Term
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Definition
| revolutionized, unified modernized Germany, wanted it after he was gone, SS, 1860s |
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Term
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Definition
| first private U.S pension plan - simple, put money into account |
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Term
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Definition
| Westinghouse grants paid vacation, |
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Term
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Definition
| First worker's comp law - injured on job, NY first, WI longest, can be no liability claim against them, Problems - people live longer fertility decreases, funding model doesn't work |
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Term
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Definition
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Term
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Definition
| SS Act - Great Dep, children moved to city and left parents |
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Term
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Definition
| Medicare - part of SS, for people with SS and disabilities, 50% health expenses |
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Term
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Definition
| Cafeteria plans - choice in benefits |
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Term
| Types of Employee Benefits |
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Definition
legally required - fed/state law, ex: min wage, SS (7.65% tax), WC
private insurance and retirement plans - pensions, health insurance, dental,
$ for time not worked - holidays, maternity leave, some have payment
extra cash payments - moving expenses, suggestion awards, ex: whistleblower
services - health club, massage, lunch |
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Term
| Reason for Employee Benefits - tax advantages |
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Definition
| pref tax treatment for some, health ins BEFORE income taxes |
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Term
| Reason for Employee Benefits - economies of scale |
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Definition
| less than if everyone purchased themselves because of admin costs |
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Term
| Reason for Employee Benefits - Gvt mandates |
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Definition
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Term
| Reason for Employee Benefits - unions |
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Definition
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Term
| Reason for Employee Benefits - motivates certain types of behavior |
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Definition
| health clubs, paid vacation |
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Term
| Reason for Employee Benefits - employee morale |
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Definition
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Term
| Reason for Employee Benefits - wage controls |
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Definition
| inflation creates problems, outlaw inflation = no incentive to stay with current employer - give days off, job title, more benefits |
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Term
| Preferential Tax Treatment |
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Definition
| people who make the most money benefit the most, highest income tax rate, no group ins = would be in highest zone, cheaper ins increases demand, people buy more, more claims, more services demanded = price increase and then people couldn't afford |
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Term
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Definition
Benefit some more than others = resentment
difficult to cut back
increase labor costs
tax treatment encourages consumption |
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Term
| Reasons for Social Insurance - adverse selections |
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Definition
| need 1. asymmetric info and 2. choice, = death spiral, justify Medicare |
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Term
| Reasons for Social Insurance - provide economic stability |
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Definition
| purpose of gvt is to back you up |
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Term
| Reasons for Social Insurance - economic stability |
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Definition
| unemployment ins., they get benefits |
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Term
| Reasons for Social Insurance - preserve important values |
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Definition
| not like welfare, people don't just get it, has to be earned |
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Term
| Reasons for Social Insurance - risks too large for private insurance |
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Definition
| very little by private, significant correlation of risks |
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Term
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Definition
| paying for someone else, mandatory, wealth transfer built in, but wealth has to be earned |
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Term
| Employment Related Social Insurance |
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Definition
SS = Old Age (1935)-only pension type benefits, Survivors (1939) - like life ins, must have dependents, disability (1956)- need to have serious, Medicare (1965)
WC (1910-1950)
Unemployment Insurance (1935) - fed legislation
*flat tax that everyone pays, only on earnings up to a certain amount - $110,100 in 2012, 7.65%, tax rate and max earnings has gone up, matched by employer |
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Term
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Definition
| need to accumulate to receive benefits, max of 4 per year, 2012 - $1130, not related to quarter of year |
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Term
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Definition
survivor benefits
at least 6 of last 13 quarters that you could have earned |
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Term
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Definition
survivor and pension benefits
1. 40 quarters of coverage or
2. as many quarters of coverage as there are years after 1950 or the year AFTER you turn 21 and BEFORE you die, become disabled or reach age 62
*need as least 6
*subtract and add one |
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Term
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Definition
survivor, pension and disability
fully insured and min number of quarters recently |
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Term
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Definition
| normal age = 67 but must be at least 62/or spouse, children to a certain age, disabled children of any age |
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Term
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Definition
| lump sum of $255, if fully insured, can get benefits at 60, dependent person aged 62 and over |
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Term
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Definition
| disabled worker, others as with retirement benefits |
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Term
| Determining Benefit Amount |
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Definition
1. Calculate the Ave. Indexed Monthly Earnings (monthly basis)
2. Calc Primary Insurance Amount (PIA) - wealth transfer, favors low income individuals
3. Calc benefits for each individual - each gets a percentage
4. Check to see if benefits exceed family max |
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Term
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Definition
1. list covered wages
2. index wages for inflation
3. determine number of years to include (need at least 22)
4.sum indexed earnings for years included
5. divide by the number of months in teh years included
*slide on exam with specifics |
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Term
| SS - indexing of benefits |
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Definition
| about 30 years, basket of goods |
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Term
| SS - termination of benefits |
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Definition
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Term
| SS - early/late retirement |
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Definition
67 is normal, reduce permanently 5/9% every month if early (62), every year you wait until 70 permanently increase 8%
*individual choice - how long you'll live, dif time pref, cash flow |
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Term
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Definition
| does not apply 67 and over, 50% tax on benefits if earn over $14,640, incentive to leave the workforce |
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Term
| Who does SS Treat Better? |
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Definition
females - live longer, get more $ all else equal
family size - benefits increase with family size up to a certain point
one income couples - |
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Term
| Why Do Employers Offer Pension Plans? - help employees save |
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Definition
| force savings, might look bad if broke later |
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Term
| Why Do Employers Offer Pension Plans? - tax deferral |
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Definition
| checking account is subject to current taxation, decreases employer taxes, qualified plans - not taxable income currently, pay taxes later - tax deferral = in lower tax bracket when retired, like interest free loan, employers charge as an expense CURRENTLY, |
