Benefits are a hot topic in today’s economy. From healthcare to retirement, benefits are an essential decision that every family has to make, especially in regard to what kind to choose. Health insurance, for example, has increasingly become more and more expensive for companies and employees, causing many to cease offering these benefits. These actions have led to the necessary, albeit controversial, Affordable Health Care Act. And although this new healthcare is not necessarily cheap, there are two major pathways of benefits, both fixed and accrued benefits.
Fixed benefit plans, whether in annuities or insurance, guarantee a fixed return for the life of the annuity. Then, when the insurance holder reaches retirement age, they can begin to receive these benefits. However, with fixed benefit insurance, the premiums tend to be cheaper while the benefits are limited. This means that major medical costs may be left to the payee and not covered by insurance. This insurance is also not compliant with the Affordable Health Care Act and would still require payment of the penalty fee required under Obamacare. It is likely that fixed benefit insurance will be phased out by the year 2017. However, if one has a fixed-benefit plan in regards to insurance, it is important to double check coverage before any major medical expense.
Accrued benefits, on the other hand, add together based on years of service to an employer as part of a pension package. This usually includes vacation time, personal time off, stock options, pay raises, and other similar benefits. This also means that when an employee leaves, they are entitled to receive all unpaid benefits. As an employee works for an extended period of time, these benefits may initially require the employer to pay upfront, but they are later compensated when those benefits are accrued by the employee. This is usually the case with insurance benefits.
No matter which type of benefits an employee is receiving, it is extremely important to have a good time management system, which can help in determining when these benefits have been earned. This is essential for hourly employees, although salaried employees’ vacation time can also be managed with these systems as well. Being able to produce an accurate summary of hours worked and benefits earned through easily managed systems can save payroll a lot of time. It is also important to decide which type of benefits are right for each particular employee, and often, cases where a combination of the two offer the best choice have been found.
So, what’s in your future? Fixed or accrued benefits? It’s definitely a questions worth answering!