Need to know OC

[betty10]

My family and I are currently considering moving to Orange County and need some information to aid in our decision. What are the standard inclusions one should ask for in their salary package? More specifically health insurance (what is the normal for employer to contribute?), bonus (do you specify minimums?), retirement - is this a 401k?? Also, what are the taxes, inclusive of federal, state, county for OC? WE are finding it difficult to find out total taxes - looking at a salary of about 130 - 160k. Any other tips/help would be greatly appreciated. We are 2 adults + one baby. Thanks

[Bevdeforges]

Hi, and welcome to the forum.

I suppose the first big question when looking at salaries and remuneration packages is where are you coming from and what are your expectations? The US has far less "standards" in the area of salary and employee benefits than most other countries. Most benefits are driven almost exclusively by the company's internal policies.

>>What are the standard inclusions one should ask for in their salary package? <<

Depends a bit on the job you're being asked to do and the type of company you'll be working for. High tech companies, for example, tend to have more "innovative" types of benefits for their employees. If you're on an expat package (usually interpreted to mean that you'll eventually be going back home or onward to another "overseas" post), you should ask about tax assistance (tax equalization or preparation assistance), housing assistance or at least house hunting assistance, home leave. One thing to be very certain of is precisely what sort of visa the employer will be putting you in for, so that you know the terms and conditions of your stay in the US. (On some visas, you could have a mere 30 days to pack up and leave the country if the job disappears for any reason.)

>>More specifically health insurance (what is the normal for employer to contribute?), bonus (do you specify minimums?), retirement - is this a 401k?? <<

It used to be the norm that the employer pays for the health insurance for the employee, and the employee pays if they want to include their spouse and/or children on the plan. But more and more companies are splitting the cost of the employee portion with the employee. It depends entirely on what the company policy is.

Bonus depends on the industry and the position. Usually bonuses are limited to sales-related position and are paid for achieving or exceeding sales targets, though there are companies with company-wide bonus plans tied to performance targets. If you don't make the target, you don't get a bonus.

Retirement - these days usually refers to a 401K plan, which is a self-saving plan. The employee has a percentage of their income (usually subject to caps) withheld for retirement savings and the employer adds a bit (usually a nominal amount) to that. Contributions to the plan are deductible from income for tax purposes and all earnings on the fund are tax free until you withdraw funds from the account at retirement age. (There are penalties for withdrawing your money before retirement.)

>>Also, what are the taxes, inclusive of federal, state, county for OC? WE are finding it difficult to find out total taxes - looking at a salary of about 130 - 160k. Any other tips/help would be greatly appreciated.<<

The taxes can vary greatly depending on where you live, as property tax (on your home, if you own it) is often determined by town or by local taxing district (e.g. school district). California State income tax runs about 7%, but the rules for determining taxable income are somewhat different from those used for federal income taxes. There are also a variety of ways to save yourself taxes by making certain types of investments or charitable contributions, so it's difficult to estimate based simply on an income figure.
Cheers,
Bev

[Fatbrit]

Originally Posted by Bevdeforges

One thing to be very certain of is precisely what sort of visa the employer will be putting you in for, so that you know the terms and conditions of your stay in the US. (On some visas, you could have a mere 30 days to pack up and leave the country if the job disappears for any reason.)

Cannot overemphasize the visa, enough. "The company will take care of it," is a recipe for disaster. The company does not have the problem, you do! Be very proactive on this. Find out what you're on and whether it will convert to permanent residency. If so, who's paying?

Beyond that, get everything in writing. Verbal promises here are worth nothing.

[SusanK]

OK, this is probably information overload but what can I say? I like to be helpful. As for me, I’m American, living in California for the last 10 years (originally from New England) but recently moved to the OC (from LA). Let me know if you have any other questions OC related. I like to lurk around expat boards because I’m considering a move to Europe (have Irish dual citizenship) but I thought I could contribute to your questions. Here goes:

Federal Income Tax: The tax payable to the IRS (Uncle Sam) is a graduated tax and there are different tax brackets for every dollar earned. You can probably do the math and figure out a blended effective rate yourself based on your salary but check out wikipedia by just searching "federal tax rate". (I know it’s wikipedia but I confirmed that the tax rate brackets are correct) At $130,000, I’m guessing that it will be around 20% averaged out.


California Income Tax: At your income, your state income rate will be 9.3% on every dollar earned. Unfortunately, California has the highest state tax rates in the United States. Some states even have no state income tax. Arrgh..

County: There are no county income taxes.

Income taxes are subject to deductions and personal exemptions, some of which get phased out at higher incomes (such as yours). If you don’t own a home, you probably won’t have many deductions, although the income tax you pay to the State of California is deductible for purposes of your federal tax return. (So if you pay $15,000 in state taxes, your income for federal purposes is $15,000 less and you don’t pay federal taxes on that).

Payroll Taxes: In addition to income taxes, there are some social welfare taxes that you pay out of your paycheck (not payable on unearned income like investment income). Social security (i.e. retirement/old age pensioners) shows up on your paycheck as a deduction under the heading FICA. The employee’s contribution is 6.2% of their salary, currently capped at a salary of $97,500 (or FICA taxes of $6,045). Meaning, you won’t pay social security tax on any income over $97,500. I like it because that means you take home a little more in the second half of the year which helps for Christmas, etc.

