ADMS 3490 Lecture Notes - Lecture 12: Fiduciary, Organizational Culture, Employee Benefits

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champagnesquirrel993

7 Mar 2016

School

York University

Department

Administrative Studies

Course

ADMS 3490

Professor

Parbudyal Singh

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Document Summary

*there are 6 types of indirect pay plans and specific employee benefits included in each: mandatory benefits: government-provided employee benefits, such as pensions and employment insurance, to which employers must contribute on behalf of their employees. There are 3 main types of mandatory benefits: Defined benefit plans: pension plans that provide retirement income based on a proportion of the employee"s pay at the time of retirement. Defined contribution plans: pension plans that provide retirement income based on the accrued amount of employer and employee contribution to the plan. Hybrid pension plans: combines features of both defined benefit and contribution plans: health benefits: Supplemental health insurance: example: government-sponsored medical benefits under the system generally known as medicare . Disability insurance: this coverage typically provides for 60-70% of normal pay and carries on until the employee is able to return to work, retires, or dies. Life and accident insurance: this item is included in almost all benefit plans.

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Please build the answer in your own words based on flowing textfrom studding book (provide the example):

text from book:

Group Term Life Insurance Plans.

Many employers offer group term life insurance as part of theiremployee benefit package. Life insurance coverage is normallycalculated as a multiple of the employeeâs annual salary, roundedup to the nearest thousand ($1,000.00). The premiums paid by theemployer for coverage under a group term life insurance policy areconsidered a taxable benefit to the employee. If the employershares the premium cost with the employee, for example, theemployer pays half and the employee pays half, then the taxablebenefit would only be the portion of the premiums the employerpays, or 50%. Group term life insurance taxable benefitcalculations are based on the premium rates and sales taxes theemployer pays and the amount of coverage provided. Premium ratesare expressed per $1,000.00 of coverage on a monthly basis. Thetaxable benefit must be calculated on a pay period basis forinclusion in the employeeâs taxable income.

The following formula calculates the employeeâs monthly taxablebenefit:

Coverage amount = Annual salary x coverage multiplier Roundcoverage amount up to nearest $1,000.00 Monthly taxable benefit =Coverage amount x premium rate $1,000.00 To ensure that the benefitis included in the employeeâs income as it is earned or enjoyed,the monthly benefit must be annualized and then prorated on a payperiod basis, as follows: Pay period taxable benefit = Monthlytaxable benefit x 12 Pay period frequency

"Example: Rhonda Goldâs life insurance coverage, through heremployerâs group plan is two times her annual salary of $30,300.00.Her employer pays the insurer 100% of the cost of her lifeinsurance coverage at a premium rate of $1.00 per $1,000.00 ofcoverage per month. Rhonda is paid on a weekly basis; her taxablebenefit is calculated as follows: Coverage amount = Annual salary xcoverage multiplier Round coverage amount up to nearest $1,000.00 =($30,300 x 2) = $60,600.00 = $61,000.00 (rounded) Monthly taxablebenefit = coverage amount x premium rate $1,000.00 = $61,000 x$1.00 $1,000.00 = $61.00"

Group Sickness and Accident Insurance Plans.

These are group plans that provide employees with income for aperiod of time, should the employee be away from work for reasonsof sickness or accident. A group plan is generally one thatprovides coverage to a class or association of employees. There canalso be multiple plans for a group of employees, for example, oneplan for clerical staff and one for management staff. The types ofsickness and accident insurance plans considered in this categoryinclude:

? short term disability plans (wage loss replacement, weeklyindemnity)

? long term disability plans

? accident insurance plans (accidental death anddismemberment)