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Term
| Why Do Employers Offer Pension Plans? - recruit, retain, and retire |
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Definition
| help people in labor market, if will work for them |
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Term
| Why Do Employers Offer Pension Plans? - encourage productivity |
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Definition
| feel more secure/happy = feel better about company |
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Term
| Why Do Employers Offer Pension Plans? - discourage collective bargaining |
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Definition
| anticipate what workers would demand with a union |
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Term
| Government Involvement with Private Pension Plans - tax breaks for plans that meet set criteria |
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Definition
| qualified plans - need to fulfill certain criteria |
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Term
| Government Involvement with Private Pension Plans - Encourage coverage of all workers |
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Definition
| have more $ to spend, drag economy, gvt will be giving them $, protect against demands for welfare |
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Term
| Concerns with pension regulation - size of tax breaks |
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Definition
| how much $ should people be able to put in? |
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Term
| Concerns with pension regulation - who gets tax breaks |
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Definition
| everyone? or just people with modest incomes? (wealthy people don't need 0% interest loan) |
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Term
| Concerns with pension regulation - effect of pension on savings |
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Definition
no particularly high, low savings - no $ to invest = no increases productivity
$ flows all over world, not necessarily in U.S. |
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Term
| Concerns with pension regulation - interest group pressures |
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Definition
| have states, lobbyists for rules that are beneficial |
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Term
| Concerns with pension regulation - mandatory portable pension |
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Definition
| certain % of income going to a special account on behalf |
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Term
| Concerns with pension regulation - discrimination in pensions |
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Definition
| with qualified - can't treat men/women differently |
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Term
| Regulation of Private Pensions |
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Definition
Statutory law - legislature
internal revenue code - taxes are important
ERISA - employee retirement income security act of 1974, rules for a qualified plan
PBGC - Pension Benefit Guarantee Corp, pension benefits associated with a DB plan lie a savings account
Securities Laws - lot of $, civil rights laws
Civil Rights Laws - defines when you can/cannot treat people over age of 40
Age Discrimination Act of 1978 - can't over 40
State Legislation - depends on state
Court cases - common law, interpret laws
regulations - Dept of Treasury, make legislation operative
rulings and other info - can affect way people operate their pension plans |
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Term
| Criteria for Plan Qualification for Tax Advantages - eligibility and plan coverage |
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Definition
| roughly comparable benefits, who is entitled to benefits/who is covered |
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Term
| Criteria for Plan Qualification for Tax Advantages - nondiscrimination in benefits and contributions |
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Definition
| at both ends of the pipe, basing on income level is frowned upon |
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Term
| Criteria for Plan Qualification for Tax Advantages - funding requirement |
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Definition
| sufficient money must be put into to pay off promises |
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Term
| Criteria for Plan Qualification for Tax Advantages - vesting requirements |
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Definition
| claim on $ in pension plan, many don't retire under plan |
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Term
| Criteria for Plan Qualification for Tax Advantages - limitations on benefits and contributions |
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Definition
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Term
| Criteria for Plan Qualification for Tax Advantages - payout restrictions |
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Definition
| rule on rate its paid out |
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Term
| Criteria for Plan Qualification for Tax Advantages - top heavy rules |
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Definition
60% or more of $ set aside is claimed by key employees
ex:law firm, consulting firm |
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Term
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Definition
1. pension plans
2. profit sharing plans |
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Term
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Definition
| profit not explicitly part of formula |
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Term
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Definition
$ depends on profits of firm, ex: 20% profits delivered based on formula
-more difficult to predict = RISKIER |
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Term
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Definition
| promise certain amount, put in money that you suspect with be sufficient using actuarial assumptions |
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Term
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Definition
make no promise about $, employee is at risk (mortality, turnover)
*who bears the risk |
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Term
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Definition
| promise about what will be paid at retirement |
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Term
| Cahs Balance Pension Plan |
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Definition
salary x % = amount into account and certain interest rate return
*DB |
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Term
| Target Benefit Pension Plan |
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Definition
determine benefit, come up with target, actuarial assumptions, no promise that target will be hit
*DB/DC hybrid |
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Term
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Definition
| deposit into account, employee at risk for $ |
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Term
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Definition
| DC, additional element of risk with contribution of company |
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Term
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Definition
| contribution make in $ stock, sell at some future point |
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Term
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Definition
| take % of %, set aside into tax shelter, take home less, full or partial match up to certain point by employer |
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Term
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Definition
attractive interest rate, up to 50% of it, payback period is really long(house) or shorter(boat)
default = money becomes currently taxable income, penalty tax |
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Term
| Pension Plans - Service Requirements |
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Definition
| no more than 1 year (2 if there is immediate vesting) - can be certain jobs |
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Term
| Pension Plans - Age Requirement |
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Definition
| Age 21+ must be eligible, TAs age 26 |
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Term
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Definition
1. ratio % test
2. average benefits test |
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Term
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Definition
Must satisfy one:
1. at least 50 employees covered
2. at least 40% of employees covered |
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Term
| Employees who may be excluded from coverage tests |
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Definition
| min age and service requirements, collective bargaining agreements (labor negotiated pension plan), railway labor act (RR have separate plans), nonresident aliens (not in U.S., not citizens) |
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Term
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Definition
| lowly paid % covered/highly paid % covered > 70% |
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Term
| To be considered highly compensated |
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Definition
1. income
2. ownership
3. officer |
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Term
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Definition
| (Ave Bene/Ave Comp) of LP/(Ave Bene/Ave. Comp) of HP > 70% |
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Term
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Definition
| Age 65 of 5th anniversary if joined plan within 5 years of age NRA |
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Term
| Benefits Reduced if Early Retirement Occurs |
