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MTHEL 131 (32)
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Group Insurance.docx

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Department
Mathematics Electives
Course
MTHEL 131
Professor
David Kohler
Semester
Fall

Description
Group Insurance Sunday, October 06, 2013 2:52 PM Intro to Employee Benefit Plans Employee benefit plans: employer-sponsored plans that provide benefits to employees as part of their total compensation  Planned, coordinated, and balanced to help meet the objectives of both the employees and the employer Rationale for Employee Benefit Plans:  Deferred age theory- retirement benefits should be thought of as employee agreement to defer current wages in favor of payments during retirement when income is presumably lower  Another reason is to meet competition for employees o In labor scarce markets, marginal utility for making E.B 's available can be competitively crucial  Governments provide tax advantages to employers that adopt pension and other benefit programs  Some benefits (health) reduce turnover and increase productivity, act as incentives, shared interest in profitability  Organized labor and collective bargaining, and vice versa; employers may offer benefits to dissuade employees from joining a union, or establishing a union Growth in Employee Benefit Plans:  U.S. Benefit Plans o Almost one-half of the increase is due to the expansion of mandated benefits. o The rest is a result of escalation in insurance costs, as well as increase in vacation granted  International Benefit Plans o Requires considerate planning both at the corporate level and in relation to the local environments in which a company operates o Clear understanding of a company's basic benefit philosophy o Usually consistent world-wide o Decisions are usually made by managements unfamiliar with the environment involved o Ability of corporate headquarters to impact overseas benefit programs varies depending on  Size of the subsidiary  Power or influence of the subsidiary  Whether the multinational is opening a completely new operation or inheriting an existing benefit program through an acquisition o Proper management infrastructure and communication channels in place to support effectively implementing the policy is necessary o Multinational pooling facilitates implementation of a global corporate benefits policy, and has the following advantages:  Reduced cost of providing benefits through receipt of an international dividend based on experience rating of all the employers plans  Reduced underwriting  Consolidated summary of global benefits  Detailed financial information  Enhanced control and coordination of benefits  Increased negotiating power with insurers o Multinational pooling is a system under which insurances coverages in various countries are brought together into one pool, reducing administration expenses and risk charges through experience rating o Experience rating is an accounting system under which the costs ultimately charged to a group contractholder are determined b
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