Deck 9: Employee Benefits: Health, Disability, and Retirement Plans

Question 1

Education reimbursement offered by your employer is an example of a(n) _______ employee benefit.

A) tangible
B) intangible
C) guaranteed
D) contingent

Answer 1

tangible

Question 2

Which of the following is not a tangible employee benefit?

A) Paid vacation
B) Use of a company car
C) Flexible work hours
D) Wellness programs

Answer 2

Flexible work hours

Question 3

The working environment on the job is

A) a tangible benefit.
B) an intangible benefit.
C) not a benefit.
D) an entitlement, regulated by OSHA.

Answer 3

an intangible benefit.

Question 4

A contributory benefit plan is one for which the

A) employer pays for the benefits.
B) employee pays some of the costs of the plan.
C) employee pays all of the costs of the plan.
D) employer reimburses the employee for the costs of the plan.

Question 5

If an employee benefit is wholly paid by the employer, it is a(n)

A) contributory plan.
B) noncontributory plan.
C) employer-sponsored plan.
D) direct payment plan.

Question 6

If you get a sum of money that can be applied to purchase benefits from a menu of employer-selected benefit options, this arrangement is called a

A) cafeteria plan.
B) direct purchase plan.
C) contributory plan.
D) noncontributory plan.

Question 7

On average, large firms offer ____ employee benefits than small employers.

A) more
B) less
C) about the same
D) exactly the same

Question 8

Group insurance is generally ______ equivalent individually purchased policies.

A) more expensive than
B) less expensive than
C) the same as
D) cost comparable to

Question 9

Group insurance is an insurance purchased on a(n)

A) group basis by an employer for the benefit of employees.
B) individual basis within a group, such as a company.
C) group of employers in the same geographic area for the benefit of their employees.
D) individual basis by an employee for a group of other employees.

Question 10

If you were to pay $1,000 in health insurance premiums through your employer as a pretax deduction from your monthly payroll, how much annual savings will you have, assuming a 25% marginal tax rate?

A) $250
B) $333
C) $3,000
D) $4,000

Question 11

If you have a 20% marginal tax rate and health insurance costs you $5,000 per year, how much will you save in taxes if you can buy the insurance through a pretax plan at your employer?

A) $1,000
B) $1,250
C) $2,500
D) $4,000

Question 12

Flexible spending accounts can be used to pay for

A) medical and educational expenses.
B) child-care and educational expenses.
C) child-care and medical expenses.
D) medical, educational, and child-care expenses.

Question 13

A major difference between a flexible spending account (FSA) and a health savings account (HSA) is that an

A) HSA can roll over unused amounts from year to year, whereas FSA cannot .
B) FSA can roll over unused amounts from year to year, whereas HSA cannot.
C) FSA contribution is made from pretax dollars, whereas HSA contribution is made from after-tax dollars.
D) HSA contribution is made from pretax dollars, whereas FSA contribution is made from after-tax dollars.

Question 14

Employers who offer employee benefits generally qualify for _______ tax deductions that they would get if they had offered equivalent cash compensation to employees.

A) higher
B) lower
C) no
D) about the same

Question 15

Noncash benefits received by employees

A) must be reported as taxable income by the employee.
B) must be reported as taxable income by the employer.
C) must be reported as taxable income by the employee and employer.
D) are not reported as taxable income.

Question 16

Even though the cost of living is higher in urban areas, urban salaries are generally

A) high enough to match the increased cost of living.
B) low enough to offset the increased cost of living.
C) higher than the increased cost of living.
D) not high enough to cover the increased cost of living.

Question 17

When comparing similar job offers in different geographical areas, it is critical to evaluate __________ differences between the different locations.

A) salary
B) cost-of-living
C) benefit
D) tax

Question 18

Which of the following statements is true concerning cost-of-living differences?

A) It is generally more expensive to live on the coasts than in the middle of the country.
B) It is generally more expensive in rural areas than urban areas due to lower compensation levels.
C) There are few sources that allow for comparison of these differences.
D) Although housing varies by geographic area, food and clothing costs are relatively constant.

Question 19

Suppose that you are offered a position in Boston for $36,000 per year and a position in Tallahassee for $36,000 per year. If Tallahassee's cost of living is 95% of the national average and that Boston's is 110% of the national average, which is the better job offer financially?