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Definition
| often they can at 59.5, benefit accrual period is shorter, foregone interest earnings, longer life expectancy at retirement if you get money earlier, chance of pre- retirement death gone (others in pool get benefits) |
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Term
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Definition
benefit accruals continue until max out, will be greater, 67-68
* in most cases - NO MANDATORY RETIREMENT AGE |
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Term
| Non-Discrimination Rules Applicable to Plan Formulas |
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Definition
| can't discriminate explicitly against lowly paid workers but can be a function of income, no race, religion, national origin, gender (Title VII), not on age - violates ADEA |
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Term
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Definition
1. Money Purchase Formulas - very common, % of salary into individual account
2. Target Benefit Formula - set a retirement target, no promise that it will be hit, can be used to favor older workers (cont may need to be greater to hit target), restrictions on the assumed interest rate (need to be reasonable) |
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Term
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Definition
| years employee participates, investment performance, contribution rate ( how much going in?), employee's earnings (function of income), administrative fees (decrease account value) |
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Term
| DB Formulas Characteristics |
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Definition
| benefit is specified, investment risk rests with plan sponsor, prefunding is required, benefit does not necessarily need to be related to compensation level, plan can favor employees who enter at later ages |
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Term
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Definition
1. Reasonable Income Replacement Ratio
2. Maximize Tax Shelter for Key Employees |
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Term
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Definition
flat benefit formula - does not take into account years of service (flat amount or % of salary)
unit benefit formula - based on length of service
cash balance formula - cont based on compensation, interest rate is guaranteed, NO individual accounts |
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Term
| Definition of Compensation |
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Definition
career average
final average - ex: highest 3 years earnings
must use total compensation or a non-discriminatory measure - against lowly paid workers |
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Term
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Definition
| not allowed in a qualified plan, DB - must have same benefit, DC - same contribution, annuity option must be unisex rate |
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Term
| Options for how pension comes out |
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Definition
1. lump sum
2. payout over cause of life
*males should get a lump sum and purchase an annuity at a better rate that is due sooner |
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Term
| Inflation Program Possible Solutions - Preretirement Inflation |
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Definition
DB Plan: final average compensation
DB Plan: index wages (SS)
DC Plan: stocks |
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Term
| Inflation Program Possible Solutions - Postretirement Inflation |
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Definition
Index benefits - beginning x inflation rate
Ad hoc adjustments - leaders of co. review and increase benefits
Increase benefits by a formula - ex: 2% every year regardless of an actual rate |
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Term
| Integration with SS Rationale |
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Definition
1. SS favors lower income individuals and pensions favor highly
2. target ratio - want a certain % at retirement for workers
3. allows highly paid favorable treatment
4. saves on plan costs - decrease money paid to pension plan on lowly paid |
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Term
| Integration with SS - Integration Level Approach |
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Definition
DB Plans:
excess benefit %
base benefit %
integration level
max excess allowed
DC Plan:
base contribution %
excess contribution %
integration level
*get a different % above and below integration level |
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Term
| Integration with SS - Offset Approach |
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Definition
*Used with DB
Pension = original pension - offset
Offset = % SS benefit - can only be used with DB plans
Several maximums apply |
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Term
| Pension Plans - Additional Benefits |
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Definition
Accrued benefit - early termination - leave after 5 years = entitled to vested portion
death benefits: death of worker
disability benefits: optional under pension plans |
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Term
| Accrued Benefit - DC Plan |
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Definition
account value = contributions +interest-distributions (borrowed money)
contributions = employer's + employee's
interest = investment earnings + forfeitures (increase account value if employee leaves before vested) |
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Term
| Accrued Benefit - DB Plans |
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Definition
*rules push curve toward straight line, government wants linear approach
1 of 3
1. 3% rule
2. 133 1/3% rule
3. fractional rule
4. insurance contracts exempted if accrued benefit not less than cash surrender value or insurance is paid up, no loans out, no security interest
* don't need to worry about rules if ins policy |
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Term
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Definition
1. term ins. - 1 year, like auto ins, 20 year policy
2. cash value product - pay more $, go into vehicle, like savings account, take it with you |
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Term
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Definition
leaves after 10 years, benefit 100,000
3% x $100,000 x 10 = $30,000 |
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Term
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Definition
| the benefit that you earn in one year can't be more than 133 1/3% of benefit accrued in prior year |
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Term
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Definition
actually worked / would have worked/normal retirement age
$50,000 at NRA, left after 10 years
$50,000 x 10 /40 = $12,500 |
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Term
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Definition
1. full vesting by NRA
2. employee contributions are always 100% vested |
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Term
| Min Vesting Rates - DB Plans |
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Definition
| 5 year cliff vesting or 3-7 year vesting (20% increments) |
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Term
| Min Vesting Rates - DC Plans |
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Definition
*Faster than DB
3 year cliff vesting or 2-6 year (20%) |
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Term
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Definition
| required by a pension plan, government doesn't want spouses in bad shape, |
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Term
| Qualified joint and survivor annuity |
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Definition
| mandated default for benefit form, survivor portion no greater than 100% of joint and no less than 50% of joint, survivor benefits continue after remarriage - asset of family |
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Term
| Qualified preretirement survivor annuity |
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Definition
if worker is past early retirement age RETIREMENT is assumed as day before DEATH, if worker dies before early retirement age TERMINATION is assumed as day of death - get vested portion of accrued benefit
*additional life insurance is allowed but NO MORE THAN 25% OF PLAN COSTS (meant primarily for retirement) |
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Term
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Definition
*optional
1. allow early retirement benefits at disability - what they would get
2. allow accrual and vesting to continue during disability - not pay anything but rights continue |
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Term
| Pension Plans - Funding Agencies |
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Definition
bank custodial account - like trust, bank run trust
trust - people oversee it, trustees = obligated to act in best interest of beneficiaries, give instructions, support survivors until age of maturity
*funding instrument is the agreement between sponsor and funding agency |
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Term
| Trusts - parties to the trust |
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Definition
1. grantor of the trust - ex: parents (employer)
2. beneficiaries - ex: children
3. trustee (fiduciary)- ex: grandparents, aunts and uncles, should not at all be in own best interest |
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Term
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Definition
1. accept contributions
2. invest assets
3. pay benefits - make sure they get $ |
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Term
| Appropriate Insurance Contracts - General Types |
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Definition
