Topic 2 The Role of Social Insurance Programs

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zookishmuff
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297705
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Topic 2 The Role of Social Insurance Programs
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2015-03-07 16:57:38
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The Role of Social Insurance Programs Topic 2
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  1. What are the types of Social Insurance programs?
    • OASDI and Medicare
    • Workers Comp
    • Unemployment Insurance
    • Temporary Disability Insurance
  2. Why do Social Insurance programs exist?
    • Individuals are myopic in their planning
    • Private Insurance Market failure
  3. Why is it important to understand Social Insurance programs when designing employee benefits?
    • Possibility of duplicate coverage
    •     - Diability
    •     - Must be coordinated/integrated into plan
    •       design
    • Employers provide funding for the programs
  4. Why may a Private Insurance Market fail?
    • - Failure to insure a particular type of risk
    •   - Issues with respect to requirements of an
    •     insurable risk     
    •       * e.g. moral hazard, adverse selection,
    •          catastrophic loss possibility
  5. What are the major characteristics of Social Insurance Programs?
    • Compulsory purchase of insurance or participation in a program
    • Government acting in a risk bearing capacity (insurer) - Federal and/or state
  6. For OASDI (Social Security), what are the types of benefits?
    • Old Age Insurance
    • Survivors Insurance
    • Disability Insurance
  7. For OASDI (Social Security), who is the risk bearer?
    Federal Government
  8. For OASDI (Social Security), what are the sources of funds?
    • Payroll taxes - specific to fund OASDI
    • 6.2% of salary up to Social Security Maximum Wage Base
    •    - 2015 max = $118,500
    • Employee pays and Employer matches (12.4% total)
    • Money goes to trust funds (OASI, DI funds)
  9. For OASDI (Social Security), what are the benefits?
    • All benefits are monthly income amounts
    • All based on the PIA (Primary Insurance Amount)
    • PIA = Function of the AIME (Average Indexed Monthly Earnings)
    •    - A person retiring at the Normal Retirement
    •      Age receives 100% of his/her PIA per month
    •    - Spouse gets additional 50%
    • Wealth transfer
    •    - Person B has 2 times salary of Person A
    •    - Person B will not get 2 times the PIA
  10. For OASDI (Social Security), who's responsibility is it to comply with the law?
    • Rests with the employer
    • Federal Law
  11. For Workers Comp, what are the types of benefits?
    • On-the-job injuries/death
    • Medical Expenses
    • Loss of Income
  12. For Workers Comp, who is the risk bearer?
    • Private Insurer
    • ER if self-insured - may not be allow because it could bankrupt the company
    • State Funds (government is risk bearer)
    • Monopoly Funds - only way to get Workers Comp in that state
    • Competitive Funds - could also buy from private insurer
    •    - Fund Issues
    •       * Rate regulation
    •       * For those who are rejected by private 
    •          insurance
    •       * Tax private insurance to make up 
    •          difference for lower price
  13. For Workers Comp, what are the sources of funds?
    • Premium
    • Self-Insurance contributions
  14. For Workers Comp, who's responsibility is it to comply with the law?
    • State Law (Varies)
    • ER must comply
  15. For Unemployment Insurance, what are the types of benefits?
    Loss of income while unemployed
  16. For Unemployment Insurance, who is the risk bearer?
    • State Government
    • Federal Government
  17. For Unemployment Insurance, what are the sources of funds?
    • Payroll taxes
    •    - Levy on employer
    •    - FUTA - Federal Unemployment Tax Act
    •    - In some states, employee pays a small 
    •      payroll tax in addition
    •    - PA is <1%
    • Tax rate to employer - experience rated back to employer
    •    - Controls Moral Hazard
    •    - If you don't lay off many employees, tax 
    •      rate will be lower
  18. For Temporary Disability Insurance, what are the types of benefits?
    • Short term non-occupational disability insurance
    • Up to 6 months
  19. For Temporary Disability Insurance, who is the risk bearer?
    • Depends on the State
    •    -Private Insurer
    •    -State Fund
  20. For Temporary Disability Insurance, what are the sources of funds?
    • Premiums paid by employer and/or employee payroll taxes
    • Problem:   
    •    - If occupational - Workers comp pays up to
    •       income level
    •    - If non-occupational - TDI pays less than 
    •       income level
    •    - Employees claim they were injured
    •       occupationally to receive better coverage
    • Solution:
    •    - Employer also purchases short-term 
    •       disability supplement to bring 
    •       non-occupational coverage up to income 
    •       level
  21. For Temporary Disability Insurance, who's responsibility is it to comply with the law?
    Employer

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