EMPLOYEE WELFARE PROGRAMS AND ERISA

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EMPLOYEE WELFARE PROGRAMS AND ERISA

• Chapters 11 and 9

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SOCIAL SECURITY

• The Social Security Program was created in 1935
  (42 U.S.C. 301 et seq.) to provide old age,
  survivors, and disability insurance benefits to
  workers and their families.
• Unlike welfare, social security benefits are paid
  to an individual or his or her family at least in
  part on the basis of that person's employment
  record and prior contributions to the system.

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SOCIAL SECURITY

• The program is administered by the Social
  Security Administration (SSA)
• Since 1965 it has included health insurance
  benefits under the Medicare program
• The Federal Old Age, Survivors, and Disability
  Insurance (OASDI) pays out monthly benefits to
  retired people, to families whose wage earner has
  died, and to workers unemployed due to sickness
  or accident.

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SOCIAL SECURITY

• Workers qualify for its protection by having been
  employed for a minimum amount of time and by
  having made contributions to the program. 
• Once an individual has qualified for protection,
  certain other family members are, as well. 
  Financial need is not a requirement.

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SOCIAL SECURITY Contributions to the Program

• Workers pay the tax as they earn their incomes.
  This system is known as "pay-as-you-go" or
  "pay-as-you-earn." Workers' payroll taxes support
  those who are currently receiving Social Security
  benefits.
• The Social Security (full FICA) rate withholding
  is 7.65 (6.2 Social Security plus 1.45
  Medicare) for wages up to 97,500 in 2007 (up to
  102,000 in 2008). All wages over that amount are
  subject only to the 1.45 Medicare rate.
• The rate remains at 1.45 for those who are
  subject only to Medicare. The Medicare wage base
  has not had a dollar limit for any year after
  1993.

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Social Security Benefits

• To determine your benefits, try a Social security
  benefit calculator

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Social Security Benefits

• Some recipients of Social Security Benefits must
  pay tax on those benefits.
• The Government devised a complex formula that can
  result in the taxation of up to 85 of social
  security benefits for taxpayers who have
  significant other income while leaving benefits
  completely tax free for those who have little
  other income
• MAGI AGI before any social security benefits
  exempt interest income ½ of social security
  benefits

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Social Security Benefits

• If MAGI is less than 25,000 for single
  individuals or 32,000 for married couples, then
  none of the social security benefits received are
  taxable
• Single taxpayers with MAGI above 34,000 and
  married taxpayers with income above 44,000 can
  be taxed on up to 85 of their benefits
• Taxpayers between the above thresholds can be
  taxed on up to 50 of their social security
  benefits
• MAGI AGI before any social security benefits
  exempt interest income ½ of social security
  benefits

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Unemployment Compensation Law

• 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 insurance is based on a dual program
  of federal and state statutes. The program was
  established by the federal Social Security Act in
  1935. Much of the federal program is implemented
  through the Federal Unemployment Tax Act.
• Each state administers a separate unemployment
  insurance program, which must be approved by the
  Secretary of Labor, based on federal standards.
  The state programs are explicitly made applicable
  to areas normally regulated by laws of the U.S.

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Unemployment Compensation Law

• To support the unemployment compensation systems
  a combination of federal and state taxes are
  levied upon employers.
• State employer contributions are normally based
  on the amount of wages they have paid, the amount
  they have contributed to the unemployment fund,
  and the amount that their discharged employees
  have been compensated from the fund.

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Unemployment Compensation Law

• The proceeds from the unemployment taxes are
  deposited in an Unemployment Trust Fund (the
  Fund).

12
unemployment compensation law

• Georgia
• To apply for unemployment
• To Learn About Unemployment Benefits for
  Individuals

13
Employment Retirement Security Act

• CHAPTER 9

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Myths About ERISA

• Your pension plans are not protected against the
  trustees who administer them
• If you put money into a retirement plan, it will
  be there when you retire
• If you put money into a retirement plan, it will
  not be there when you retire
• ERISA applies only to retirement or pension funds

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Statutory Basis

• Employee Retirement Income Security Act allows
  for civil action by participants or beneficiaries
  to recover benefits or enforce rights under the
  terms of his or her plan
• It prohibits interference with those rights
  protected under such plans

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Who is Covered

• Any employer that offers welfare benefit plans to
  its employees is covered by ERISA
• Most private sector plans are covered
• Generally, plans maintained by governmental
  entities or churches are not covered

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Types of Plans to Which ERISA Applies

• ERISA covers employee benefit plans
• Welfare plans
• Pension plans
• Defined benefit contribution plans
• Defined benefit plans
• Qualified plans must be permanent, in writing and
  communicated, must have assets held in trust, and
  must exclusively benefit employees and
  beneficiaries

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ERISA Regulations

• Reporting and disclosure
• Summary plan descriptions
• Annual reports
• Fiduciary duty
• Fiduciary is one who holds funds in trust for
  another
• Must handle funds in best interests of
  participants

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• Eligibility and vesting rules
• All employees over 21 and with one year of
  employment are eligible
• Vesting is acquiring a right or interest that is
  irrevocable by the donor
• Employees vested after 5 7 years
• Consolidated Omnibus Budget Reconciliation Act of
  1985 (COBRA)
• Allows temporary continuation of health care
  coverage
• Covers retrieval of pension funds by employers

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• Health Insurance Portability and Accountability
  Act (HIPAA)
• Limits preexisting exclusions in health care
  plans
• Protects individual health information from
  inappropriate use
• Funding requirements of defined benefit plans are
  set forth under ERISA
• Also covers modification of existing retirement
  plans

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Enforcement of ERISA

• Enforced by Department of Labor and Internal
  Revenue Service
• Plaintiffs may only file for relief under ERISA
• State common-law claims are preempted
• Some ERISA claims may also be violations of ADEA