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Flashcards in GBA 2 Questions Deck (36):

 Which of the following states have compulsory short-term disability (STD) income

benefits for workers?

  • I. N ew Jersey and Rhode Island
  • II. N orth Carolina and South Carolina
  • III. Pennsylvania and Delaware

A. I only

B. II only

C. III only

D. I and II only

E. II and III only

 A is the correct answer. New Jersey and Rhode Island have compulsory short-term disability

income benefits for all workers as do California, Hawaii, New York and the territory of Puerto

Rico. The states in items II and III do not have these benefits. See page 366 of the text.


Under normal circumstances, reemployment rights are available for all the following leaves EXCEPT:

A. Bereavement leave

B. Jury duty leave

C. Military leave

D. Family and Medical Leave Act (FMLA) designated leave

E. Leave for active duty in a war lasting less than five years

 A is the correct answer. All the other options are leaves under which reemployment rights are available. See pages 441-445 of the text.


All the following statements regarding funding of old Age, survivors, and Disability insurance (oAsDi) benefits are correct eXcept:

  • The trust funds of the various OASDI benefits in general do not borrow or make loans to each other.
  • The Federal Old Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund are financed primarily through payroll taxes.
  • The Federal Hospital Insurance (HI) Trust Fund of Medicare is financed primarily by the federal income tax collected from upper-income earners receiving OASDI benefits.
  • The Federal Supplementary Medical Insurance (SMI) Trust Fund of Medicare is financed by about 75%, perhaps more, from general revenues of the federal government.
  • The Federal Supplementary Medical Insurance (SMI) Trust Fund of Medicare receives contributions from individuals receiving OASDI disability benefits. 



 Which of the following statements is (are) descriptive of potential disadvantages to

employees when participating in a flexible benefit plan?

  • I. E mployees typically pay higher Social Security taxes when they participate in a flexible benefit plan.
  • II. E mployers can more readily pass on health care cost increases to their employees.
  • III. E mployee benefit elections are, with limited exception, irrevocable during the entire period of coverage.

A. I only

B. III only

C. I and II only

D. II and III only

E. I, II and III



 All the following statements regarding the administration of workers’ compensation administration are correct EXCEPT:

  • A. In most states, employers are obligated to begin payment as soon as the worker is injured and the employer accepts liability.
  • B. Overseeing the agreement of benefit payment arrangements between employees and employers is a key function of most state workers’ compensation agencies.
  • C. The initial level of decision in workers’ compensation disputes between employees and employers often is made by an administrative law judge.
  • D. Compromise-and-release agreements in workers’ compensation claims are often criticized for offering no protection to workers who receive a lump-sum payment and subsequently have additional need for medical care or income benefits.
  • E. The worker’s attorney fee is almost always deducted from the cash benefit of a workers’ compensation suit.



Typically, state unemployment compensation programs are financed by:

  • Employer payroll taxes only
  • Employee pretax contributions only
  • One-half employer payroll taxes and one-half employee pretax contributions
  • Two-thirds employer payroll taxes and one-third employee pretax contributions
  • One-third employer payroll taxes, one-third employee contributions and one-third federal subsidy 



 Which among the following workers’ compensation benefits is the most complicated, controversial and expensive type of benefit?

A. Temporary total disability benefits

B. Temporary partial disability benefits

C. Permanent partial disability benefits

D. Permanent total disability benefits

E. Death benefits



 When automatic enrollment occurs under an employer-sponsored flexible benefit plan, this is known as a(n):

A. Evergreen election

B. No-choice plan

C. Employer-mandated election

D. Negative election

E. One-time election



 2. An individual who terminates his or her employment may obtain continued life insurance coverage in which of the following ways?

  • I. S election of a settlement option
  • II. E xercising the conversion privilege
  • III. O peration of the 31-day continuation-of-protection provision

A. II only

B. III only

C. I and II only

D. II and III only

E. I, II and III

 D is the correct answer. Items II and III reflect provisions for continued coverage of a

terminating employee under a group term life insurance contract. Item I, however, refers to a

method of distributing proceeds. See page 388 of the text.


 A common variable used for employee differentiation regarding sick time is the:

A. Length of employee service

B. Exempt or nonexempt status under the Fair Labor Standards Act (FLSA)

C. Employment category

D. Wage level

E. Completion of a waiting period

 B is the correct answer. A common variable used for employee differentiation regarding sick

time is the employee’s exempt or nonexempt status under the Fair Labor Standards Act (FLSA).

Several of the other options may be used to determine an employee’s entitlement to and

amount of sick leave, but they are not a common variable used for employee differentiation.

See page 438 of the text.