allocated: guarantee plan benefits - if you pay premiums as promised, ins co. promises premiums will be paid, co. takes on the risk
unallocated : no guarantee, minimal guarantees, takes $ and invests it, no promise, don't know if it's enough
mix of allocated/unallocated: not all in particular types, |
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Term
| Life Insurance Individual Life - Allocated Instruments |
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Definition
1. retirement income policies - RIP, death benefits, largely life ins., care about health
2. retirement annuity contracts
3. combination plans with a conversion fund - pull two pools together of $, change risk profile
4. group permanent contract - life retirement inc. policy, pay an amount and it provides a death benefit, keep account and enough to pay off
5. group deferred annuity - like retirement annuity contract, no death benefit, pooling for group
6. group contract with a conversion fund |
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Term
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Definition
| pay in premiums, ex: $1,000,000 death benefit, cross over policy limit and get million |
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Term
| Life Insurance Individual Life - Unallocated Instruments |
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Definition
*assumptions not mature
when working, there is no promise on return and at retirement - pull out money and pay to ins. co and buys an annuity for person retiring
1. group deposit admin contract - assets pooled, annuity purchased for worker at retirement, annuity purchased from same insurer, annuity rates guaranteed for a period of time, may have minimum rate of return guarantee
2. immediate participation guarantee contract - more like a trust, annuities are not purchased, benefits come directly from the fund |
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Term
| Funding Rate Mandated by Law |
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Definition
DC plans: pay in promised contribution
DB plans: use actuarial assumptions
-normal cost: work today, earn benefit in the future
-supplemental liability: employer starts plan and wants to give credit for past years - underfunded |
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Term
| Why do supplemental liability? |
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Definition
| benefit can included more people, create opportunity to put more $ aside into a tax deferred basis, people there longer |
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Term
|
Definition
1. accrued benefit approach - PV of benefits accruing in a year
2. projected benefit approach - level $ amount or level % of pay (pay more in earlier years, smooth out) |
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Term
|
Definition
| determine amount needed at retirement, smooth this over working years - assumptions required |
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Term
| Choosing an Actuarial Cost Method |
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Definition
-minimize early contributions (growth, cash is king),
-max early contributions (max tax shelter for key employees)
-match pension costs with payroll costs - more even burden |
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Term
| Actuarial Cost Methods - Important Actuarial Assumptions |
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Definition
interest rate, mortality (die before retirement), turnover (take another job), salary scale
*IRS - assumptions must be reasonable |
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Term
|
Definition
| related to past service benefits, 10-30 years to pay off (gvt doesn't want it to go on forever) |
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Term
| Minimum Funding Standards - Pensions |
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Definition
| tax penalties if not met, request for leniency can be made, some plans are exempt from ERISA - governmental plans (don't want to raise taxes), certain church plans, profit-sharing plans, stock bonus plans, fully insured plans under certain circumstances |
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Term
| Insurance Policy Conditions |
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Definition
| level premiums and paid up at retirement (ex: retirement income plan), insurance covers total benefits promised - ins is funding instrument by itself, premiums paid on time, no security interest (not backing debt), no loans outstanding |
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Term
Payout Options - Actuarial Equivalents
straight life annuity |
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Definition
| highest amount per month, 1 life, no guarantee of min # of payments |
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Term
Payout Options - Actuarial Equivalents
joint and survivor annuity |
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Definition
| default for marriage (QJSA), based on two lives, on average the payout stream will be longer |
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Term
Payout Options - Actuarial Equivalents
Annuities with a certain period |
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Definition
| ex: 10 years guaranteed (and you can leave a beneficiary), lower than straight life because of the guarantee, the longer you pay the less you get annually |
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|
Term
Payout Options - Actuarial Equivalents
Annuities of a set amount for a set period |
|
Definition
| not based on length of life, lower than straight life because of guarantee |
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Term
Payout Options - Actuarial Equivalents
Lump sum |
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Definition
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|
Term
| Life Expectancy at Certain Ages |
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Definition
| another approach to payout, take $ in pool and at age of retirement divide it by life expectancy, can recalc every year, the effect can reduce the amount needed to take out - tax shelter, life expectancy doesn't drop the same rate as time goes by, government wants it to come out during lifetime so they can tax it, |
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Term
| Withdrawing $ from the Plan |
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Definition
retirement
death
disability - optional
sometimes job termination - pension plan is minor - employer writes check
10% penalty for other WD - borrow money and don't pay it back |
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Term
| Plan Distributions - Beginning Distributions |
|
Definition
1. earlier of 65 or normal retirement date
2. 10th anniversary of joining - overrides #1
3. participant's termination of service - above #1
4. IF employee wants - can begin later |
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Term
| Minimum Distribution Rules |
|
Definition
70.5
lump sum or periodic distribution
death of participant during benefit period
death prior to benefit period = QPSA
*DROP DEAD no later than April 1st of the year after a person turns 70.5 |
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Term
| Plan Distribution Rules - Misc. Rules |
|
Definition
death benefits must be incidental - affects annuity selection (limit of death benefits)
non alienation rules - pension benefits intended for worker and spouse, benefits needs to remain a part of you |
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Term
| Federal Income Taxation of Benefits |
|
Definition
special tax treatment of lump sum (would have high taxes), payments are taxable UNLESS attributable to employee contributions, beneficiary's benefits after employee's death treated the same
generally - death benefits are not taxed |
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Term
|
Definition
| permissible, payback period set by law - usually 5 years, longer if used to buy primary residence |
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|
Term
| Qualified Domestic Relations Order (QDRO) |
|
Definition
benefits are a family asset, exception to non-alienation rules, cannot change the way the plan operates, difficult if DB - hire someone to make assumptions
Typically - pension given to worker, other assets to spouse |
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|
Term
| Restrictions Aimed at Highly Compensated |
|
Definition
$250,000 in 2012 - limit for plan (DC or DB)
Limits on:
1. benefits (DB)
2. plan additions (DC)
Additional rules on top heavy plans |
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|
Term
| Limit on Benefits - DB Plans |
|
Definition
cannot exceed less of:
1. 100% of highest 3 years ave. compenstaion
2. $200,000 in 2012
Apply only to employers contributions
Exception to limit 1 for lowly paid ($10,000)
Actuarial adjustment for benefit form and early/late retirement |
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|
Term
| Limits on Contributions - DC Plans |
|
Definition
cannot exceed:
1. 100% of annual compensation or
2. $50,000 in 2012 (adjusted for inflation)
Contributions include: employer contributions, reallocated forfeitures, after-tax employee contributions |
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|
Term
| Top Heavy Plans - Key Employee Traits |
|
Definition
60% going to top
1. high income
2. significant ownership interest
3. officer |
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|
Term
| Additional Rules for Top Heavy Plans |
|
Definition
Additional vesting requirements:
100% after 2 years
6 year graded vesting
Min benefit for non-key employees
DB - at least 2% per year x ave compensation, doesn't have to exceed 20%
DC - at least 3% a year |
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Term
|
Definition
death benefits (lump sum or annuity) taxed as part of estate
$1,000,000 exclusion for 2013, $5.2 million for 2012
Unlimited marital tax deduction - can pass all your assets to your spouse with no estate tax applied to it then when spouse dies, then subject to estate taxes |
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Term
| Administrative Duties (ERISA and IRS) |
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Definition