A) They are both the same at $36,000 each.
B) Boston is better because you can purchase 110% of what you can in Tallahassee.
C) Tallahassee is better because it has a lower cost of living.
D) There is no sufficient information to make this decision.

Question 20

You are comparing a $45,000 job offer in St. Paul to a $57,000 job offer in San Francisco. St. Paul's costs are 92% of the national average, whereas San Francisco's costs are 150% of the national average. What is the equivalent salary in San Francisco?

A) $27,600
B) $34,960
C) $73,370
D) $92,935

Question 21

In order to compare fringe benefits of different jobs, you should

A) consider the cash-equivalent benefits plus the compensation.
B) consider the cash-equivalent value of all intangible benefits.
C) compare the cash equivalence of the benefits.
D) only consider those benefits that are valuable to you.

Question 22

Charlotte is a graduating finance major and is considering two job offers in the same city. Techtronics LLC pays a salary of $40,000, and the firm will contribute 5% of her salary to a retirement plan. Compusoft LLC pays a salary of $42,000, and the firm doesn't offer a retirement plan. If all other factors are equal, which job opportunity is better?

A) Techtronics by $166
B) Techtronics by $222
C) Compusoft by $1,000
D) Both are even.

Question 23

In assessing your potential health-care needs, you should consider your

A) tax situation.
B) savings.
C) family health history.
D) income.

Question 24

National trends in health-care costs shows that

A) the share of health insurance premiums paid by employers has remained stable.
B) wages have risen at a faster rate than health costs.
C) the share of health insurance premiums paid by employers has decreased.
D) the rise in health insurance premiums has corresponded closely to the inflation rate.

Question 25

In March 2010, Congress passed the politically controversial Patient Protection and Affordable Care Act, commonly called "ObamaCare." Which of the following is not an included provision?

A) Expand coverage required by insurers
B) Health-care cost controls
C) Improvement in the health insurance marketplace through the creation of exchanges
D) Nationalized health care

Question 26

Under the Affordable Care Act (ACA),

A) 70 percent of all premiums collected by insurers must be used to pay for actual claims costs and quality improvements.
B) children under age 30 can be covered under parents' plans even if they don't live at home.
C) insurers cannot use health as a rating factor in pricing individual insurance policies.
D) individuals cannot obtain health insurance if they have a preexisting condition.

Question 27

Many states have developed electronic clearinghouses for individuals and small businesses to shop for and compare health insurance plans. What provision of the Patient Protection and Affordable Care Act of 2010 was this created under?

A) Health insurance exchanges
B) Premium credits and subsidies
C) Employer mandates
D) Medical loss ratios

Question 28

What provision of the Patient Protection and Affordable Care Act of 2010 required U.S. citizens and legal residents to hold health coverage?

A) Individual mandate
B) Employer mandate
C) Coverage
D) Medicaid expansion

Question 29

A fee-for-service plan, also known as an indemnity plan,

A) controls your access to medical services in order to control costs.
B) pays for medical services within closed networks in order to control costs.
C) pays or reimburses for the actual medical costs incurred.
D) reimburses only for customary medical costs based on national averages.

Question 30

A managed-care health insurance plan focuses on reducing health-care costs by

A) having large deductibles.
B) having low maximum dollar limits of protection.
C) contracting with health-care providers to give them incentives for low-cost alternatives.
D) reimbursing the actual medical costs incurred.

Question 31

HMOs and PPOs are both examples of _________ health insurance plans.

A) fee-for-service
B) managed-care
C) major medical
D) indemnity

Question 32

The most common type of employer-based health insurance plan today is the

A) fee-for-service plan.
B) preferred provider organization (PPO).
C) health maintenance organization (HMO).
D) point-of-service (POS) plan.

Question 33

A ________ is less restrictive on its members than a ____________.

A) preferred provider organization; health maintenance organization
B) health maintenance organization; preferred provider organization
C) health maintenance organization; point-of-service plan
D) preferred provider organization; fee-for-service plan

Question 34

Basic health-care insurance benefits include

A) hospital, surgical, and pharmaceutical expenses but not physician expenses.
B) physician, surgical, and pharmaceutical expenses but not hospital expenses.
C) hospital expenses but not physician and surgical expenses.
D) hospital, surgical, and physician expenses.

