
Employees who have been working in employment
covered by the Social Security Act and who are laid off may be eligible
for unemployment insurance benefits during their unemployment for a period
up to twenty-six weeks. Eligible persons must submit an application for
unemployment compensation with their state employment agency, register
for available work and be willing to accept any suitable employment that
may be offered to them. However, the term suitable permits individuals
to enjoy considerable discretion in accepting or rejecting job offers.
The amount of the compensation that workers are eligible to receive which
varies among states, is determined by their previous wage rates and previous