Employee Benefits Strategies

Required Benefits

Social legislation requires that the employer make expenditures for the health and safety of employees, and for various forms of insurance to protect employees against loss of income from illness, injury, unemployment, and old age. These expenditures are required by law and are not discretionary to the employer. Benefits law also determines how the organization will develop and operate specific benefit programs, particularly retirement plans.

In our course 15: Federal Employment Laws That Impact Compensation and Benefits, we look more closely at U.S. benefit legislation.

In this course, we'll review the following:

• Social Security and Medicare
• Unemployment Insurance
• Workers' Compensation
• Family and Medical Leave Act (FMLA)
• Consolidated Omnibus Budget Reconciliation Act (COBRA)
• The Affordable Care Act (ACA)
• Health Insurance Portability and Accountability Act (HIPAA)

Social Security and Medicare

Employers and employees are taxed to pay for the following benefits:

• retirement
• survivors and disability insurance
• hospital and medical insurance for the aged and disabled

These taxes, authorized by the Federal Insurance Contributions Act of 1936 (FICA), constitute the FICA deductions noted on paychecks. FICA taxes have two basic components: Medicare and the other is Old Age, Survivors, and Disability Insurance or OASDI, more commonly known as Social Security.

The tables show 2026 FICA taxes. An equal portion of each tax is paid by the employer and the employee.

Social Security also imposes some record-keeping and reporting requirements. Employers must maintain records and report:

• amounts and dates of wage payments
• amount of tips received
• name, address, occupation, and periods of employment and the
• Social Security number of each employee receiving wages

Social Security requires that employers provide each employee with a W-2 income and tax withholding form by January 31 for the previous calendar year.

Unemployment Insurance

Unemployment insurance is a state-administered program operating under general requirements set out by the Old Age, Survivors, Disability and Health Insurance Program (OASDHI). Its function is to provide partial income replacement when a worker loses a job through no fault of their own. In the United States, unemployment insurance (UI) is funded by a tax levied by states on employers. In a few states, employees also contribute to unemployment insurance. The employer's tax is adjusted up or down from the standard tax depending on the employer's record or experience rating.

To draw UI, workers must be:

• able to work
• available for work
• actively seeking work
• willing to take a suitable job

Workers must have lost their job through circumstances beyond their control. They cannot quit without good cause, and they cannot have been discharged for cause.