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 subsidy: 0.70 × $10 , 000 = $7 , 000 .
Calculate the retirement matching: 0.08 × $70 , 000 = $5 , 600 .
Calculate the PTO cost: 260 $70 , 000 × 15 = $4 , 038.46 .
Calculate the FICA contribution: 0.0765 × $70 , 000 = $5 , 355 . Total benefits are $7 , 000 + $5 , 600 + $4 , 038.46 + $5 , 355 = $21 , 993.46 . Benefit rate is $70 , 000 $21 , 993.46 × 100 ≈ 31.42% , which rounds to 31 % .
Explanation
Calculate Health Insurance Subsidy First, we need to calculate the employer-subsidized portion of the health insurance. This is 70% of $10,000.
Health Insurance Cost The calculation is: 0.70 × $10 , 000 = $7 , 000 .
Calculate Retirement Matching Next, we calculate the retirement matching, which is 8% of Sofia's annual salary of $70,000.
Retirement Matching Cost The calculation is: 0.08 × $70 , 000 = $5 , 600 .
Calculate Daily Rate Now, we need to calculate the cost of Sofia's 15 days of PTO. We assume there are 260 working days in a year (52 weeks * 5 days/week). We first calculate Sofia's daily rate.
Daily Rate Calculation The calculation is: 260 $70 , 000 ≈ $269.23 .
Calculate Total PTO Cost Then, we calculate the total cost of PTO by multiplying the daily rate by the number of PTO days.
PTO Cost Calculation The calculation is: $269.23 × 15 = $4 , 038.46 .
Calculate FICA Contribution Next, we calculate the FICA contribution, which is 7.65% of Sofia's annual salary of $70,000.
FICA Cost The calculation is: 0.0765 × $70 , 000 = $5 , 355 .
Calculate Total Benefits Now, we calculate the total benefits by summing the health insurance subsidy, retirement matching, PTO cost, and FICA contribution.
Total Benefits Calculation The calculation is: $7 , 000 + $5 , 600 + $4 , 038.46 + $5 , 355 = $21 , 993.46 .
Calculate Benefit Rate Finally, we calculate the benefit rate by dividing the total benefits by the annual salary and multiplying by 100.
Benefit Rate Calculation The calculation is: $70 , 000 $21 , 993.46 × 100 ≈ 31.42% . Rounding to the nearest percentage point, we get 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 true value of different packages. If two jobs offer similar salaries but one has a significantly higher benefit rate, the latter might provide better overall financial security due to superior health insurance, retirement plans, or paid time off. This comprehensive view aids in making informed decisions about employment and financial planning.
Sofia's total benefits amount to $21,993.46, leading to a benefit rate of approximately 31%. This rate is calculated by dividing the total benefits by her annual salary and multiplying by 100. Thus, the final rounded benefit rate is 31%.
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