Finally, there is your contribution toward the federal Medicare fund (medical insurance for disabled/retired folks), which is 1.45% of your salary. Unfortunately, there is no cap on Medicare contributions.

Insurance: Most private employers offer group health insurance plans. It is dependent company-to- company what amount of the premium the employer will pay. In my experience (high tech and legal industries), an employer will offer a basic HMO plan (full coverage but must only use doctors in a specified network and you need a referral from your GP for specialists) that is free for the employee but must be purchased for family members (although employers subsidize the cost for family members so it is still much cheaper than buying it yourself). Most companies will also offer opportunities to upgrade to more flexible plans (often called PPO or “Preferred Provider” that allow you to go to a wider range of doctors of your choice and also allow you to see specialists by self-referring), but you will have to pay for this privilege through an employee contribution towards the premium. Be careful: medical insurance is really tricky to understand even for the US born and there are different coverage rates in PPO plans depending on which doctors you see so it will be a lesson to learn. In general, out of pocket costs (like doctor visit copays) are low for HMO plans ($10?) but can be high for PPO plans (up to $30) so the extra amount you pay for premiums are not the only costs. However, if you have health problems, or unique issues, the PPO may be better if you want to see that top notch specialist on the other side of the country. You can change your choice of plan during open enrollment once a year so you are not stuck with your choice forever. Just to give you an idea of costs: I could have received HMO insurance for free from my employer but upgraded to a better PPO insurance and pay $87 per month for myself. I am single but I think that it costs $200-$300 per month to add a spouse or child for HMO coverage.

What you pay towards medical insurance are usually not negotiable when being hired and information on the premiums should be provided to you with your offer letter (or ask your HR person). Obviously, insurance costs can impact your take home pay so if it looks dire (they are not paying much toward premiums), the option is to renegotiate your salary. Unless you are the CEO, they usually won’t make special arrangements on insurance for employees.

Finally, note that any amounts that you pay for medical insurance are paid in “pre-tax dollars”, meaning that they come out of your income first before the income tax rates are applied.

Now, if you are working for a big Fortune 500 company with unionized workers, ignore all the above! You’ll probably get your insurance free for you and your family.

Bonuses: I’m used to seeing a bonus stated as a “bonus potential”, i.e, up to 15% of your salary. Most US companies reserve the right to pay you a bonus based on performance, both personal and company wide. So they set expectations with the amount but it’s not a promise. It’s not untypical if you are being wooed to get a signing bonus payable up front though.

Other Inclusions: If you are working for a high tech company, receiving equity (in the form of stock options) is not unusual. The amount of options you get should be negotiated in your offer. If the company is public, there may also be a stock purchase plan which allows you to buy stock at a discounted price. These plans are generally applicable to all employees.

In addition to medical insurance, companies in my experience usually offer dental insurance (which is usually crap because it doesn’t cover much), disability insurance (to pay you a portion of your salary if you are disabled and cannot work) and life insurance (in my experience, 1x of your salary is decent but I currently get 2x for non-accidental death and 4x for accidental death…don’t tell my brother and parents that, don’t want to encourage any "accidents" ). These are not negotiable but you should find out whether your employer offers them to know whether the package of benefits is decent.

The other things that companies usually have is a 401(k) plan. This is a voluntary retirement plan that allows you to put money into a savings/investment account without paying taxes on it today. You pay taxes only when you withdraw the money (when your tax rate is much lower presumably). The best companies offer a “matching contribution” but I consider that a minority benefit and wouldn’t expect it. For example, a 50% match would mean that if you put $5,000 of your own money in the account, your employer would put another $2,500 into. Note that 401(k)s are retirement accounts and you cannot withdraw the money before the age of 55 without paying a 10% tax penalty (in addition to your normal taxes). Don’t know how this would apply if you had moved out of the US before retirement.

Hope that helps!

[Bevdeforges]

Hi SusanK, Wow, a very thorough explanation of benefits! BTW, welcome to the forum. Let me invite you to post a note in the Introductions section. (You and I have lots in common, it seems...)

I'll add just a couple notes of clarification (from an overseas perspective) to what you've written:

Except for Social Security and income tax withholding (state and federal), employers in the US are not obligated to provide any particular benefits. Anything they do offer is "out of the goodness of their hearts" (i.e. to be competitive in the job market), and most benefits must be offered equitably to all employees. (Bonuses are not considered "benefits" but rather matters of salary.)

With regard to the 401K plans - if you leave the country after establishing one, there are no special rules covering the situation. You still can't withdraw anything without a penalty until age 59 1/2 and you must start withdrawing from the fund by the age of 70 (possibly 70 1/2 - for some reason they're nuts about these 1/2 years!). You pay income taxes on withdrawals - so if you withdraw money from abroad, you'll have to file a US income tax form for that year.
Cheers,
Bev

[betty10]

Thank you all so much for your responses - it is extremely valuable in our assessment to whether this is going to be the right move for us! Susan K - I'll come back to you if I need more advice on the OC - thanks! Have a great day!