Benefit Plan Design Analysis Research Paper

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Benefit Plan Design Analysis

Select and profile an organization for the benefit plan

Extraordinary and above average people are recruited by ABC. Their task force possesses a number of exceptional skills and many of them are graduates of top universities or possess professional qualifications. One of the most interesting things about ABC is that it is continually trying to make the organization host to an increasingly global platform that employs people coming from various nationalities and cultures. This way, it makes sure that the creme de la creme of the task force is employed in the organization that is not afraid of taking on challenges. Also, the organization then comes up to their expectation by providing a healthy and competitive corporate culture.

Staff that is new to the ABC organization undergoes a series of sessions whose themes range from personal mentoring to formal training. The training is imparted by their colleagues who have gathered ample experience over the years and are now willing to transfer it on to the new recruits. Throughout their work life, the employees are constantly encouraged to take on more challenges and are provided with the environment that can encourage them to go above and beyond their usual list of tasks and responsibilities. This organizational attitude inculcates confidence and courage in their employees, making them risk takers and teaching them valuable insights about decision making. Also, an employee working at a certain department in the company is encouraged to try on various other departments by proving his experimental abilities and by making decisions confidently (Fronstin, 2008).

Part 2: Statement of the issue

Prior to the recent years, the ABC organization has offered to the employees, the employee benefit plans that are standard in nature which implies that the characteristics of the plan does not change with employee to employee but is the same for everyone. It was formulated by the organization by keeping in mind the concept of an average employee and an average family whose needs were quantified to be incorporated into the standard plan (Fronstin, 2008).

However, as the ABC organization has gone increasingly global and the employees that are employed come from various backgrounds and settings, the provision of one-size-fits-all employee benefit plans are not effective anymore. Also with the coming of new technologies, it is easier for the organization to anticipate and quantify the various needs of various employees which then facilitates the organization in providing its task force with an employee benefit plan that is flexible in nature and takes into account various needs of the employee that are specific to each staff (Fronstin, 2008).

Many surveys and research studies have been carried out to identify the acceptance of benefit plans that have been made flexible and they have indeed proved to be popular as they provide the task force with the option to choose the benefits they require while also assisting the employer organization in managing the costs of the benefit plan. However, the idea of flexible benefit plans is not a new one and has been around for a number of years.

When it comes to the usage however, it has seen a steady increase in the recent years. They are offered to the employee according to the rating or the credit the staff has been given by the employer. Credits that are not used are typically transferred to a spending account of health care, cashed or transferred to the next period or other such options are used. The organization identifies the amount that is to be contributed to the benefit plan, commonly premised on a certain fixed amount for every employee is a particular percentage of the staff's salary.

It is more challenging to manage benefit plans that are flexible and there is also a possibility that they might not be available for organizations that do not employ more than a hundred employees. The plans also may be chosen unwisely, which is a possibility when the employees do not have enough awareness or the information to make the right selection. Such a choice can also lead to employees being inadequately protected and ultimately, they may have to bear losses instead. One other drawback of these benefit plans is that if one does not expend the entire value by each year end of the plan, the remaining money is given up. This point is generally known as "Use it or lose it."

Part 3: Literature Review

The benefit plan of the employees at ABC are designed with the objective of fostering the financial security by means of providing insurance against unforeseen circumstances and to increase the standards of living by offering the emphasized services.

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Programs that benefit employees also contribute to the financial stability by means of assisting in income security and by enhancing social welfare that improves the standard of economy in general (Fronstin, 2008).

The employee benefit mechanism in the U.S. is collaboration between the government, people and the corporations. Many of the benefits based on the employment, for instance health insurance and pensions are offered by the organizations voluntarily. These voluntary benefits are supported by the government that assists in offering the organization preferential tax treatment. However, benefits such as workers' salary, medical leave, unemployment insurance, social security, family leave are compulsory to be provided by the organization. Also, other examples of government assistance include programs that provide individuals with financial security, such as retirement schemes, tax exempt, death benefits etc. (Fronstin, 2008).

As has been mentioned, employee benefit plans are not a new phenomenon. In fact they go way back to the times of colonialism in America. Early examples of benefit plans include the profit sharing program of Gallatin Glassworks that was formulated in 1797, military retirement plan of Plymouth Colony settlers that was introduced in 1636, private employer programs on pension of American Express Company that came about in the year 1875, programs related to insurance of life, health and accident by Montgomery Ward in the year 1910 and in 1929, as well as the prepaid hospitalization program that was introduced by Baylor University Hospital (Fronstin, 2008).

What widened the coverage even more was the involvement of the federal government in the offering of such benefit plans. The Congress made compulsory the provision of preliminary retirement income in the year 1935 under its program on Social Security. Later in the year 1956, it further emphasized upon protecting the income of disabled employees and people who are dependent on them. In the year 1965, the Medicare program expanded to cover themes such as health insurance for the old and disabled. Even more so, organizations that voluntarily provided benefit programs became more in numbers as the government provided tax advantages to such organization. This was seen as an attractive incentive particularly in times when tax rates were rising (Fronstin, 2008).

The Role of Employee Bene-ts

In recent times, the programs providing benefits to employees reflect the commitment of the nation to offer adequate levels of social and income security and provision of necessary facilities such as health care to employees, regardless of the employees being able, disabled, displayed, retired etc.

Income Security

The survivability of a household can come under threat if the bread earner of the family passes away or becomes handicapped. When a family undergoes such circumstances, if an organization voluntarily provides insurance for long-term disability or other forms of life insurance, it can go a long way in eradicating the financial burden of the family. Other programs that can confer benefits on the employee and his/her family are savings program or pensions arising from employment.

Such programs offer financial security to the employees who aspire to get voluntary retirement when they come of age. There are other programs made compulsory by the government that offer income security to the employees. An income stream is provided by the Social Security Old-Age, Survivors, and Disability Insurance (OASDI) program. The stream continues for life and the payments are fixed and regular. It is given to almost all the disabled and retired employees and their respective spouses. Also employees who have lost their employment or have become disabled can ask for impermanent insurance for unemployment or payments to compensate employees (Fronstin, 2008).

Almost all the people living in America are to gain benefit from one of the aforementioned income security schemes once in their lives. According to statistics, over fifty percent of the employees were working for organizations that offered them a retirement program in 2007. Almost eighty percent of such employees opted to participate in the retirement plan that was employment based (Copeland, 2008). In the same year, over thirty percent of the aged people who were married and around thirty five percent of single and elderly employees were benefiting from the income coming from an annuity of pensions that were employment based. This was identified by the EBRI estimates mentioned in the Current Population Survey in 2008.

Almost universal coverage is provided by programs mandated by the government. Approximately one hundred and sixty million staff….....

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