Government-Mandated Benefits - Essay Example

?RUNNING HEAD: Benefits Government-man d Benefits Lecturer: Government-Man d Benefits Summary National government policy requires employers to provide some benefits to all employees. These benefits (also known as social insurance programs) include unemployment compensations, Social Security, workers’ compensation, and family and medical leave. According to Dominguez’s report on Social Security and Medicare future funding, it has been postulated that both programs are expected to run out of funds sooner than anticipated. While the government’s health insurance for the elderly is predicted to come in 2024, Social Security will be depleted 12 years later; with both predictions associated with the increasing aging population coupled with the sagging economy. The revelation in the current time is vital for policy makers as well as the baby boomers as if prepares them adequately before the financial challenges expected in their golden years (Dominguez, 2011). Primarily, the overseeing trustees have called upon the Congress to look into the issues and implement changes necessary to curtail future “disruptive consequences”. Although current scheduled financing is anticipated to be sustainable for the projected long-run program costs, disruptive consequences for taxpayers and beneficiaries can be avoided entirely through legislative corrections. Motivated and willing leaders should be charged with this legislation which is critical considering the over 105 million beneficiaries of both Social Security and Medicare programs. Laws and Concepts Provision of government-mandated benefits through Medicare for the aged and Social Security for the general public derives its funding through budgetary allocations. Deductions made on salaries of the employed and income contributes greatly to the provisions of such benefits; up to the amount allocated by the legislators in congress. Consequently, the report by Dominguez exposes the pitfalls lying in wait for the Medicare and Social Security programs. As such the report serves to hasten the speed at which Congress pushes for changes in the federal budget to raise the $14.3 trillion federal debt. Despite the push to beat the deficit target set for Aug 2, prepositions for privatization of Medicare have been sounded by the Republicans. This way, older Americans will be offered a subsidy to purchase coverage from private insurers. That notwithstanding, the Democrats’ backing of an overhaul sought to extend the life of Medicare would still necessitate immediate action to allow for options and time to phase in changes that will adequately prepare the affected (Turner, 2010). Recommendations Considering the pitfalls plaguing the government-mandated benefits, planning is paramount in the subsectors of the business community. For instance, the perceived challenges resulting from the sagging economy and aging population will not only affect the future financing of benefits, but also various sectors of the business community. Of greater concern are the effects of mandated benefits which include paying lower wage for employed labor, having catered for their mandated benefits. As such, the employee will be motivated to work even at lower wages because mandated benefits are guaranteed for working (Weerapana, 2009). Additionally, leaders elected into key legislative roles should be vetted as willing and able to push for necessary laws and policies. Otherwise, leaders that are likely to undermine the pillars of health and financial security should not be entertained. Healthcare Programs Summary According the article “Medicare, Medicaid, CLASS in crosshairs of 'Gang of Six' deficit plan”, Anderson (2011), points out the plan by a group of senators to reduce the federal deficit that is feared might significantly cause cuts in government healthcare programs. The reductions, anticipated to occur over a 10 year period would require the Senate Finance Committee to find a $500 billion in healthcare spending. The elimination of the Community Living Assistance Services and Supports (CLASS) Act, enacted as an insurance program through the Affordable Care Act, would generated a savings of $200 billion. The CLASS Act, in spite of its flaws is being implemented as an entitlement program, although numerous calls for transparency are expected by the American taxpayers of the Department of Health and Human Services. Furthermore, numerous red calls have been ignored of the massive unsustainable entitlement program. Although the program was aimed at lessening the budgetary burden on Medicaid and help pay for long-term care costs, AARP Bulletin pointed out the weaknesses of the program, which included a poor design on coverage, eligibility and contributions. The elimination of the SGR Medicare physician payment formula will be crucial in saving another $300 billion in Medicaid and Medicare spending; a push resulting from MedPAC’s concern over its use as a volume control mechanism. The increased spending has however increased due to demographic shifts characteristic of slowing birth rate and increasing life expectancy (The Council of Economic Advisors Staff, 2009). Laws and Concepts In order to protect the federal government against deficits spending in healthcare programs will necessitate external funding. The $3.7 trillion federal deficit in addition to necessitating a $500 billion 10-year healthcare spending cut, exempts cuts at the expense of services relied upon by the elderly and the poor. The push for deeper healthcare cuts extended to reductions in certain entitlement programs, while elimination affecting the CLASS Act was based on its poor design. Furthermore, the anticipated