The History of the Employee Benefits Plans in the U.S.

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Introduction

Employee benefits arrangements encourage financial safety of workforce by indemnifying them against unseen predicaments and improving existing conditions.

This is through availing people centered services. The plans contribute to the fortification of financial situation in the country through enhancing wage and wellbeing of citizens thus enhancing service availability through the taxation process.

The benefits program draws all stakeholders to collaborate in order to improve lives of citizens through granting work-based gains (Vitt 226). The private facet avails these gains including annuities and welfare cover voluntarily while the government injects support through enhancing appropriate tax provision to the private division.

This paper exemplifies such benefit plans by dwelling on the history. Consequently, the paper concentrates on identifying some of the retirement plans and the decrees, which standardize operations; furthermore, it outlines computations into the design. Further, this paper recognizes the employee health care and welfare plans and their applicability to individual workers. In addition, regulations controlling the plans are also illuminated.

The piece continues to discuss compliance in operations and its effects on employers. To conclude, the paper converses on compliance and other benefits, upon their utilization in attracting and withholding workforce as a strategy and the resultant effects on human resource managers.

Brief History of the Plans

“Employee benefit plans” is a variety of schemes that are set up either as per legal requirements or by the employer’s will. The pact involves payment of contribution by the employer, employee, or both. These arrangements include “Healthcare schemes, pension funds, retirement schemes, and social security plans”. Cover firms and funds facilitate personnel benefit schemes.

The insurance determine total amount payable in equal mounts regarded as installments (Organization for Economic Co-operation and Development 13). Money contributed and interest is then paid to the employee after certain duration or after occurrence of an event. This is stipulated in the agreement either as lump sum or as installments.

Initial Benefit plans included an ancient retirement scheme in the 16^th century for military men and a profit-sharing arrangement in the culmination of the 17^th century (Vitt 226). The Social security bill was enacted throughout the depression in the US, marking the beginning of social schemes.

The act was signed at the height of the great depression when the government had no funds to pay retirees and the only way to pay them was by getting the current working generations make contribution from which the retirees were paid (Vitt 232).

The employee benefit schemes were spurred by the government incentive in the 1950s to offer tax relief for employers who voluntarily offered benefits to employees. This resulted in the steady enrolment of Americans into benefit plans. Statistics reveal that by 2006 over 90% of Americans were registered under schemes, largely attributed to the fact that the benefit plans are unregulated.

Types of Retirement Plans

Retirement plans exists covering everyone on any employment including self-employed persons and employees obtaining their remuneration from employers. Diverse forms of “Individual Retirement Accounts”, (IRAs) exist for people with gross income and may want to save. Rollover IRAs collect benefits generated from varied retirement accounts (Slesnick & Suttle 12).

In addition, SEPs and SIMPLE IRAs are practically IRAs however, regulations applicable to their operations compares with the rules governing qualified plans.

Qualified plans refer to retirement accumulation strategy, which employers create for its workforce and match regulations under section 401 of the Tax Code instituted by the U.S administration (Fishman 310). Qualified plans regularly meet the criteria for applying special tariff rules where the main regulation connotes that all donations submitted by employers under the plan in place of its workforce becomes excise deductible.

Apparently 401 (k) stands out among the qualified plans. It enables workers to accumulate and delay remitting income levies on finances submitted to the scheme (Slesnick & Suttle 9). 401(k) plans permit individuals to divert part of their reparation into the plan without income tax payable on fraction of their wage until withdrawal.

It has options for employer donation and can make equal payment for every value a participant submits and donations are tax deductible (Slesnick & Suttle 8). Created by employers Roth 401(k) arrangements compare with the customary 401(k) plan as it permits workers rescheduling of wages into the plan. Contrast emerges in tax treatment where donations to this plan are unreduced

Compliance with the intricate set of allotment becomes a core concern under qualified plans. Examples of qualified plans include, profit allocation plans like 401 (k) plan, Roth 401 (k) plans and stock bonus strategy where employers submit employees benefits under the plan as shares of business reserve (Fishman 312).

In addition, money acquisition annuity plans where it is obligatory for employers to surrender employee benefits as predetermined percentages annually. Further, the workers stock possession plans signify a stock bonus plan containing few attributes of funds procure annuity plan. Benefits submissions are through the stock owned by the employer (Slesnick & Suttle 9).

Finally, defined benefits plans pledge to give individuals a specific value as pension starting from the retirement time. Factors including workers final reimbursement and period of service to the business guides values paid under the pledge. However, a worker quitting the job prematurely obtains low gains.

Nonqualified plans include the incentives awarded by company bosses when business performs well or at times on grounds that becomes hard to understand. Not all the business workforce becomes qualified to enjoy the incentives, which include delayed cash additional benefit and business items (Cassidy 19). Further, the plans encourage biased practices in business and benefits are incomputable as provided for under the distribution requirement.

Almost qualified plans signify a hybrid of numerous plans thus becoming less qualified but share most remuneration and checks applicable to qualified plans. Examples include qualified annuity arrangements where administrators ensure custody of all the benefits generated towards the plan. Lastly, tax deferred annuities scarcely apply rules applicable under qualified plans (Cassidy 19).