If a cafeteria plan is considered to have a welfare benefit plan, then:

  • A. Employees must be given the right to change benefit elections at least twice a year.
  • B. A claims provision satisfying the requirements of the Employee Retirement IncomeSecurity Act (ERISA) must be included.
  • C. Summary plan descriptions must be filed with the Department of Labor annually.
  • D. The Consolidated Omnibus Budget Reconciliation Act (COBRA) mandates notification of COBRA rights as part of any open enrollment periods.
  • E. It is exempted from having to pass the key employee concentration test.



 Which of the following conditions must a voluntary benefit plan meet not to be

subject to the Employee Retirement Income Security Act?

  • I. T he employer does not make any contributions.
  • II. T he employer cannot endorse the program.
  • III. P articipation is completely voluntary for employees.

A. I only

B. III only

C. I and II only

D. II and III only

E. I, II and III



Which of the following statements regarding retiree life insurance is correct?

  • It is typically an expensive benefit relative to the cost of retiree health coverage.
  • Pension-style expensing is required for the cost of these benefits.
  • Retirees’ death benefit needs are greater than those of active employees.
  • The retiree life insurance benefit is usually related to final salary.
  • Current retirees often receive ad hoc increases in face amount of coverage. 



Which of the following statements is (are) correct concerning employer-provided LtC benefits under the Health insurance portability and Accountability Act of 1996 (HipAA)?

  • employer contributions to qualified LtC plans are tax deductible to the employer.
  • LtC benefit payments are considered taxable income.
  • employer contributions to qualified LtC plans are excluded from the taxable income of employees.
    • I only
    • III only
    • I and II only
    • I and III only
    • I, II and III 



 Which of the following is (are) duties of an employee benefits administrator?

  • I. C ollecting and processing enrollment information
  • II. C larifying policy provisions for employees
  • III. D eciding the level of expenditures for employee benefits

A. I only

B. III only

C. I and II only

D. I and III only

E. II and III only



 1. Which of the following is a characteristic of group term life insurance?

  • A. It involves appraising the risk associated with the entire group rather than each life covered.
  • B. The face amount is the net amount at risk less cash values.
  • C. It typically is required by law for most employment situations.
  • D. Premiums normally are rated according to the principle of social adequacy.
  • E. It must be administered by a trust or government agency.

 A is the correct answer. Group term life insurance is provided on the basis of group

selection principles rather than individual selection. While the other options are applicable to

other forms of private and social insurance death benefit coverage, none of them is a

characteristic of group term life insurance. See page 383 of the text.


 Which of the following legal entities are expressly prohibited from offering a flexible benefit plan to their employees?

I. S ubchapter S-corporations

II. P artnerships

III. S ole proprietorships

A. None

B. I only

C. III only

D. II and III only

E. I, II and III



under the defined dollar benefit approach to financing retiree health care, a retiree may be able to apply their defined dollar benefit to which of the following?

  • premiums for employer-sponsored coverage
  • premiums for individual market coverage
  • Direct reimbursement of out-of-pocket expenses
    • I only
    • II only
    • III only
    • I and III only
    • I, II and III 



Under the federal income tax laws, employer contributions for group term life insurance are tax-free for an insured employee under which of the following circumstances?

  • I. T he plan is contributory and limited to regular employees.
  • II. T he employee has named a tax-exempt charity as the beneficiary.
  • III. T he amount of the benefit is less than $50,000.

A. I only

B. III only

C. I and II only

D. I and III only

E. II and III only


 2. Which of the following is (are) correct statements concerning the eligibility

requirements of the Family and Medical Leave Act (FMLA)?

  • I. T he employee must have been employed by the employer for at least 12 months.
  • II. T he employee must be employed at a worksite where 50 or more employees are employed by the employer within a 75-mile radius of that worksite.
  • III. T he employee must have worked at least 1,000 hours during the 12-month period immediately preceding the commencement of the leave.

A. I only

B. II only

C. III only

D. I a

 D is the correct answer. Items I and II are correct statements of FMLA eligibility

requirements. Item III is incorrect because the minimum number-of-hours requirement is 1,250

and not 1,000. See pages 3.27-3.28 of the Learning Guide.

nd II only

E. II and III only

 D is the correct answer. Items I and II are correct statements of FMLA eligibility requirements. Item III is incorrect because the minimum number-of-hours requirement is 1,250 and not 1,000. See pages 3.27-3.28 of the Learning Guide.


 Which of the following is a feature of a flexible spending account for dependent care expenses?