If an employer pays the premiums for group short-term orlong-term disability plans there is no taxable benefit implicationfor the employee, however employer-paid accidental death anddismemberment (AD&D) premiums are considered a non-cash taxablebenefit. As a result, employer-paid AD&D premiums, plus the 8%RST (Manitoba and Ontario), the 9% tax on insurance premiums(QuÃ©bec) and the 6% PST (Saskatchewan) as applicable, areconsidered pensionable for C/QPP contributions and taxable forfederal and provincial income taxes. Employer-paid premiums for anon-group plan are considered a non-cash taxable benefit in alljurisdictions. A non-group plan is one that generally does notcover a group or association of employees. For example, if theorganization pays the premiums for a long-term disability plan foronly the president of the organization, this would be considered anon-cash taxable benefit to the president. When the benefit istaxable it is also pensionable for C/QPP contributions; however, asit is a non-cash benefit, it is not insurable, and no EI or QPIPpremiums are deducted. GST and HST are not included in the value ofthis type of benefit, but the provinces of Manitoba, Ontario,QuÃ©bec and Saskatchewan assess sales tax on AD&D insurancepremiums.

Question : Your organization, located in Manitoba,will be enhancing the group benefits plan offered to employees intwo months by adding accidental death and dismemberment (AD&D)coverage and vision care coverage. The organization will pay 50% ofthe cost of the AD&D premiums and 50% of the cost of the visioncare premiums, with the employees paying the other 50% of eachpremium. The Manager of Finance, Laura Bruce, has requested thatyou, as the Payroll Supervisor, prepare a communication for theemployees, explaining how these new benefits will impact their netpay.

(200 â 350 words)

Based on following text in your own words, list anddefine the four categories of employment income,providing an example (other than regular pay) foreach category.

Employment Income

An individual working for an employer receives compensation orpay, known as remuneration, for the services they perform. Where anemployee-employer relationship exists, remuneration is referred toas employment income. Employment income can be categorized intoearnings, allowances, benefits and taxable expensereimbursements.

Earnings

Earnings are dollar amounts the employer pays an employee forthe work they perform. Earnings can be paid as:
Â· a salary
Â· a rate for each hour worked
Â· a rate per piece of goods produced or picked
Â· a disability payment for time off work due to illness
Â· a payment for vacation time
Â· a premium payment for overtime hours worked
Â· a premium payment for hours worked on shift

Deciding which types of earnings are paid and how they arecalculated is primarily a decision made by the employer. Earningsare pensionable, insurable and taxable, and therefore subject toall statutory deductions.

Allowances

Allowances are additional dollar amounts paid to employees forthe use, or anticipated use, of their personal property forbusiness purposes. Allowances can also be provided to employees tocover the cost of personal living expenses associated withemployment. The most common types of allowances cover the costsincurred by the employee for car, meals, uniforms, safety shoes orother particular types of clothing for business reasons. Undercertain conditions, allowances are not considered employment incomeand therefore are not subject to statutory withholdings.

Benefits

Benefits are dollar values attributed to something the employerhas either provided to an employee or paid for on an employeeâsbehalf. Usually, when an employer provides an employee withsomething (for example, a company-leased automobile is given to theemployee for both business and personal use) or pays for somethingon an employeeâs behalf (for example, group term life insurancepremiums), it results in a benefit to the employee. There arecertain situations where benefits are not included in employmentincome and therefore are not subject to statutory withholdings.

Expense Reimbursements

Similar to allowances, expense reimbursements are also dollaramounts paid to employees to cover expenses that they incur whileperforming their job. For the most part, expense reimbursementsgenerally fall outside of payroll because they are business-relatedand therefore not employment income to employees. These expensesare claimed on an expense report, supported by receipts, andusually submitted directly to the accounting department forreimbursement. As such, they are not considered in the calculationof an employeeâs pay. Some organizations choose to reimburseexpenses through payroll in which case they are not subject to anystatutory deductions; they will, however, affect the net pay. Anyreimbursements made to an employee for personal living expenses areconsidered taxable to the employee, included in income and subjectto statutory withholdings.

