Deck 21: Employee Benefits

Question 1

Which of the following is not a characteristic of group insurance?

A)benefits are individually selected by the employee
B)one master contract is provided to the employer
C)for larger employer groups there is no medical exam required for coverage
D)group insurance premiums are lower than comparable individual coverage

Answer 1

A

Question 2

Which one of the following is not a typical exclusion/limitation in group major medical plans?

A)cosmetic surgery
B)physical exams
C)emergency medical care
D)mental health expenses

Answer 2

C

Question 3

Which of the following plans provide retirement benefits to self-employed individuals?

A)unqualified deferred annuities
B)cafeteria plans
C)Keogh plans
D)401(k)plans

Answer 3

C

Question 4

Which of the following is not required for qualification of a group health or disability plan?

A)must cover all full time and part time employees from the first day of work
B)must be in writing
C)must create legally enforceable rights for the employees
D)must be for the exclusive benefit of the employees

Question 5

Which of the following is not a goal of the government,employer or employee in providing employee benefits?

A)raise tax revenue
B)provide security for employees
C)retain, attract and compensate employees
D)encourage savings for retirement

Question 6

An integrated disability income plan is one that:

A)limits the amount of coverage to 50 percent of pre disability take home wage
B)coordinates the waiting period with other sick leave and personal leave plans
C)requires a participation provision such as 20/80 when paying for eligible expenses
D)coordinates the benefits under Social Security and the disability income plan

Question 7

Which of the following is not a reasonable justification of employee benefits from the point of view of the employer?

A)take advantage of business tax benefits
B)retain, motivate and attract employees
C)can legally funnel disproportionately high benefits to the owners on a tax advantaged basis
D)allows freedom of benefit selection as opposed to the government mandating employee minimum benefits

Question 8

Which of the following expenses would not be covered in a basic group health plan?

A)physician office visits
B)physician charges for services provided in a hospital
C)hospital charges for x rays and supplies
D)rental of the operating room

Question 9

Which of the following is not a characteristic of group insurance provided by an employer?

A)Many persons are covered under one contract
B)Volume discount results in a lower cost for the coverage
C)Evidence of insurability usually is not required
D)Employers cannot require employees to share in the cost

Question 10

Which of the following statements about Roth IRAs is false?

A)contributions made to a Roth IRA are not tax deductible, but are tax-free when withdrawn
B)withdrawals of contributions made at any time are not subject to taxation
C)withdrawals of investment earnings are not subject to taxation as long as the taxpayer is at least 55 years old and the Roth IRA has existed for at least five years
D)withdrawals of investment earnings are not subject to taxation if they are used to (up to $10,000 worth)to buy a first home, and if the Roth IRA has existed for at least five years

Question 11

Which of the following is not an employee benefit provided by private insurance?

A)group health insurance
B)unemployment insurance
C)pension plans
D)group life insurance

Question 12

What does ERISA stand for?

A)Employer retirement income security act
B)Employee retirement income security act
C)Employee restitution and income security act
D)Employer required insurance standards amendment

Question 13

Which of the following are potential benefits of a 401(k)or 403(b)plan?
I)You can make yourself low?interest loans
II) You can save for retirement
III)Your contributions to the plan are tax?free
IV) Your contributions to the plan are tax?deferred

A)I, II, III and IV
B)I, II, and III only
C)I, II and IV only
D)I and II only

Question 14

From an employee's perspective,tax deferral is beneficial because

A)current taxes are increased in return for reduced taxes later
B)money can be invested that would ordinarily be paid in current income taxes
C)tax rates in the future are guaranteed to be lower
D)since tax policy varies, there may be no tax on retirement income in the future

Question 15

An insured has incurred $12,000 in medical expenses from an illness.How much will he collect from a group major medical plan that has an 80/20 participation clause and a $500 deductible?

A)$500
B)$ 8,000
C)$ 9,200
D)$11,500

Question 16

Suppose you have a 401(k)plan,and you would like to draw the money out when you are age 45. You want the money to send your child to college. What will happen if you draw all the money out and close the account?

