Deck 12: Designing Indirect Pay Plans

Question 1

Which type of employee services are free onsite massages during peak times,fitness club memberships,and Internet stations in lounge areas examples of?

A) work-life balance
B) outplacement services
C) employee assistance programs
D) wellness and recreational

Answer 1

D

Question 2

A force promoting flexible benefits plans is the increasing diversity of the work force.

Answer 2

True

Question 3

Which variable is NOT used to determine the income level provided to employees upon retirement under a "defined benefit program"?

A) some variable (percentage)of the average income over a certain period of time,usually three to five years
B) the company's profit level over a period of three to five years
C) employees' years of service
D) employees' salary level

Answer 3

B

Question 4

Which term refers to a company pension plan that guarantees a certain benefit to retirees regardless of market conditions?

A) defined benefit plan
B) money purchase plan
C) defined contribution plan
D) Canada Pension Plan

Question 5

Defined contribution plans are riskier for employees versus defined benefit plans.

Question 6

Deferred profit-sharing plans tend to be classified as "contributory benefits."

Question 7

Which of the following is NOT an issue in establishing an indirect pay system?

A) determining the role of employee performance in establishing benefits
B) choosing a process for plan design
C) choosing the benefits system and specific benefits
D) determining the structure of each benefit

Question 8

Firms with pension plans have higher turnover rates among employees.

Question 9

Defined contribution plans ultimately transfer retirement income risk from the employer to the employee.

Question 10

As a result of a recent human resource audit,it was determined that a particular company has an "underfund liability" associated with its retirement plan,requiring an immediate injection of cash.What type of pension plan or retirement plan is this company likely using?

A) hybrid flexible plan
B) registered retirement savings plan (RRSP)
C) mandatory retirement plan
D) defined benefit plan

Question 11

Research shows that satisfaction with a benefits plan declines as employees learn more about it.

Question 12

One drawback associated with outsourcing routine benefits administration is the notion that employers will begin to lose touch with benefit needs and issues important to employees.

Question 13

A force hindering flexible benefits plans is loss of economies of scale in the purchase of benefits.

Question 14

For most organizations,what component of its benefits package is second only to mandatory benefits in terms of cost for an organization?

A) employment assistance programs
B) wellness and recreational plans
C) retirement plans
D) pay for time not worked plans

Question 15

From a funding obligation perspective,why do employers prefer to use a defined contribution pension plan?

A) Liability is limited to the amount placed into the plan.
B) Actuarial predictions are made easier.
C) Pensioners are guaranteed a fixed sum of money.
D) This avoids "underfunded" plans.

Question 16

Life insurance is among the top three nonmandatory benefits offered by Canadian firms with at least 10 employees.

Question 17

Ricardo has worked for a local company for the last 25 years.Upon retirement,Ricardo has been guaranteed a salary of $2,000.00 per month under the company's retirement plan.What kind of retirement benefit program is this company using?

A) defined contribution plan
B) tax-deferred plan
C) defined benefit plan
D) registered retirement savings plan

Question 18

It is not cost effective having employers purchase dental coverage on behalf of their employees instead of the employees themselves.

Question 19

What is NOT a possible reason for implementing flexible benefit plans?

A) cutting benefit costs
B) developing a more diverse work force
C) lowering overall administrative costs
D) shifting employee perspective away from an entitlement approach

Question 20

What is the first issue in developing an effective benefit system?

A) determining the tax implications
B) examining the compensation cost structure of the organization
C) establishing the administration process
D) determining the role of indirect pay in compensation strategy

Question 21

Which plan allows you to tailor your benefit plan to suit your needs and even trade off benefits that are not important to you?

A) health care spending accounts
B) simplified flex plan
C) flexible benefits plan
D) fixed benefits plan

Question 22

As a member of the company's defined benefit plan,employees receive a pension based on one percent of the average of their best three years' earnings for each year of service.What will be your annual pension if you retire after 30 years of service and have averaged $50,000 per year during your three best years?

A) $15,000
B) $28,000
C) $30,000
D) $50,000

Question 23

Which process of evaluating benefits systems considers the net benefits associated with a particular benefit system?

A) competitive analysis
B) cost break-even analysis
C) cost analysis
D) employee surveys

Question 24

Which term usually describes severance packages for executives?

A) RRSPs
B) termination benefits
C) golden parachutes
D) just cause severance

Question 25

Which statement best describes benefits for full-time versus part-time employees in Canada?