Question 35

What fee-for-service plan only includes hospital, surgical, and physician expenses?

A) Major medical insurance
B) Basic health-care insurance
C) Coinsurance
D) Premium medical insurance

Question 36

Major medical insurance plans

A) often have high maximum limits and no deductible.
B) only cover hospital, surgical, and physician expenses.
C) add to the protection offered by basic health-care insurance by providing coverage for additional expenses and a wider range of medical services.
D) are managed-care plans offered by the state-sponsored insurance exchange.

Question 37

In health insurance plans, coinsurance is a(n)

A) initial amount the insured will have to pay before the insurer will pay any of the covered expenses.
B) proportional sharing of medical costs by the insurer and the insured.
C) maximum amount an insured has to pay out of pocket in a given year.
D) maximum amount an insured can be reimbursed by an insurer.

Question 38

If you must pay 20 percent of your medical costs and the insurer pays the other 80 percent, this is an example of

A) a deductible.
B) coinsurance.
C) indemnity.
D) a copay.

Question 39

Which type of health-care plan provides comprehensive services, encourages preventive medicine, and gives health-care providers financial incentives to control costs?

A) Fee for service
B) Indemnity
C) HMOs
D) Medicare

Question 40

The primary disadvantage of HMOs is that

A) they are not widely available in many parts of the United States.
B) the patient often has a limited choice of physicians and limited access to specialist care.
C) the deductibles are relatively high.
D) there isn't a primary care physician to manage the use of medical specialists.

Question 41

Ethan Johnson is injured in a boating accident and incurs a $1,000 medical bill. If his plan has a $250 deductible and a 70/30-coinsurance provision, how much of the bill will be his responsibility?

A) $250
B) $300
C) $475
D) $1,000

Question 42

With dental expense insurance, you will normally have to pay

A) premiums.
B) coinsurance.
C) deductibles.
D) premiums, coinsurance, and deductibles.

Question 43

Vision insurance is considered

A) inexpensive for the benefit received.
B) expensive for the benefit received.
C) essential for the benefit received.
D) complementary to medical insurance.

Question 44

Medicaid is a

A) federally operated health insurance program.
B) state-operated health insurance program.
C) federally run insurance exchange.
D) employer-sponsored, federally subsidized insurance plan.

Question 45

Which of the following are covered by Medicare?

A) People aged 65 and over
B) People receiving Social Security disability benefits
C) People with end-stage renal disease
D) All of these.

Question 46

Which of the following health programs is funded by a payroll tax?

A) Worker's compensation
B) Medicare
C) Medicaid
D) Affordable Care Act

Question 47

Which of the following medical costs is/are covered by basic Medicare (Part A)?

A) Doctors' costs
B) Hospital costs
C) Prescription drug costs
D) All of the above.

Question 48

Medicaid is a government program that is administered by

A) the federal government and provides health insurance for the poor.
B) each state and provides health-care coverage for low-income households.
C) each state and provides health-care coverage for low-income elderly consumers.
D) the federal government to provide health insurance for persons of age 65 and older.

Question 49

Under COBRA, you are eligible to purchase health insurance through a previous employer for

A) as long as you remain unemployed.
B) as long as you were employed.
C) a period of 18 months (extendable under some circumstances to 36 months).
D) a period of 24 months (extendable under some circumstances to 48 months).

Question 50

If you elect to obtain COBRA coverage after losing your job, you will be responsible for paying the

A) same portion of the premium cost as you did while employed.
B) entire premium and your former employer can add up to 10 percent for administrative costs.
C) entire premium and your former employer cannot increase it.
D) same premium as you did while employed, with a subsidy paid by the federal government.

Question 51

COBRA health insurance coverage is available for which of the following previously insured individuals?

A) Divorced spouses
B) Nondependent children under 26 years old
C) Dependent children under 18 years old
D) All the choices are correct.

Question 52

A health plan that provides financial incentives for the insured to practice preventive care and invest in their own health is called a

A) consumer choice plan.
B) managed-care plan.
C) preventive care plan.
D) healthy living plan.