| appoint administrator, reporting and disclosure forms - summary plan description (how plan works), annual report (Form 5500)- keystone report in pension report, termination report - Form 5310, merger or other changes (PBGC), individual benefit statement - says what you've earned, what's vested |
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Term
|
Definition
| act in best interest of beneficiaries, provide benefits and defray costs, prudent person standard, diversify investments, follow plan documents, know environment they are operating in, |
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Term
| Investment Considerations |
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Definition
*find out what other prudent people are doing and hang with the pack
Growth - oriented strategies but not too extreme
Risk (but not high risk)
Social effects - don't invest in pollution,
Social investing - investments that take into consideration effects of other life employees |
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Term
| Prohibited Transactions for a Fiduciary |
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Definition
Sale, exchange or lease of property
Lending $
Furnishing goods, services or facilities
Transfer to or use of plan assets (ex: airplanes)
Acquisition of employer securities or property beyond certain limits |
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Term
| Reasons for Plan Termination |
|
Definition
too expensive and need to cut back, not a good means of compensation (employees don't value as much), asset-reversion - DB, over funded and shut it down, take $ out of plan, buy off annuities to pay off promised benefits and keep rest
Government doesn't like this, want more stability = new tax laws about money left over |
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Term
| Consequences of Termination |
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Definition
Repeal of tax advantages - if you end plan 1-2 years after
Immediate 100% vesting - gives plan benefits to people who are vested (if legit plan) |
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Term
| Pension Benefit Guarantee Corp (PBGC) |
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Definition
| DB plans, participation is mandatory (except church, govt, etc.), benefit must be non-forfeitable, benefit must be vested before termination (one minute before), limit on benefit insured, recipient must be entitled to the benefit, benefit payable to a natural person (not a corporation) |
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Term
|
Definition
plan becomes disqualified (fails coverage tests), benefits are reduced (could mean financial trouble)
, min funding NOT maintained
*want to know what the likelihood is, don't want a potential loss dumped on them - would have to pay a bogus promise |
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Term
| Termination of Plan - Division of Assets |
|
Definition
*DB
*moment after termination - 100% vested
1. employee voluntary contributions
2. mandatory employee contributions
3. benefits in or near pay status
4. all other PBGC guaranteed benefits (amount you are entitled to)
Not PBGC insured:
1. all other vested benefits (ex: 40 -100% vesting benefits
2. $ to employer |
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Term
| Types of Plan Terminations |
|
Definition
Forced Terminations
Distress Terminations - not shutting down (forced), employers goes, might be underfunded, choosing and PBGC says ok
Voluntary Terminations - in good shape |
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Term
| Group v. Individual Insurance |
|
Definition
| Group - set of similar risks, little underwriting, loss experience from past group, between employer and ins. co. |
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Term
| Desirable Groups for Group Insurance |
|
Definition
1. doesn't exist only to obtain ins. (less adverse selection)
2. steady flow of people - people go in and out
3. persistence - renewing decreases transaction costs
4. minimize individual bias - less choice, less adverse selection
5. eligibility provisions - who working for employer is entitled to benefits
6. high participation rate - better pool of risk
7. good prior experience - if loss history is good, that is a positive thing
8. good individual underwriting factors |
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Term
| Eligible Groups for Group Insurance |
|
Definition
1. individual employer groups
2. negotiated trusteeships (taft-hartley trusts) - half union/half employers
3. trade association - ex: term life ins.
4. union groups - steel/auto
5. METS (exist to buy ins,only in some states)
Fully insured - set up and only go through them
Insured 3rd party admin - set up trust, invite co., buys ins but not tied to one particular company
Self-insured - pay in $ but don't buy ins. , create trust and an ins. co. controls the trust |
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Term
|
Definition
| With Group Ins, the more people the cheaper it is and loading fee decreases |
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Term
| METS and Adverse Selection |
|
Definition
1. participation requirements - whole group (90-100%)
2. probationary period - don't join just because someone is sick
3. pre-existing condition clause - limits amount of adverse selection
4. underwriting employers - want employees to stay a long time
5. limits on coverage - if one bad risk, won't damage pool too much |
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Term
| Regulation of Group Insurance |
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Definition
1. contractual provisions - written in straightforward language, ins commissioner must approve
2. benefit limitations - specific rules
3. taxation
4. premiums - charge a particular price
5. underwriting criteria - health ins = if stat sig then generally ok
6. mandated benefits - if policy allowed to be held, need certain things
7. regulatory jurisdiction - all states have rules when ins transaction covers multiple states |
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Term
| Restricted Underwriting Criteria |
|
Definition
each state has own
WI: blindness, sex, physical impairment |
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Term
|
Definition
from political pressure/lobbyists, increase cost of health ins policy
WI: alcoholism treatment, chiropractors |
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Term
| Age Discrimination in Employment Act |
|
Definition
| ADEA, with 20+ employees, can't discriminate age 40 and over, no age taken into account for health |
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Term
|
Definition
|
|
Term
| Pregnancy Discrimination Act |
|
Definition
| 1978, with 15+ employees, can't treat any different than other conditions |
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Term
|
Definition
|
|
Term
| Americans with Disabilities |
|
Definition
| reasonable accommodations, ok if not targeted at particular person |
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Term
|
Definition
| taxes drive what employers do |
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Term
|
Definition
1. benefit by benefit approach - look at each by itself, see if it's cost justified/admissible
2. benefit package approach - do more than cost justified reduction as long as it's made up in other benefits (even if it's not cost justified) |
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Term
|
Definition
| less adverse selection in larger groups, cost savings with increase group size, |
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Term
| Common Benefit Provisions - Benefit Schedules for Death Benefits |
|
Definition
1. earnings schedule - multiply by # and round to closest thousand
2. position schedules - problem = people do multiple jobs
3. flat benefit schedules - tell everyone they get same thing
4. length of service schedules - how long someone worked there, generally not a good idea - mismatch
5. pension schedules |
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|
Term
| Common Benefits Provisions - Eligibility Requirements |
|
Definition
covered classifications - these jobs are eligible for life ins.
full time - very common
actively at work - as long as you show up to work that day
probationary period - have to work for a certain period of time
insurability - need to demonstrate you are an acceptable risk
premium contribution |
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|
Term
| Common Policy Provisions - Beneficiary Designation |
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Definition
Typically employee chooses beneficiary - spouse/parents
Successive beneficiary provision (fallback)
Facility-of-payment - with no obvious beneficiary can dispurse money to whoever was taking care of them at the end of their life or someone taking over dependents |
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Term
| Common Policy Provisions - Settlement Options |
|
Definition
Lump sum - full value of promised, might squander it
Interest option - pays out interest
Installment option for a fixed period - agrees to pay all over a certain time
Installment option for a fixed amount - every period until gone
Life income option (annuity) - joint survivor, straight line annuity |
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|
Term
| Common Policy Provisions - Misc. Provisions |
|
Definition
premiums - need to be paid regularly
claims - no hurry, can't decrease loss
assignment - passing ownership
grace period - 30 days after due date to pay premium
entire contract clause
incontestability clause - ins co has a certain period of time with which they can challenge statements made during underwriting process
misstatement of age - group = premium amounts not paid need to be paid (employer)
individual = adjust death benefit for amount of premium paid
*can assi |
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Term
| Common Policy Provisions - Termination |
|
Definition
Insurer may terminate group coverage because
1. non-payment of premium
2. required group size not maintained (adverse selection)
3. required participation rate not maintained
Employees coverage termination...