A) Most jurisdictions do not legally require firms to have the same benefits for full-time and part-time employees.
B) Most firms have the same benefits for both categories of employees,regardless of the law.
C) All employees who work more than 20 hours a week are entitled to nonmandatory benefits.
D) All employees who work more than 25 hours a week are entitled to nonmandatory benefits.

Question 26

What benefit system provides employees with the choice between two or more fixed plans?

A) modular benefits plan
B) "core" benefits plan
C) flexible benefits plan
D) "Beneflex" plan

Question 27

Which of the following is NOT a government-regulated benefit?

A) outplacement services
B) rest breaks
C) vacation time
D) statutory holidays

Question 28

Teresa has a dental plan through her employer.Recently,she has undergone dental work costing the plan $2,500.Luckily for Teresa,this particular dental work was covered completely by her dental plan.What are the tax consequences as a result of Teresa not having to pay for the dental work?

A) Her employer will add the $2,500 as an expense in their income statement.
B) She will have to include the $2,500 as additional income.
C) There are no tax consequences at all as benefits are tax-free.
D) Teresa will have to claim half of the benefit as income.

Question 29

Which statement best describes pension plans in Canada?

A) Defined contribution plans have been decreasing.
B) Defined contribution plans have been increasing.
C) Hybrid plans have been decreasing.
D) Defined benefit plans have not changed in terms of their use.

Question 30

Which of the following are all Canadians entitled to?

A) Old Age Security
B) defined pension plans
C) defined contribution plans
D) deferred profit-sharing plans

Question 31

Firms with flexible benefit plans may enjoy a competitive advantage in terms of recruitment.What is the likely reason for this?

A) Flexible plans can lower administrative costs.
B) Prospective employees may find the idea of choosing their benefits appealing.
C) Flexible plans enjoy economies of scale.
D) Flexible plans imply higher wages.

Question 32

Which nonmandatory major benefit is the most common among Canadian organizations with 10 or more employees?

A) life insurance
B) supplemental unemployment benefits
C) formal pension plans
D) group RRSPs

Question 33

From an employee's point of view,what advantage do defined contribution plans have over defined benefit plans?

A) The employer assumes the risk of investments.
B) They tend to be more portable.
C) They provide a higher pension for those who join the company later in life.
D) Risk is averaged over a large group of employees.

Question 34

What is usually NOT considered by courts in establishing awards relating to notice periods or severance in lieu of notice?

A) whether some element of enticement was involved
B) the likelihood that the employee will secure employment quickly
C) the employee's age
D) the employee's gender

Question 35

What is NOT a consideration in deciding whether to include a particular benefit in indirect pay?

A) whether it contributes to the objectives of indirect pay
B) whether or not there is a union
C) whether it is valued by employees
D) whether it adds much net value to the compensation package

Question 36

Life and accident insurance is almost always included in benefit plans.Which statement does NOT accurately describe life and accident insurance?

A) Often a spouse or partner may be included under the coverage.
B) Coverage amounts may be increased at the employee's expense,or on a cost-sharing basis.
C) Often the coverage is based on a multiple of the employee's annual salary.
D) Recent changes to the tax code have made group life insurance products much more tax-friendly to employees.

Question 37

Which variable has NOT caused Canadian organizations to move away from pensions that have defined benefits?

A) inflationary pressures during the early 1980s
B) tax issues associated with the manner in which pension plans are funded
C) market returns associated with pension funds
D) rising life expectancies of employees

Question 38

Which of the following is NOT a mandatory benefit?

A) Canada Pension Plan
B) defined benefit pension plans
C) workers' compensation
D) employment insurance

Question 39

Experts will support the notion that employee participation in the process of designing a benefits plan is highly desirable.Which goal do experts NOT identify as a positive outcome of having employee involvement?

A) better understanding of needs
B) support mechanism in communicating the plan
C) increased level of acceptance
D) decreased overall plan costs

Question 40

Providing which benefit will reinforce your strong commitment to helping your employees balance work and personal activities?

A) group banking package discount rates
B) paid time off for community service
C) subsidized meals and free hot drinks
D) computer purchase plan

Question 41

Identify and briefly explain the types of pension plans discussed in the textbook.

Question 42

Identify and briefly explain the most common and important employee services.

Question 43

Discuss the pros and cons of flexible versus fixed benefits plans.

Question 44

Describe how a health care spending account works.

Question 45

Describe the main issues in designing the benefits system.