Question 53

Insurance policies designed to pay costs not covered by Medicare are called

A) Medigap policies.
B) Medicare Plus plans.
C) Medicaid policies.
D) complete coverage policies.

Question 54

Chuck's health insurance requires payment of an annual deductible of $500 per person or $1,000 per family. After meeting the deductible, he must pay 20% of covered charges until he reaches $4,200 out of pocket, after which the insurer will pay 100% of the costs. Chuck has had no other claims during the year. Zoey, his daughter, fell from a playground swing set and requires emergency surgery. The hospital stay costs $20,000. How much will he end up paying out of pocket?

A) $3,900
B) $4,000
C) $4,200
D) $4,400

Question 55

Marnie has recently compiled her required monthly expenses and evaluated all of her sources of nonemployment earnings in the event that she was unable to work for a period of time. She has just completed a(n)

A) incomplete financial statement.
B) life insurance needs analysis.
C) disability income needs analysis.
D) emergency fund analysis.

Question 56

Which of these is not a source of disability income replacement?

A) Life insurance
B) Household emergency funds
C) Investment portfolio
D) Government program benefits

Question 57

Which of these is not a disability income insurance source?

A) The government
B) Employer benefits
C) Unemployment insurance
D) Private insurance company

Question 58

Jeb McCrown has been injured out on his ranch and will not be able to return to work for a few months. Of the following sources of disability income replacement, which one should be the last source of income he should consider?

A) Tax-deferred retirement savings
B) Vacation days from his employer
C) Investment income
D) Household emergency fund

Question 59

Short-term disability insurance from employers typically has _______ waiting period and will replace income for _________.

A) 7-14 days; 3-6 months
B) 7-14 days; 6-12 months
C) 15-30 days; 3-6 months
D) 15-30 days; 6-12 months

Question 60

The majority of long-term disability insurance plans offered by employers pay benefits

A) for 5 years.
B) for 5-10 years.
C) until 65 years of age.
D) for the rest of the policyholder's life.

Question 61

Long-term disability income insurance is usually a(n) ________ group benefit.

A) optional contributory
B) mandatory noncontributory
C) optional noncontributory
D) mandatory contributory

Question 62

Why is it considered preferable to buy disability insurance on an after-tax basis?

A) You are not allowed to purchase disability insurance on a pretax basis.
B) If you purchase disability insurance on an after-tax basis and later are disabled, the income benefit you receive while disabled will be tax-free.
C) Disability insurance is so inexpensive that a pretax purchase is an administrative burden.
D) The tax rate on benefits is less than the tax rate on regular earnings.

Question 63

What is a common requirement regarding qualification and waiting periods before one can collect employer-sponsored disability income protection?

A) Using all sick days
B) Using all personal days
C) Using all vacation days
D) Using all sick days, personal days, and vacation days

Question 64

Jeff Jeffers was injured two weeks ago and keeps sending his wife to the mailbox to look for his new disability check. Coming back empty-handed, she finally decided to look through their policy to see where the problem may lie. What feature should she look for and why?

A) Benefit duration, which shows how long you have to be disabled before you receive payment
B) Waiting period, which shows how long you have to be disabled before you receive payment
C) Waiting period, which tells you when the benefits start and stop
D) Benefit duration, which tells you when the benefits start and stop

Question 65

Workers' compensation insurance is a

A) federally run health-care program that requires employers to pay workers who incurred an injury or illness as a result of their work.
B) state-run program that requires employers to pay lost wages and medical costs associated with job-related illnesses or injuries.
C) state-run health-care program that provides health insurance for low-income employees.
D) federally run health-care program that provides health insurance for low-income employees.

Question 66

State workers' compensation laws provide for __________, in addition to payment for medical expenses.

A) rehabilitation costs
B) lost wages
C) lump-sum death benefits
D) rehabilitation costs, lost wages, and lump-sum death benefits

Question 67

You will be eligible for workers' compensation benefits if you are injured

A) when employed.
B) on the job.
C) or fall ill when employed.
D) or fall ill on the job.

Question 68

Most employers provide workers' compensation insurance through _________ to cover claims associated with job-related illness or injury.

