Total Rewards Module 9A

Total Rewards: Legally Required Benefits

Introduction

  • Presenter: Jared Harvey

  • Focus: Overview of legally required benefits that form part of the social safety net for workers.

  • Importance of understanding these benefits as an HR professional for proper administration.

Overview of Legally Required Benefits

  • Legislation protects workers and provides necessary benefits.

  • Historical context: Some benefits originate from laws passed over 80 years ago; others from more recent legislation.

  • Aim: Provide support to everyone in society, regardless of personal views on these benefits.

Unemployment Insurance

Definition

  • Payment for individuals who are out of work.

  • Eligibility and duration of payments vary by state.

Key Features

  • Federally mandated but state-run:

    • Each state defines eligibility requirements, payment amounts, and duration.

  • Eligibility Requirements:

    • Must have been previously employed for a minimum time before collecting benefits.

    • Extended unemployment periods can lead to the exhaustion of benefits.

Duration and Funding

  • Typically lasts between 12 to 18 weeks.

  • Benefits can be extended during exceptional economic situations (e.g., Great Recession, COVID-19).

  • Funded through employer payroll taxes (6.2% on the first $7,000 of wages).

Variability

  • Unemployment benefits differ significantly across states (e.g., southern states vs. California).

  • Employers shoulder the tax burden; employees do not directly contribute.

Social Security (OASDI)

Definition

  • Stands for Old Age, Survivor, and Disability Insurance.

  • Commonly referred to as Social Security.

Funding and Contributions

  • Funded by both employee and employer: 6.2% each on all wages (total of 12.4%).

  • Has a wage cap (approximately $100,000), above which contributions are not required.

Retirement Benefits

  • Workers must pay into the system for 40 quarters (10 years) to be eligible for retirement benefits.

  • Full retirement age has gradually increased to 67.

  • Lower benefits for early retirement (62 years).

Historical Context and Challenges

  • The Social Security Act was introduced in 1935; the retirement age was set at 65 when average life expectancy was 58.

  • Current projections indicate potential depletion of Social Security funds between 2030 and 2040.

Survivor and Disability Benefits

  • Survivor Benefits:

    • Provided to dependents (children or non-working spouses) of deceased workers.

    • Assistance for dependents under specific eligibility criteria.

  • Disability Benefits:

    • Covers short and long-term disabilities.

    • Designed to aid individuals who are unable to work due to health issues.