1. employment ends
2. master contract terminated
3. employee ceases to be eligible (full to part time)
4. employee fails to make contribution |
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Term
| Common Policy Provisions - Termination (2) |
|
Definition
waiver-of-premium provision - become disabled and employment ends, life ins. will continue for rest of life but no one pays premium
Conversion - if group ins ends, can convert to individual policy but price is based on group loss experience and likely to be expensive because of a lack of underwriting |
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Term
| Group Life Insurance Riders |
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Definition
supplemental life insurance - pay for it if you want
accidental death and dismemberment - inexpensive, from accident = 2x the death benefits
survivor income benefit insurance - pays dependent survivors as if you were still alive to pay part of salary = until no longer
dependent life insurance - life ins. on a family member of worker, generally burial insurance |
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Term
| Group Life Insurance and Taxation |
|
Definition
Employer: TAX DEDUCTIBLE EXPENSE except when
1. compensation is unreasonable (all life ins)
2. contributions for sole proprietors and partners (could be tax dodge)
3. contributions for stockholders
3. employer named as beneficiary
For Employee
- payments by employees are taxable income
- payment by employers have Code Section 79 |
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Term
|
Definition
Premium for first $50,000 not taxable income
Limit higher if:
disability precludes work
qualified charity is beneficiary
employer is beneficiary
*Premiums for coverage above $50,000 = taxable income |
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Term
| Code Section 79 - Qualifying Criteria |
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Definition
Death benefit must be excluded from federal income taxation
Must be provided to a group of employees
Allowable criteria for exclusion = age, marital status, factors relating to employment (full v. part)
Policy carried by EMPLOYER - employer pays part of cost and cross subsidization (group underwriting) |
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Term
|
Definition
| someone pays someone else to buy life ins. policy, profitable in the 1980s |
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Term
| Code Section 79 - Discrimination |
|
Definition
cannot favor key employees,
Key employees =
officer making above and indexed amount, 1 of 10 largest owners above $30,000, more than 5% owner, more than 1% owner over $150,000, retired employee who was key employee at the time |
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|
Term
| Code Section 79 - Eligibility Non-Discrimination Tests |
|
Definition
1 of 2:
70% of all employees are eligible
85% of all participants are non-key employees
IRS determines status
For 70% rule don't need to count:
employees with < 3 years of service, part-time, seasonal, collective bargaining |
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|
Term
| Code Section 79 - Benefits Non-Discrimination Test |
|
Definition
neither the type nor the amount of benefits discriminates in favor of key employees
-uniform % of salary is OKAY |
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|
Term
| Code Section 79 - Uniform Premium Table |
|
Definition
| place value on what your employer probably paid for the life ins., based on age not gender |
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Term
| Federal Income Taxation of Proceeds |
|
Definition
generally not taxable for beneficiary
if viatical settlement - YES
if employer self insures - only first $5000 is exempt from income tax
proceeds are usually considered part of estate for estate tax purposes |
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|
Term
|
Definition
income tax on employer paid premiums - typically none
estate tax treatment of ins. proceeds - very favorable |
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|
Term
|
Definition
more likely than death during working years
more devastating financially than breadwinner's death - less income more med expenses
many have no disability ins.
adverse selection and moral hazard problems
WC and SS
*very expensive |
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|
Term
| Types of Disability Plans - Short term |
|
Definition
usually less than 6 months
insured or self-insured |
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|
Term
| Types of Disability Plans - long term |
|
Definition
waiting period (time period deductible)
payout period may be lifetime
insured or self-insured |
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|
Term
| Disability Insurance - Self-Insured Plans |
|
Definition
May start at day 1 if short term plan
full then partial replacement
Qualifying criteria = perm full time, covered class, probationary period is common
Max common benefit (180 days)
Coordination with social ins.
Benefit period depends upon years worked
Physicians statement is proof |
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Term
| Disability Insurance - Insured Plans |
|
Definition
more short term than long term plans
eligibility requirements -STD less stringent
less than full wage replacement (malingering)
waiting period
moral hazard is large concern |
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|
Term
| Common Exclusions Both STD and LTD |
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Definition
| self inflicted wounds, not under physicians care, injury prior to being covered, employee making $ at another job, large companies (15+) may not exclude pregnancy |
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|
Term
|
Definition
| war (but still covered sometimes), participation in a felony or assault,mental disease, alcoholism or drug addiction, pre-existing med conditions |
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|
Term
| Def of Disability - short term |
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Definition
| very broad def, total inability to perform EVERY duty reg/any occupation, most cover just non-occupational injuries |
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|
Term
| Def of Disability - long term |
|
Definition
dual def
1. like short term - 2 years
2. any gainful occupation that employee is qualified for
LTD often provides partial disability benefits. |
|
|
Term
|
Definition
Benefit Schedule - percent of salary, flat amount by earnings
Why not 100%?
1. moral hazard (malingering)
2. favorable tax treatment
3. expenses may be less (gas/clothes)
May be weekly/monthly max |
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|
Term
|
Definition
time deductible: usually 1 to 7 days
purposes = lower costs, discourages unwarranted absences
Applies to each disability
Successive disabilities with same cause are same disability unless specified time period has passed |
|
|
Term
|
Definition
elimination period 3-6 months
benefits: 2-lifetime
benefit duration may vary by age |
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|
Term
| Coordination with other Benefits |
|
Definition
Most disability plans integrate WC,SS, pension plans
Coordination with ind plans is illegal
More common with LTD than STD
Two approaches: full integration and dual % |
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|
Term
| Disability Insurance - Policy Provisions |
|
Definition
claims - prompt notification and proof
payment of benefits - facility of payment provisions are common, can be assignable
Rehab - will pay for if it will result in a job
Termination - conversion is rare (expensive) |
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|
Term
| Supplemental Disability Benefits |
|
Definition
COLA - inflation protection, expensive
Pension contribution continuation - treat you like an employee, add money to pension
Survivor benefits - continuation of benefits after death |
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|
Term
| Federal Taxation - Disability Benefits |
|
Definition
employer contributions - deductible (like wages)
employees contributions - after tax(no advantage)
Employers' PAYMENTS are not taxable income
BENEFITS
employer contributions - taxable (paid 75% of premium = 75% of benefit is taxable)
employee contributions - not taxable (not show up in income tax)
State generally follow feds |
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Term
|
Definition
| rehab reduces benefit by a % of earnings for some time period |
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|
Term
| Health Insurance Problems |
|
Definition
Many uninsured: 17.2% of pop 2012
Many underinsured: hard to define, if at financial risk (low limit, conditions not covered)
Risk of being uninsured: exists for everyone, go through policy limit
Children at risk: didn't make choice
Escalating health care costs hitting all: more difficult to pay for
Federal deficit (SS HI fund): run massive deficit
Cost of health ins. to business: competitiveness
Increasingly underinsured elderly: not eligible for Medicare, can't find work
*people with insurance tend to be healthier, diagnosed earlier
*want people to work and can't if unhealthy (societal) |
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|
Term
| Characteristics of Uninsured |
|
Definition
Have jobs - near poor, pay taxes and pay for others health ins.