Self-employed persons have a retirement arrangement named Keoghs is a form of profit allocation plan resembling company schemes and are listed under qualified plans. The plan let people on own employment to participate in accumulating gains through similar rules as defined plans (Slesnick & Suttle 11).

Laws on Retirement Arrangements

The basic decree governing retirement plans include taxes and “Employee Retirement Income Security Act”, IRISA. Distributions attract taxation immediately, which is the most basic law requires annual taxation on all distributions as they appear on the plans (Slesnick & Suttle 28).

The tax rule may not apply in cases where benefits transfer happen thus when accumulations change plans, it necessitates non-payment of tax until finances are transferred to new plans. Your basis is not taxable also connotes financial amassing to plans or IRAs where notice is already given as proceeds on individuals’ tax return.

Payment of tariff in such a scenario happens once; however, there is a limit on the withdrawal of the accumulations characteristic to the basis. Another tax rule entails non-withdrawal of cash (Slesnick & Suttle 29). Individuals saving as IRAs may allow items withdrawal however, regulations limits taking of hard cash.

Income tax regulations require individuals not to claim losses sustained within IRA or plans on tax returns. Although, payment of tax takes place in accordance with the prevailing market prices. A rule stipulating operations of inherited retirement plans demands that divorce or acceding to benefits from next of kin cannot alter the basic levy rules (Slesnick & Suttle 30). The income tax on qualified plans and qualified annuities specify rules on allocations from an individual’s withdrawal from work plan while still working. The rule ensures that removal of finances before retirement attracts heavy and complex controls and a possibility of forfeiting finances paid as penalties (Slesnick & Suttle 30)

“Employee Retirement Income Security Act”, (ERISA) is a federal law on workers retirement plans. It requires that plan asset benefits custody take place through trust and trustees named under the trust concurrence (Bbp 21).

The custody of such plan items regularly benefits the individual employees. Further, ERISA stipulates that company retirement plan submissions inured under the receiving eligible status be returned should the IRS indicate disparities existence with the standards. In addition, employers might recover excess of assets on ceasing defined advantage plan after all individuals’ gains are vested.

ERISA also indicates that retirement plans satisfying the qualification goals receive positive tax gains and that employer’s submission to the plans are deductible immediately upon payment (Bbp 30). Furthermore, it states that employees never owe tax until when they have received benefits.

The edict also deliberates on the expectations of the employers towards meeting the goals of contributing to the plans on behalf of the individuals. The Act expects employers to administer their strategy for the entire gain of its participants and benefactors. It stipulates that firms need to conform to the lowest echelon of standards for their plan partake, vesting and endowment.

Employers’ are restricted to avail any information as requested by workforce or government (Vitt 232). Finally, the Act forewarns employers to submit to funds where surety on workforce gains is guaranteed and desist from abuses regarding workers retirement plans.

Welfare Plans

Health and related policies ensure the wellbeing of workers. They further outlines compensations and restoration of employee’s health should a predicament befall them. Most of the plans cover large groups of employees and mainly sponsored through the purchase of health cover (Ferenczy 4).

Some of the plans are also self-insured, connoting that the workers may like to contribute to the plans themselves. The employees operationalise the plans on a casual manner of payment. Medical plans are agendas demarcating the mode of employee refund for remedial services by the company. It is tenable through costs incurred by employer or through buying insurance covers (Ferenczy 4).

Regularly the plan entails doctor’s visits, hospital visitation, bodily therapy, brain treatment, surgeries, drugs, psychoanalysis, and wellness plans. Most employers avail health care gains through insurance services however, limitations occur on the charge of benefits provided. These may include deductibles, coinsurance, health care procedures, and yearly coverage maximums.

The dental plans also provided by some companies offer dental treatment as fraction of the common health plan while others also offer identical program as disconnected gains.

Life and accidental death and dismemberment cover plans include coverage offered by employers as group insurance. This plan targets employees who may die or get injuries resulting from accidents (Ferenczy 5). It is applicable to manufacturing industries where employees gain contact with machines capable of causing injuries.

In addition, disability assurance provides gains to workers that cannot fulfill their duties at some point. The repayment might be a solitary value or restoring the workers income when disabled. The worker must prove further that the disability may lead to permanent removal from work or death may occur (Ferenczy 7).

Own occupation plans ensure that workers who cannot hold their positions because of that disability also gains. Further, cafeteria plans imply programs allowing workforce to cater for all or a few of the fitness and safety payback on a pretax foundation (Ferenczy 7). They may be wholly employee paid. Moreover, they may permit workers to give inputs from their compensation based on pretax.

Laws on Health and Welfare Arrangements

“Employee Retirement Income Security Act”, (ERISA), stipulates the mode of reporting, giving disclosure, and fiduciary functions. According to ERISA, the safety of employees and profit strategy are plans, programs, or finances put in place to provide insurance policies to participants or benefactors (Vitt 232).