increase need for resources to fund Medicare over time will either mean that beneficiaries will be asked to pay more or taxpayers to increase their contributions, or both. Although it may not be feasible to ask beneficiaries on lower income to subscribe to a greater share of the costs of their care, individuals will be required to devote most of their incomes to the costs of institutionalization (Binstock, 2010). Recommendations Therefore, the business community would benefit from providing adequate care and coverage for the employee workforce in order for the organization objectives to be achieved. Similarly, efforts to cut on costs would go a long way in ensuring lower overhead and general operational costs. As such, newcomers into the industry will be encouraged to keep up with the competition considering the reduced costs and ease of entry/exit. On the other hand, the government ought to intervene during times of economic recession by either cushioning the players or providing subsidies to lower prices. Pension Programs Summary According to Tergesen (2011), “Pension plans for the rest of us” have been introduced by the financial-services industry which aims to become a personal pension manager to participants. The novel services by most companies seek to allow investors covert their savings into reliable stream of retirement income. Once an investor has been assigned to a financial advisor or call center, computations are conducted on how much a retiree can spend annually throughout retirement. Companies can be allowed to invest on behalf of the investors, with some issue monthly checks. Considering uncertainties account inflation, life expectancies, and inflation, the decision on whether or not to invest becomes a stumbling block for most investors. However, some of the services are available to everyone, while others to participants of 401(k)s or other defined-contribution plans. A number of services that would be availed for a 65 year-old couple, about to retire include Fidelity’s Income strategy evaluator, financial engines’ income+, GuidedChoice’s Guided Spending 2.0, and Schwab's Retirement Planning Consultation. Laws and Concepts Pension plans have traditionally been maintained by the employer or employee organizations. But the industry has over time been flooded by other companies offering retirement plans termed derivations of traditional pension plans and 401(k)s. Although some services are accessible to everyone, other services are targeted at participants of 401(k)s and other defined-contribution plans; hence closing out some participants and beneficiaries of ERISA (Weltman, 2010). In addition to ERISA covering most private sector pension plans, it also charged with providing protections for participants and beneficiaries in employee benefit plans. Individuals, managing plans are required by law to meet certain standards of conduct as mandated by EBSA (Employee Benefits Security Administration). Therefore, in attempting to help investors convert their savings into a reliable stream of retirement income, the financial-services companies should abide by the provisions of ERISA. As a matter of fact, their services should cater for all beneficiaries and participants, or be designed to allow for different investors to move from one plan to the other, with ease. For instance, Fidelity’s Income strategy evaluator’s focus on annuities, should allow for conversion to the financial engines’ income+ that focuses on managing 401(k) assets. Similarly, the GuidedChoice’s Guided Spending 2.0 focus on stocks and bonds should be in congruence with Schwab's Retirement Planning Consultation, which is limited to tax payments (Rattiner, 2009). Recommendations Diverse individuals with different investment plans in the business community should first be contacted before designing any retirement plan. As such, the new pension plans will maximize the financial opportunities as well as address the demands of most participants and beneficiaries. Additionally, investors should be well informed of to protect them against unscrupulous companies that seek to fleece them of their savings. Furthermore, advice prior to signing up to any new pension plan should be sought from EBSA or IRS. Fraudulent cases should also be reported to the appropriate authorities including Pension Benefit Guaranty Corporation (PBGC). References Anderson, C. (2011). Healthcare Finance News: Medicare, Medicaid, CLASS in crosshairs of 'Gang of Six' deficit plan. Retrieved July 23, 2011 from http://www.healthcarefinancenews.com/news/medicare-medicaid-class-crosshairs-gang-six-deficit-plan. Binstock, R. H. (2010). Handbook of Aging and the Social Sciences. Academic Press: New York. Dominguez, R. (2011). NY Daily News.com. New report warns Social Security, Medicare could run out of money even earlier than feared. Retrieved July 15, 2011 from http://articles.nydailynews.com/2011-05-14/news/29558086_1_medicare-government-health-insurance-program-social-security. Rattiner, J. H. (2009). Financial Planning Answer Book. CCH: Melbourne. Tergesen, A. (2011). Weekend Investor: Pension Plans for the Rest of Us. Retrieved July 31, 2011 from http://online.wsj.com/article/SB10001424052702304563104576357523950840558.html. The Council of Economic Advisors Staff. (2009). The Economic Report of the President 2009. Cosimo, Inc: New York. Turner, J. A. (2010). Pension policy: the search for better solutions. W.E. Upjohn Institute: Michigan. Weerapana, T. A. (2009). Principles of Microeconomics: Global Financial Crisis. Cengage Learning: Florence. Weltman, B. (2010). J.K. Lasser's Small Business Taxes 2011: Your Complete Guide to a Better Bottom Line. John Wiley and Sons: New Jersey. Read More