Service sector - food, hotel, retail, means test = 1. income 2. assets
Low income - 24% of families with incomes less than 25k
Not all have low income - chosen not to, risk takers
Young adults - take risk, no job, adverse selection, stay on parents until 26
Minorities - AA, Hispanic, relative to portion of population
Unmarried - tend have much higher rates (married = 2 chances to have coverage)
Less educated - higher education = higher income
*Rates vary a lot by state
*Citizens are also much more likely to have coverage |
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|
Term
| Escalating Heath Care Costs |
|
Definition
| grown to be much more of the GDP, lots more spent on per capita basis than other countries, medical tourism increases, 50% of U.S. health expenses paid by government |
|
|
Term
| Growth in Health Care Expenses |
|
Definition
| 250% increase in cost of healthcare, individuals paying less and less |
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|
Term
| Increasing Cost of Health Care |
|
Definition
technological advances - new pharmaceuticals, treatments, state of the art can be very expensive, signal of quality of care
Medical malpractice - cost of business, priced in, tort system (limit awards)
Payments by 3rd parties - moral hazard and increases cost
Physician induced demand and increasing number of physicians - docs create own demand, overtreat if not busy, decide income and then create demand, theory #2: incredible demand that is not satisfied, increasing docs increase opportunity for people who normally wouldn't get care (rural)
Expensive conditions - AIDS, crack babies, drug treatment |
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|
Term
| International Health Expenditures |
|
Definition
| We spend 15.3% of GDP (highest in world) |
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|
Term
| Life Expectancy at Birth: 2001 |
|
Definition
| Many things affect beside health care system, in U.S. depends a lot on the state |
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|
Term
| International Comparison Infant Mortality: 2001 |
|
Definition
| number of babies that don't make it to 1, U.S. has a high rate compared to other developed countries but not a clean comparison = U.S. takes a lot of effort to save preemies, not everyone gets same level of prenatal care, varies a lot by state |
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|
Term
| There is No Healthcare Crisis |
|
Definition
Health cost % of GDP - as long as basic needs are met
Cost increases - so has quality
Uninsured - people are making choice, ins. largely available
Affordability - most could afford it, it's just their choice
Million uninsured but there are nonprofit hospitals and uninsured care per capita is 60% of insured (bad debt expense and added to cost of people who do pay)
Only 1% of population is uninsurable
Only 3% of population can't afford insurance |
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|
Term
| There is No Healthcare Crisis (continued) |
|
Definition
Competitive disadvantage - labor market theory, Japan, Germany (U.S at a severe disadvantage because they have to pay group health ins.
Who makes life and death decisions? - U.S. insured primarily makes descions, elsewhere government policy influences
Increase in health care - better product, people have more disposable income |
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|
Term
| Providers of Group Health Ins. |
|
Definition
Blue Cross and Blue Shield Plans
Commercial Insurers
HMOs
PPOs
Self-Insurance |
|
|
Term
| Commercial Insurance Companies |
|
Definition
| today lots of companies (700), prior to 1940s: very little health ins. sold,over half sold by 30 companies, most companies sell health and life |
|
|
Term
| Blue Cross and Blue Shield |
|
Definition
Began during Depression to insure payment, paid money to the hospital and then if you had to use it, you were covered (just that hospital)
Blue Cross: prepaid hospital ins.
Blue Shield: prepaid physician exp. ins. - doctors group that copied blue
Cross
* Today BCBS plans exist in most states |
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|
Term
| Commercial Insurance v. BC/BS |
|
Definition
Commercial - largely indemnity ins., have deductible, co-ins, stop loss and policy limit
BC/BS - community rating, counterbalance adverse selection risk with lenient state taxes, has provider rates negotiated with doctors, lost a lot of money and went away from community rating
Status
Types of Benefits - pay for what you incur
Basic v. major medical - major medical goes over top and provides higher level
Geographic area -
Flexibility -
Rating -
Acquisition expenses - |
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|
Term
|
Definition
early 1970s, deal with moral hazard - indifference to loss, comprehensive care - complete coverage, delivery of med care - own hospital/employ doctor
Cost control - keep premiums low, competing |
|
|
Term
|
Definition
Group-practice plan - doctors on salary
1. staff model - salary by HMO itself
2. group model - salary to some other org (contract with HMOs)
3. network model - several groups of doctors have contracts with HMO, more choice, different types of care, increase market size, enter into different areas
Individual practice associations plans (IPA) - doctors not on salary, entrepreneurial people, per person fee,doctor at risk - if someone is sick they have to provide care and could lose money
Open-ended plans - still have set panel of doctors, if they go to any other doctor will only pay a % of bill (not a lot of people use this) |
|
|
Term
|
Definition
Want to control moral hazard
Keep insureds healthy - inexpensive ways, cover checkups, gym, immunizations
Limit services - have to wait, economic incentive to do it
Create health more efficiently |
|
|
Term
|
Definition
$$ for Qualifying HMOs
Access to employment groups if qualify
Qualification criteria
1. comprehensive coverage
2. fiscally sound
3. annual open enrollment period
4. quality assurance program
Moral hazard controls, passed by U.S. Congress, wanted to move country toward HMOs, HMO was offered as a choice - employees could choose
comprehensive coverage - broad range of services, full range, must be fiscally sound - strong insuring org
annual open enrollment - individual could go and apply for coverage for strenuous underwriting,
quality assurance program - might cheat on services provided |
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|
Term
| Preferred -Provider Organizations (PPOs) |
|
Definition
*background agreement
Discount provider groups
Seek volume - thin margins (Walmart)
Broad or specific services - just cardiologist or not
Fee-for-service (Not prepaid) - not paid for bearing risk
Employees not restricted to PPO
*decreasing price does not necessarily decrease quality |
|
|
Term
| Group Ins. Coverage - Typical Indemnity Plan |
|
Definition
Basic Coverage - would buy as single unit
1. hospital expense benefits
2. surgical expense benefits
3. physician expense benefits (vision care, prescription, hospice)
Major Medical |
|
|
Term
| Hospital Expense Benefits |
|
Definition
Inpatient hospital expenses
Facility must meet a hospital definition - 24/7 nursing care and an operating room
2 types of inpatient hospital expenses (room and board, hospital services)
Preadmission certification often required - insurance company needs to ok prior to incurring cost, sometimes denied and go anyway, appeal it and doctors will review it