A) private insurance
B) state-run programs
C) Medicaid
D) either private insurers or state-run programs

Question 69

In order to be eligible for Social Security disability coverage, you must be unable to work

A) at any job, be out of work at least one year, and expect to remain disabled for at least another year.
B) at any job, be out of work at least five months, and expect to remain disabled for at least another year.
C) your job, be out of work at least six months, and expect to remain disabled for at least another year.
D) your job, be out of work at least one year, and expect to remain disabled for at least another year.

Question 70

Mateo fell from a chimney while constructing a fireplace. His employer, Fireplaces Unlimited, is fully insured and will provide Mateo $2,900 monthly after five months from his accident. Since he is expected to be immobile for 9 months and another 9 months of physical therapy before he can return to work, he is eligible for Social Security disability for $1,800 a month. How much will Mateo receive in benefits after five months?

A) $1,800
B) $2,900
C) $3,700
D) $3,800

Question 71

Unlike employer-sponsored disability benefits, Social Security disability benefits stipulate that you must be unable to work

A) any job.
B) your job.
C) part-time.
D) full-time.

Question 72

Justin wants to be sure that his family's expenses would be covered if he were to become disabled for a period of time. His estimated household expenses for the coming year to be approximately $4,800 per month, and if necessary, he could temporarily cut expenditures for job-related expenses ($50), savings ($725), and other discretionary spending ($700). His wife Monica is a stay-at-home mom, so one alternative would be for her to return to work. However, she might not be able to earn enough to cover the additional child-care expenses. Justin's salary is $65,000 and his employee benefit plan includes 30 paid leave days, as well as disability insurance that pays 65% of his salary after 90 days. If the family has an emergency fund of $10,000, does he have sufficient disability income protection?

A) Yes, $196 surplus after waiting period
B) Yes, $2,092 surplus after waiting period
C) No, $1,279 deficit after waiting period
D) No, $504 deficit after waiting period

Question 73

Bill Patterson was injured at work and needs some money while he is out of work. Which disability income should he be receiving?

A) Long-term disability
B) Short-term disability
C) Workers' compensation
D) Social Security disability

Question 74

Gertrude broke her hand snowboarding over the weekend with her friends in Aspen. Her boss at 10-Key Accounting said there is no work for her that does not require the use of Gertrude's broken hand. What type of disability insurance could Gertrude collect?

A) Short-term disability
B) Long-term disability
C) Workers' compensation
D) Social Security disability

Question 75

Under a tax-qualified retirement plan, taxes on _______________ are deferred until withdrawal at retirement.

A) contributions
B) earnings from plan assets
C) benefit accruals
D) contributions, earnings from plan assets, and benefit accruals

Question 76

When a retirement plan is tax-qualified,

A) earnings on plan assets are subject to a lower federal income tax rate.
B) federal income taxes on contributions made to the plan and earnings on plan assets are not assessed until withdrawal at retirement.
C) contributions made to the plan and earnings on plan assets are exempt from federal income taxation.
D) earnings on plan assets are subject to additional federal income taxes, including a higher tax rate.

Question 77

If you withdraw money from a tax-qualified plan before age 59½, you will have to pay

A) federal income tax on the amount withdrawn.
B) state income tax on the amount withdrawn.
C) a 10 percent penalty on the amount withdrawn.
D) All of the above.

Question 78

In a defined-benefit retirement plan, the employer promises to

A) pay employees a set retirement benefit when they retire based on how much the employee has contributed.
B) pay employees a retirement benefit determined by a formula that is typically based on preretirement income and number of years worked.
C) pay a certain amount of money into their retirement account each year based on a percentage of their salary.
D) allow employees to contribute money to their retirement account out of their current earnings on a tax-deferred basis.

Question 79

In a defined-contribution retirement plan, the employer promises to pay

A) employees a set retirement benefit when they retire.
B) employees a retirement benefit determined by a formula that is typically based on preretirement income and number of years worked.
C) a certain amount of money or percentage of an employee's salary into his or her retirement account each year.
D) None of the above.

Question 80

XYZ Corp is looking into providing a retirement plan for their employees. They would prefer a plan wherein they (the employer) make a benefit promise, and the actual benefit depends on the performance of an investment account kept on behalf of the plan participant. Which type of retirement plan should they purchase?

A) Cash-balance plan
B) Defined-benefit plan
C) Defined-contribution plan
D) Pension plan