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What are the types of Social Insurance programs?
- OASDI and Medicare
- Workers Comp
- Unemployment Insurance
- Temporary Disability Insurance
Why do Social Insurance programs exist?
- Individuals are myopic in their planning
- Private Insurance Market failure
Why is it important to understand Social Insurance programs when designing employee benefits?
- Possibility of duplicate coverage
- - Diability
- - Must be coordinated/integrated into plan
- Employers provide funding for the programs
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
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
For OASDI (Social Security), what are the types of benefits?
- Old Age Insurance
- Survivors Insurance
- Disability Insurance
For OASDI (Social Security), who is the risk bearer?
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)
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
For OASDI (Social Security), who's responsibility is it to comply with the law?
- Rests with the employer
- Federal Law
For Workers Comp, what are the types of benefits?
- On-the-job injuries/death
- Medical Expenses
- Loss of Income
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
- * Tax private insurance to make up
- difference for lower price
For Workers Comp, what are the sources of funds?
- Self-Insurance contributions
For Workers Comp, who's responsibility is it to comply with the law?
- State Law (Varies)
- ER must comply
For Unemployment Insurance, what are the types of benefits?
Loss of income while unemployed
For Unemployment Insurance, who is the risk bearer?
- State Government
- Federal Government
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
For Temporary Disability Insurance, what are the types of benefits?
- Short term non-occupational disability insurance
- Up to 6 months
For Temporary Disability Insurance, who is the risk bearer?
- Depends on the State
- -Private Insurer
- -State Fund
For Temporary Disability Insurance, what are the sources of funds?
- Premiums paid by employer and/or employee payroll taxes
- - 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
- - Employer also purchases short-term
- disability supplement to bring
- non-occupational coverage up to income
For Temporary Disability Insurance, who's responsibility is it to comply with the law?