Sofia earns $70,000 per year, receives 15 days PTO, 8% retirement matching, and receives 70% employer-subsidized health insurance which totals $10,000. Calculate the benefit rate.
| Employee Benefits |
| --- |
| Health Insurance | 70% |
| FICA | 7.65% |
| Paid Vacation (PTO) | 15 days |
| Retirement Matching | 8% |
[?] %
Round to the nearest percentage point.
Answer (2)
Calculate the health insurance benefit: 0.70 × $10 , 000 = $7 , 000 .
Calculate the retirement matching: 0.08 × $70 , 000 = $5 , 600 .
Calculate the PTO value: 260 $70 , 000 × 15 ≈ $4 , 038.45 .
Calculate the FICA contribution: 0.0765 × $70 , 000 = $5 , 355 .
Calculate the total benefits and benefit rate: $70 , 000 $7 , 000 + $5 , 600 + $4 , 038.45 + $5 , 355 ≈ 31% .
The benefit rate is 31 % .
Explanation
Understanding the Benefits First, let's break down the problem. We need to calculate the total value of Sofia's benefits and then express that as a percentage of her annual salary. The benefits include health insurance, retirement matching, paid time off (PTO), and FICA contributions.
Calculating Health Insurance Benefit Next, we calculate the employer-subsidized portion of the health insurance. The employer covers 70% of the total health insurance cost of 10 , 000. S o , t h e h e a lt hin s u r an ce b e n e f i t i s : 0.70 × $10 , 000 = $7 , 000 $
Calculating Retirement Matching Now, let's calculate the retirement matching benefit. The employer matches 8% of Sofia's annual salary of 70 , 000. T h ere f ore , t h ere t i re m e n t ma t c hin g b e n e f i t i s : 0.08 × $70 , 000 = $5 , 600 $
Calculating PTO Value To determine the value of the 15 days of PTO, we first need to find Sofia's daily rate. Assuming there are 260 working days in a year, the daily rate is: 260 $70 , 000 ≈ $269.23 Then, we multiply the daily rate by the number of PTO days: $269.23 × 15 = $4 , 038.45
Calculating FICA Contribution Next, we calculate the FICA contribution. This is 7.65% of Sofia's annual salary: 0.0765 × $70 , 000 = $5 , 355
Calculating Total Benefits Now, we sum up all the benefits to find the total benefits: $7 , 000 + $5 , 600 + $4 , 038.45 + $5 , 355 = $21 , 993.45
Calculating Benefit Rate To find the benefit rate, we divide the total benefits by the annual salary: $70 , 000 $21 , 993.45 ≈ 0.3142
Converting to Percentage and Rounding Finally, we multiply the benefit rate by 100 to express it as a percentage and round to the nearest percentage point: 0.3142 × 100 = 31.42% ≈ 31%
Final Answer Therefore, the benefit rate is approximately 31%.
Examples
Understanding benefit rates is crucial in personal finance and compensation analysis. For instance, when evaluating job offers, knowing the benefit rate helps you compare the total compensation packages, not just the salaries. A higher benefit rate indicates a more comprehensive package, potentially including better health insurance, retirement plans, and paid time off. This comprehensive view aids in making informed decisions about employment and financial planning, ensuring you're considering the full value of what you're receiving.
The benefit rate for Sofia, considering her health insurance, retirement matching, PTO, and FICA contributions, is approximately 31%. This is calculated as the total value of the benefits divided by her annual salary. Therefore, Sofia's employer provides a significant amount of additional compensation beyond her base salary.
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