Employee Benefits Required by Law

Employee

Benefits Required by Law

The legally required employee benefits
constitute nearly a quarter of the benefits package that employers provide.

These benefits include employer contributions to Social Security, unemployment
insurance, and workers’ compensation insurance. Altogether such benefits
represent about twenty-one and half percent of payroll costs.

Social Security

Social Security is the federally
administered insurance system. Under current federal laws, both employer
and employee must pay into the system, and a certain percentage of the
employee’s salary is paid up to a maximum limit. Social Security is mandatory
for employees and employers. The most noteworthy exceptions are state and
local government employees.

The Social Security Act was passed
in 1935. It provides an insurance plan designed to indemnify covered individuals
against loss of earnings resulting from various causes. This loss of earnings
may result from retirement, unemployment, disability, or the case of dependents,
the death of the person supporting them. Social Security does not pay off
except in the case where a loss of income through loss of employment actually
is incurred. In order to be eligible for old age and survivors insurance
(OASI) as well as disability and unemployment insurance under the Social

Security Act, an individual must have been engaged in employment covered
by the Act. Most employment in private enterprise, most types of self-employment,
active military service after 1956 and employment in certain nonprofit
organizations and governmental agencies are subject to coverage under the

Act. Railroad workers and United States civil service employees who are
covered by their own systems and some occupational groups, under certain
conditions, are exempted form the Act. The Social Security Program
is supported by means of a tax levied against an employee’s earnings which
must be matched buy the employer. Self-employed persons are required to
pay a tax on their earnings at a rate, which is higher than that paid by
employees but less than the combined rates paid by employees and their
employers.

In order to receive old age insurance
benefits, a person must have reached retirement age and be fully insured.

A full-insured person is one who must have earned at least $50 in a quarter
for a period of 40 quarters. It is possible for an individual who dies
or becomes totally disabled at an early age to be classified as fully insured
with less than 40 quarters. To receive old age insurance benefits, covered
individuals must also meet the test of retirement. To meet this test, persons
under 70 cannot be earning more than an established amount through gainful
employment. This limitation of earnings does not include income from sources
other than gainful employment such as investments or pensions. Social security
retirement benefits consist of those benefits which individuals are entitled
to receive in their own behalf, called the primary insurance amount, plus
supplemental benefits for eligible dependents. These benefits can be determined
from a prepared table. There are also both minimum and maximum limits to
the amount that individuals and their dependents can receive.

The Social Security program provides
benefit payments to workers who are too severely disabled to engage in
gainful employment. In order to be eligible for such benefits, an individual’s
disability must have existed for at least 6 month and must be expected
to continue for at least 12 months. Those eligible for disability benefits
must have worked under Social Security for a t least 5 out of the 10 years
before becoming disabled. Disability benefits, which include auxiliary
benefits for dependents, are computed on the same basis as retirement benefits
and are converted to retirement benefits when the individual reaches the
age of 65.

The survivors’ insurance benefits represent
the form of life insurance that is paid to members of a deceased person’s
family who meet the requirements for eligibility. As in the case of life
insurance, the benefits that the survivors of a covered individual’s receive
may be far in excess of their cost to this individual. Survivors of individuals,
who were currently insured, as well as those who were fully insured at
the time of death, are eligible to receive certain benefits, provided that
the survivors meet other eligibility requirements. A currently insured
person is one who has been covered during at least six out of the thirteen
quarters prior death.

Many people think of Social Security as
a retirement program. But, retirement benefits are just one part of the

Social Security program. Some of the Social Security taxes person pays
go toward survivors insurance. In fact, the value of the survivors insurance
he/she has under Social Security is probably more than the value of his/her
individual life insurance. When someone