A)You will have to pay income taxes on the withdrawal
B)You will have to pay income taxes, plus a tax penalty, on the withdrawal
C)You will receive the money tax free, since you paid taxes on it when you deposited it
D)You will only have to pay taxes on the amount of money drawn out that represents interest earned on your deposits

Question 17

A defined contribution retirement plan can be advantageous for an employer because:

A)the employer may take the tax advantages without funding the plan
B)cost containment can be effective
C)only individuals that retire will receive benefits and therefore the costs are reduced
D)the investment risk is shifted to the employee after the contribution is made

Question 18

Characteristics of group insurance include all the following except:

A)one master contract is issued to the employer; individual certificates of coverage are issued to employees
B)the group is underwritten as a whole
C)the group was not formed to purchase insurance on a group basis
D)pre existing health impairments are always covered

Question 19

Under ERISA,which of these is not required of a qualified plan?

A)plans must cover all full time employees with at least one year of service
B)plans should not provide disproportionately high benefits to the highly compensated employees
C)defined benefit plans must be funded in advance according to ERISA requirements
D)all employees must receive the same percentage of wages as benefits

Question 20

Which of the following patterns would not be allowed in determining the face amount of life insurance in a qualified group life insurance plan?

A)150% of gross annual wage
B)all hourly workers $100,000, all salaried workers $150,000
C)$50,000 for each employee
D)Bill Gates, CEO, $500,000 and all other workers $100,000

Question 21

Instead of purchasing group health insurance,many employers now self-fund health benefits for their employees. Who normally administers such a self-funded health program?

A)the risk management department
B)the human resources department
C)state health insurance pools
D)a third-party administrator

Question 22

The primary purpose of a 401(k)plan is to:

A)save for retirement on a tax deferred basis
B)save for retirement on a tax free basis
C)save for retirement and have your employer match your contributions, all on a tax-free basis
D)have a forced savings plan for emergencies

Question 23

Our government gets several advantages from the private employee benefit systems. Which of the following is not one of those advantages?

A)Fewer people are dependent on welfare programs
B)The burden on the Social Security program is reduced if people have private pensions and life insurance
C)Government control of the economy is avoided if the funds to finance benefits remain in private hands
D)All of the above are advantages

Question 24

HIPPA applies to group health plans that cover _____ or more employees.

A)2
B)15
C)20
D)50

Question 25

The Family and Medical Leave Act

A)applies to employers having 15 or more employees
B)gives employees the right to have paid leave for the birth of a child
C)gives employees the right to have unpaid leave to care for a foster child
D)does not require employees to give employers medical evidence of the illness that requires their leave

Question 26

The monthly fee that HMOs charge employers is called the

A)capitation payment
B)capitation and insurance premium
C)insurance premium
D)subscription fee

Question 27

The maximum amount that can be contributed to an IRA is:

A)2% of your salary or $3,000, whichever is less
B)$3,000 in 2004, and $5,000 after 2004
C)$3,000, but that will increase to $5000 in 2008
D)$3,000 in 2004, and then it increases $500 per year through 2010

Question 28

Which of the following statements about IRAs is false?

A)Withdrawals made after age 59 are taxed as ordinary income in the year they are received
B)Only deductible contributions and tax deferred interest paid out during retirement are taxed as income
C)Early withdrawal from an IRA causes a 20% tax penalty to be incurred
D)Withdrawal of IRA funds must begin by age 70.

Question 29

What is the main reason for the increase in employee benefit costs during the last 15 years?

A)cost of funding retirement income
B)cost of sick leave and worker absenteeism
C)cost of health insurance
D)none of the above

Question 30

Jane is offered a pension plan through her employer. The plan agrees that if she will deposit 6% of her salary to a retirement account,the employer will deposit a matching amount. When Jane retires,whatever money is in the account will belong to her. What is the proper name for this type of pension plan?

A)A vested pension plan
B)A defined contribution plan
C)A defined benefit plan
D)A tax deferred savings plan (401(k))

Question 31

The maximum tax-deductible contribution an employer can take on a profit-sharing plan distribution is:

A)$25,000 per employee
B)25% of all eligible employees' compensation
C)50% of all eligible employees' compensation
D)5% of after-tax corporate profits

Question 32

Carlos and Mary are married,and covered under Carlos' group health plan provided by his employer. Carlos dies. How long can Mary continue her health coverage,according to COBRA provisions?