Sometimes outpatient hospital expenses - surgery, pre-admission testing, ER, now its more common to go home and come back |
|
|
Term
| Surgical Expense Benefits |
|
Definition
Setting not important
Typically just covers surgeon's fees - med supplies, anastheologist
Benefit amount determination - fee schedule and relative value schedule, list out of all types of surgery and max $ amount
Exclusions |
|
|
Term
| Physicians Visits Expense Benefits |
|
Definition
Non-surgeon fees during hospital stay
Calc of max benefit - dif in dif policies
1. UCR per visit to max # of visits per stay
2. daily max for a specified time period
3. max = daily benefit * # of days in the hospital
Typical additional benefits
1. higher limit for ICU
2. consultation services
3. visits in other care facilities
4. out of hospital physician visits
Exclusions: phys exams, eye exam, dental exam |
|
|
Term
|
Definition
Middle ground between hospital and home
Conditions necessary to get benefits
1. physician recommended stay
2. 24 hour nursing care needed
3 after hospital stay, same condition
Max number of days usually specified
Exclusions: drug rehab, homes for aged |
|
|
Term
| Home Health Care Benefits |
|
Definition
Recovering after and need some sort of care, occ therapy p help how to live again
Keys off hospital stay
Covered expenses: nursing care, phys, occupational and speech therapy, medical supplies and equip |
|
|
Term
|
Definition
Goal: ease pain and psychological suffering
uncommon coverage, for terminally ill, goal: ease pain and psychological suffering, family may receive counseling as well |
|
|
Term
| Ambulatory-Care Expense Benefits |
|
Definition
Surgicenters - just surgery
Facility operated for surgical procedures, continuous physician and nurse services, no overnight stay |
|
|
Term
|
Definition
*want to win customers so hospitals become more aggressive
Birthing centers: not hospitals, homelike facility, short stay
Diagnostic x-ray and lab expense benefits - in hospital
Radiation therapy expense benefits - covers outpatient treatment
Drug expense benefits - pharmaceutical expenses, often deductibles, prescription drugs, reimbursement or service benefit approach
Vision care - eye exams, glasses, does not cover surgery or disease treatment
Supplemental accident expense coverage - med care needed due to accident, redundant when you have other coverages |
|
|
Term
|
Definition
Supplemental major medical - above basic coverage, higher limit
Comprehensive major medical - stands alone, serves all needs
Advantages or supplemental v. comprehensive - uses 2 insurers, employers may want to provide first $ coverage, more choice for employee
Advantage of comprehensive: simplicity |
|
|
Term
| Major Medical Deductibles |
|
Definition
All causes deductible - accumulation period = time before deductible satisfied, benefit period = each dif med episode treated
Per cause deductible - each dif med episode treated differently
Family deductible - add on to policy, pay first $500 yourself and then it kicks in
Common accident provision - all members of family have accident at same time, one deductible |
|
|
Term
| Major Medical Coinsurance |
|
Definition
80/20 common
1. Reduces moral hazard
2. Channel patients into particular treatments - have surgery as outpatient
3. Stop loss is common - max amount that insured will have to pay before 100% of costs |
|
|
Term
|
Definition
1. decrease admin costs
2. insureds more sensitive |
|
|
Term
|
Definition
| 1. sensitive to cost of care |
|
|
Term
|
Definition
| Actions by which insurers affect the delivery of med care - financing component is important, over 50-60 years actively provided care |
|
|
Term
|
Definition
Second surgical opinions - sometimes even by an ins. co. recommended doctor
Preadmission hospital Certfication
HMO
PPO |
|
|
Term
|
Definition
Benefit plan design - HMO/PPO?
Contracting with providers - ins co. will often do this
Alternative funding methods - self insure the plan with pool, don't have to pay ins. co. to bear the risk
Utilization review - prospective, concurrent (in extreme med situation - have someone on team) and retrospective review (check billing)
Health education and preventative care - improve health, discourage smoking
Civic involvement and sin taxes - ex: soft drinks in NY
Managed care |
|
|
Term
| Types of Managed Care and Savings |
|
Definition
Utilization review: save 6% on total plan costs
HMO: 38.5%
PPO - hospital inpatient: 31%
hospital outpatient: 16%
non-hospital costs: 14%
*any ins. co influence health care |
|
|
Term
| Group Health Insurance Contract Provisions: Eligibility |
|
Definition
Covered positions
Probationary period - amount of time you need to work
Full time -
Actively at work
Eligibility and plan replacement - covered by previous plan, eligible classification, preexisting condition, treatment of deductible |
|
|
Term
| Group Health Insurance Contract Provisions: Dependent Eligibility |
|
Definition
Eligible dependents: spouse (domestic partner - with close ties, must share financial risk with you) and children under specified age, disabled any age
Employees must usually be covered
Enrollment window if contributory - 31 days typical (new job, new ins. plan, dependents for the first time), yearly open enrollment, new dependents covered if others are, non-confinement provision - not covered until out of hospital |
|
|
Term
| Group Health Insurance Provisions - Coordination of Benefits |
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Definition
Plan with COB provision pays first - will tell which one pays
Coverage of employee before coverage of dependent - if your plan runs out, then go off of dependents
Children living with 2 parents = birthday rule: policy of parent with earliest birthday
Other rules for different family structures - divorce = can have 4 parents paying |
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Term
| Group Health Insurance - Termination of Coverage |
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Definition
For employee: employment terminates, employer can't afford, employee ceases to be eligible, max benefit is reached, employee quits making contributions
For dependents: dependent ceases being a dependent, employee's coverage ceases, dependent hits maximum benefit, employee quits making contributions |
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Term
| Group Health Insurance - COBRA: Qualifying Events |
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Definition
*Allow to continue as part of group FOR SOME PERIOD OF TIME (if pool still exists)
Death of employee, termination, change in workers status to part time, divorce, employee becomes eligible for Medicare (employee will get Medicare but dependents can stay on regular health insurance, child ceases to be a dependent |
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Term
| Group Health Insurance COBRA: Coverage Ceases |
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Definition
Termination or part time: 18 months (buy private)
SS disability: 29 months
Other qualifying beneficiaries: 36 months
Immediately if:
don't pay portion of premium, group plan terminates, covered by another plan |
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Term
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Definition
must be offered continuation to degree employer knows, not automatic (must fill out forms
Must pay premium - 102% max (for administration costs), 150% for months 19-29 if SS disabled
Some states have more generous rules and some employers are more generous. |
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