Further, ERISA authorizes people responsible for management and undertakings workers benefit plans named fiduciaries to work towards securing rights and gains of workers covered by the plan.

“The Health Insurance Portability and Accountability Act”, (HIPPA) officially protects workers and the reliant covered under the group’s wellbeing assurance plan. It undermines prejudice against employees due to their status health wise. Further, it allows workers to register under new plans and delineate their privileges of buying personal cover (Ferenczy 39).

The regulation seeks means of making health care cover further inexpensive. However, the rule also outlines higher levy deductions on health cover accumulations submitted by citizens engaged on own jobs.

The decree also makes tax inducements accessible to spur uptake rate of the long-term health cover (Ferenczy 39). Unfortunately, the Act operations is limited to all insured citizens and fails to outline conclusively the fate of such citizens apart from clarifying that they may be covered under tax subtraction for health assurance expenditures for people on own employment.

In addition, income tax for health insurance gains rests upon the options of whether the regulations on gains were bought by employer or individual worker. However, the tax decree pushes firms to provide health care procedure by permitting subtractions and credit for their expenditures (Ferenczy 41). The tax rules also vary regarding the different types of business class.

Compliance Issues and Employers

Compliance including hiring of workforce, testing and choosing people to fill positions remains employers’ still remains a worry. Employers try to ensure limited discriminatory practices in the whole process of workers recruitment. Employers must consider compliance with the statutes because the repercussions may be far – reaching in the business legally (Deb 149).

Compliance involving safety issues in the companies become a core apprehension to the managers. The implementation of “Occupational Safety and Health Act”, (OSHA) must be adhered to uphold work conditions and guarantee safety of employees.

Benefits as Applied in Attraction and Retention and Effect on Human Resource Managers

Compliance has generated benefits to companies implementing its requirements. Business outfits compliance with the legal requirements enable them evade fine and consequences of nonconformity.

The strategies also permit companies to progress their safety systems by acquiring and implementing stronger security power (Banning & Day 1). There is a competitive benefit by businesses escalating security concerns to defend consumer privacy.

The compliance implementation facilitates businesses to build a level functioning relationship with customers through designing efficient methods of responding to customers.

Human resource managers apply various workers benefits plans to draw and retain workforce. However, these strategies generate certain effects to the managers.

Flexible benefits approaches are applied in the attraction and withholding of company personnel because the programs enable businesses to enjoy a competitive edge over firms that does not implement the program. HR technocrats feel the method permits them to distinguish themselves in the market by retaining their highly proficient employees (McKay 25).

Managers also observe an escalated competition among workforce thus huge outputs realized. Employer’s reduction of reimbursements benefiting staff has a motive to balance manager given contributions to workforce for purposes of diminishing gaps among employees on gains directed at them freely.

This is a positive step for human resource managers who find it easier to work with contented workers (McKay 27). Moreover, such actions motivate workforce to implement their work to attain a double gaining edge for the business company and the employee.

Conclusion

This paper critically discusses the facets of the question by expounding on the history of the employee benefits plans. The history elucidated the progress of assorted saving designs in the U.S.

The four key forms of retirement strategies are succinctly discussed bringing out the various aspects distinguishing them. Further, the piece identified tax laws and ERISA rules determining retirement arrangements.

Moreover, health and welfare arrangements were clarified and the laws regulating their prerequisite including excise laws, ERISA, and HIPPA. Furthermore, employer compliance, attraction, and withholding of employees through flexible benefits and its effects on the human resource managers are carefully observed.

Works Cited

Banning, Debra. & Day, Glen. Compliance Provides Benefits beyond the Obvious. Information Week. 13 October 2007. Web.

Bbp. Practical Guide Employment Law 2004. New York, NY: Aspen Publishers Online, 2004. Print.

Cassidy, Daniel. A Manager’s Guide to Strategic Retirement Plan Management. Hoboken, NJ: John Wiley & Sons, Inc., 2006. Print.

Deb, Tapomoy. Strategic Approach to Human Resource Management: Concepts, Tools, and Applications. New Delhi: Atlantic Publishers & Distributers, 2006. Print.

Ferenczy, Iiene. 2005 Employee Benefits in Mergers and Acquisitions. New York, NY: Aspen Publishers, Inc., 2005. Print.

Fishman, Stephen. Tax Deductions for Professionals. 6^th Ed. Berkeley, CA: Nolo, 2010. Print.

McKay, Robert. The Canadian Handbook of Flexible Benefits. Canada: John Wiley & Sons Canada, Ltd., 2007. Print.

Organization for Economic Co-operation and Development. Benefit Systems and Work. Danvers, MA: OECD, 1999. Print.

Slesnick, Twila. & Suttle, John. IRAs, 401(k) s & Other Retirement Plans: Taking Your Money Out. 9^th Ed. Berkeley, CA: Nolo, 2009. Print.

Vitt, Lois. Encyclopedia of Retirement and Finance. Vol, 1. Westport, CT: Greenwood Press, 2003. Print.

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