A)0 months
B)18 months
C)24 months
D)36 months

Question 33

Mary Jane divorces her husband Dustin. Dustin was previously covered by Mary Jane's group health insurance plan offered by her employer. How long can Dustin continue his health coverage,according to COBRA provisions?

A)0 months
B)18 months
C)24 months
D)36 months

Question 34

The popularity of defined benefit pension plans has:

A)increased
B)decreased
C)remained about the same
D)become so low that these plans are no longer legal

Question 35

In the year 2006,what is the maximum amount you can contribute to a 401(k)plan per year?

A)10% of your salary
B)$10,000
C)12.4% of your salary, or, $11,000 (whichever is greater)
D)$15,000

Question 36

The traditional "tripod approach" to economic security assumed that who would provide economic security for the individual worker?

A)the employer and the worker
B)the employer and the government
C)the government and the worker
D)the employer, the worker, and the government

Question 37

Which of the following statements about IRAs is false?

A)annual contributions made to the account are tax-deductible up to certain amounts
B)they earn tax-deferred investment income
C)only people in certain income categories can make deductible IRA contributions
D)the maximum annual deductible contribution is $4,000 per person

Question 38

When you are "100% vested" in a pension plan,what does that mean?

A)You own 100% of your contributions, but you do not own the employer's contributions to the plan
B)You own 100% of the employer's contributions, but you do not own your contributions to the plan
C)You own 100% of your contributions to the plan
D)You own 100% of the employer's contributions to the plan

Question 39

Which of the following is/are advantages of tax-deferred income benefits?
I)Postponing tax payments allows interest to accrue on dollars owed to the government.
II)Deferral allows compound interest to also accumulate on a tax-deferred basis.

A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question 40

In the historic tripod approach to economic security,how much of an individual's economic security was the employer anticipated to provide?

A)1/4
B)1/3
C)1/2
D)3/4

Question 41

The traditional American method of providing retirement and health benefits is best described as a democratic socialist approach.

Question 42

The term "tax deferral" refers to the ability to pay taxes at a later date on otherwise currently taxable income.

Question 43

Explain the difference between a PPO and an HMO.

Question 44

A group disability plan that considers Social Security disability benefits is referred to as an integrated plan.

Question 45

A defined contribution retirement plan defines the amount of benefits to be contributed to the employee during retirement.

Question 46

Generally,the justification from the employer's point of view in providing employee benefits is to attract,retain and motivate employees.

Question 47

Wex Enterprises hires you as a benefit consultant. Mr.Wex wants to reduce the number of employees covered by the company's group health insurance plan. Which of the following reasons would you advise him to use to legally determine who to exclude from the health insurance plan?

A)health status of the employee
B)job classification (hourly employee versus salaried employee)
C)genetic information about employees
D)disability of employees

Question 48

Which of the following is not a factor that has caused the decline in defined benefit plans in the U.S.?

A)increasing mobility of the workforce
B)global competition causing employers to reduce expenses
C)reduced employer liability for pension plan results under a defined benefit plan
D)employee, and not the employer, bears the investment risk of a defined contribution plan

Question 49

A cash balance pension plan guarantees the participating employee:

A)nothing
B)a minimum interest rate on the employee's retirsement savings
C)a minimum monthly pension amount for the first 10 years of retirement
D)none of the above

Question 50

One requirement of group insurance is that the group be formed for the purpose of purchasing coverage.

Question 51

Explain the advantages to an employer of a defined benefit pension plan versus a defined contribution pension plan.

Question 52

Explain the difference between a defined contribution and a defined benefit plan.

Question 53

According to HIPPA,which of the following reasons can be used to legally exclude an employee from the employer's group health plan?

A)health status
B)medical history
C)disability
D)none of the above

Question 54

Allocated funding in a pension plan requires an employer to purchase an annuity or life insurance policy for each employee.

Question 55

What are the rules to be considered a qualified plan?

Question 56

Explain how employees are taxed on group life insurance supplied as an employee benefit.

Question 57

The face amount of group term life insurance is typically not selectable by the individual employee and therefore can be based on salary.

Question 58

Why are employers interested in providing employee benefits to their employees?

Question 59

A qualified benefit plan must not discriminate in favor of highly compensated employees.

Question 60

Major medical insurance provides first dollar coverage for any in?hospital expenses.