Employee benefit programs play an important role in persuading a worker to take a job. While the law mandates certain employment benefits, a substantial number of them are optional. Benefits currently required by law include social security, unemployment insurance, and workers’ compensation insurance.
The Social Security Act established the Social Security Administration. In the original Social Security system, only retirement benefits were paid to a primary worker, but later survivors’ benefits, benefits to spouses and dependents, and disability benefits were added. Beneficiaries pay into it throughout their work lives. Employers are required to withhold state and federal income taxes, as well as Social Security and Medicare taxes from employees’ salaries or wages. They must also pay a matching amount of Social Security and Medicare tax.
If an employee develops a medical disability that prevents him or her from working, he or she may be able to claim benefits from the Social Security Administration under one of two programs. The Social Security Disability Insurance (SSDI) program is available only to those disabled people who have built up a sufficient amount of work history. Supplemental Security Income (SSI) is available for both the disabled and the elderly when their income and assets are extremely low.
The Affordable Care Act (ACA) requires employers with 50 or more full-time or equivalent employees to offer health insurance.
State laws cover unemployment insurance and workers’ compensation law and each state has different rules. Generally, states require employers to pay a tax in the event that a worker becomes unemployed, and this goes towards a terminated employee’s unemployment insurance benefits. Similarly, states such as California, New York, Hawaii, New Jersey and Rhode Island mandate that employers purchase workers’ compensation insurance to cover workers who are disabled by occupational injury or illness. Other states have an option to provide private insurance to employees.
Certain employment benefits are mandated for employers of a certain size. For example, employers with 50 or more employees are required to provide 12 weeks of unpaid leave, during which the job is protected, during any 12-month period for specified reasons including a birth in the family, childcare, immediate family care or care for an employee’s own medical condition under Family and Medical Leave Act (FMLA).
Benefits Not Mandated By Law
Many are surprised to learn that the law does not mandate regular vacation days. Nor are employers required to provide retirement plans or life insurance, though many employees find these benefits essential reasons to take a job offer. Federal law does set minimum standards for certain types of benefits that employers voluntarily provide.
For example, the Employee Retirement Income Security Act of 1974 (ERISA) sets minimum standards for pension and health plans voluntarily offered in private industry. The goal is to protect individuals who accept employment, based on particular benefits that are offered, such as medical benefits and pensions. Under ERISA, plans must provide participants with plan features and funding information and set fiduciary responsibilities for the people who manage and control plan assets. ERISA gives participants the right to sue when there is a breach of fiduciary duty or a denial of benefits.
ERISA has been revised several times and its amendments have affected mental health, newborns, and cancer rights. Under one of the ERISA amendments—the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)—employers with 20 employees or more on more than 50 percent of typical business days are required to abide by certain regulations. COBRA gives former employees, their spouses and dependent children a continuation of their health insurance coverage at group rates.
The Health Insurance Portability and Accountability Act (HIPAA) is also an amendment to ERISA. HIPAA gives American consumers of health services certain protections, including privacy protections, in case of pre-existing medical conditions that could result in adverse effects in obtaining health coverage.
However, ERISA will not cover group health plans maintained for governmental entities’ employees or churches’ employees. Nor does it apply to group plans established in order to comply with workers' compensation, unemployment, or disability laws.