Hi, Please help me to solve these questions with detailexplanation . Thanks

Question 4
Dustin, who is 48 years old, works for Pinnacle Inc., with a salaryof $300,000, a car allowance, and a very nice expense account.Pinnacle is a Fortune 1,000 company that sponsors a defined benefitplan that pays 2 percent times years of participation times theaverage of the three final years of compensation. In addition,Pinnacle sponsors a 401(k) / profit sharing plan and contributes18% of employees salary to the profit sharing plan. There is noadditional match. If the ADP of the NHCEs is 3%, what is themaximum that Dustin can defer this year (2018)?
A.

$5,500.
B.

$13,750.
C.

$15,000.
D.

$18,500.

Question 5
Larry, age 55, is employed by BB Trucking Company as a tire repairspecialist. He earns $62,000 per year and received an allocation of$40,000 to his employer-provided profit sharing plan for the year.If BB Trucking does not match employee deferrals, what is themaximum amount Larry can defer to his 401(k) plan for the 2018 planyear?
A.

$15,000
B.

$18,500
C.

$21,000
D.

$24,500

Question 6
Jacques, who is age 45, has just resigned from his current job. Heworked for Ace, which sponsors a cash balance plan and a standard401(k) plan. Each of the plans uses the longest permitted vestingschedule and both plans are top heavy. He has a balance of $40,000in the cash balance plan, has deferred $20,000 into the 401(k) planand has employer matching contributions of $10,000. If he has beenemployed for three years, but only participating in the plans forthe last two years, how much does he keep if he leaves today?
A.

$ 20,000.
B.

$30,000.
C.

$60,000.
D.

$64,000.

Question 7
Mikael opened a fabulous restaurant ten years ago. The food is soexceptional that the restaurant has become one of the top spots inthe city. Mikael, age 55, is the sole owner with compensation of275,000. Mikaelâs son Jamel, age 28, is the master chef withcompensation of $100,000. Jamel has been with the restaurant fulltime since he turned 18. Mikael also employs 15 other individualswhose ages range between 25 and 35 and have compensation on averageof $40,000 per year. Mikael wants to establish a profit sharingplan. Which of the following statements is true?
A.

If Mikael selected the standard allocation method and the plancontributes 10 percent per individual, the plan will contribute$55,000 to Mikaelâs account.
B.

If Mikael selected the permitted disparity method and the plancontributes 10 percent per individual, the contribution the companymakes for Mikael will be increased.
C.

Considering the needs and wants of Mikael and Jamel, anage-based profit sharing plan is the best plan for both ofthem.
D.

A new comparability plan is the least expensive, simplest way tomeet both Mikael and Jamelâs retirement needs.
Question 8

Which of the following statements regarding an age-based profitsharing plan is correct?
A.

An age-based profit sharing plan provides a greater benefit tothose plan participants whose earnings exceed the Social Securitywage base and who are over fifty years old.
B.

An age-based profit sharing plan only provides a benefit tothose plan participants whose age is within 10 years of the age ofthe owner of the plan sponsor.
C.

An age-based profit sharing plan provides greater benefits tothe older plan participants.
D.

Younger plan participants in an age-based profit sharing planusually receive the majority of the profit sharing planallocation.

Question 9 :
Acme Inc., is establishing a retirement plan and they want a planthat includes a Roth account. Which of the following statements iscorrect about Roth accounts?
A.

Matching contributions can be contributed to Roth account.

Amounts in a traditional 401(k) plan cannot be rolled over to aRoth account.
C.

Roth accounts do not require minimum distributions until afterthe death of the participant.

Roth accounts permit access for taxpayers who may otherwise notbe able to contribute to a Roth IRA.

Question 10
Which of the following qualified plans would allocate a higherpercentage of the planâs current contributions to a certain classor group of eligible employees?

A profit sharing plan that uses permitteddisparity.
An age-based profit sharing plan.
A defined benefit pension plan.
A target benefit pension plan.

1 only
B.

1 and 3
C.

2 and 4
D.

1, 2, 3, and 4

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ADMS 3490 Lecture Notes - Lecture 12: Fiduciary, Organizational Culture, Employee Benefits

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