  • A. The total amount of the dependent care account is restricted by the requirements of Internal Revenue Code Section 132.
  • B. The account may only be funded by employee contributions.
  • C. Qualified expenses for a handicapped spouse of the employee are allowed.
  • D. Changes to the contribution amounts may be made twice in a plan year.
  • E. Any money left in an account at the end of the year is returned to the employee and taxed at the employee’s marginal tax rate.



 All the following are types of communications required by the Employee Retirement Income Security Act of 1974 (ERISA) to be provided to employee benefit plan participants EXCEPT:

A. Consolidated Omnibus Budget Reconcilation Act (COBRA) notice

B. Statement of participant’s accrued and vested benefits

C. Women’s Health and Cancer Rights Act notice

D. Wellness program disclosure

E. A plan amendment proposal being discussed by senior management



 Which of the following is an indirect (hidden) cost within the total cost of disability

to a firm?

  • A. Sick leave costs
  • B. Disability plan costs
  • C. Disability component of Social Security taxes
  • D. Overtime pay
  • E. Workers’ compensation claim costs

 1. D is the correct answer.  Overtime premiums paid to workers are a hidden cost in the total cost of disability to a firm. Options A, B, C and E are all direct costs of disability. See page 360 of the text for descriptions of both public sector and private sector plans that represent direct costs of disability. 


 Which of the following statements is descriptive of the federal income tax treatment of investment income generated by the reserves of a welfare benefit plan?

  • A. Investment income on reserves for medical expense plans of active employees is taxable to the employer.
  • B. Investment income on reserves held for post-retirement health care is taxable to the employer.
  • C. Employees are taxed on the investment income of group term life insurance plans.
  • D. Investment income generated by reserves above the allowable limit is taxed at the 100% rate.
  • E. Investment income on reserves for disability income plans is fully taxed as unrelated business income.



Which of the following statements concerning long-term care (LtC) employee benefit programs is correct?

  • LTC programs typically are structured under the National Committee on Quality Assurance (NCQA) model bill.
  • The federal income tax laws do not provide favorable tax treatment for LTC programs.
  • Policy termination provisions should be negotiated in advance since large reserves are accumulated for claims that may arise, or may continue for decades.
  • The communication of LTC programs to employees is an exclusive insurer responsibility.
  • An LTC benefit program should be designed totally independent of other benefit programs the employer sponsors. 

C is the correct answer. Employers should negotiate policy termination provisions at the inception of the policy contract because of the duration of future claims and their impact on reserves. All of the other options are incorrect statements. 


Which of the following statements regarding social security’s primary insurance amount (piA) is (are) correct?

  • the piA is the monthly amount paid to a retired worker at the normal retirement age.
  • A worker’s average indexed monthly earnings, not the piA, are used to determine the benefits of a spouse of a retired worker.
  • A disabled worker who qualifies for social security disability benefits receives 60% of the piA amount. 



LtC programs are a matter of public concern for all of the following reasons eXCept:

  • There is a growing increase in the number and percentage of older people in the population.
  • The need for LTC is exploding because of lack of progress in the field of medical gerontology.
  • Many people erroneously believe that Medicare and Medicaid adequately provide for LTC coverages.
  • Existing medical coverages generally do not adequately provide for LTC.
  • Family members are less able than in the past to provide LTC services to each other. 

B is the correct answer. Actually, significant medical advancements, not lack of progress, have increased the need for LTC. All the other options correctly reflect reasons for public concern over LTC 


 All of the following are important aspects of creating a carefully crafted

communication program when establishing a flexible benefit plan EXCEPT:

  • A. An employer must be prepared for negative reactions and criticism from employees.
  • B. An employer should only address the positive attributes of plan participation when communicating with employees and omit any references to negative consequences.
  • C. If employee input is solicited in the earlier design phase, communications should reflect, as much as is feasible, suggestions and input gathered.
  • D. Adequate time and resources should be budgeted for the communication campaign while the other plan features are being designed.
  • E. Employees should have adequate time and forums so as to facilitate the answering of their questions.


 3. I ndividual term insurance policies typically have all the following features EXCEPT:

  • A. Pure protection
  • B. Specific face amount
  • C. Savings element
  • D. Expiration date
  • E. Renewability

C is the correct answer. Individual term insurance policies have all the features set forth in the other options. However, the lack of a savings element or cash value in a typical term policy is one of the features that distinguishes term insurance from whole life insurance. See pages 1.37-1.39 of the Learning Guide.


 Which of the following statements is correct concerning the use of a common

relational database in the employee benefits administration function?

A. Its goal is the ability to view benefit plans on a plan-by-plan basis.

B. It can provide benefit counseling services to employees.

C. It requires a benefits administrator in order to access information.

D. It can result in the benefits administrator being the secondary means of accessing information.

E. It creates the need for additional filing of information.



 Which of the following is (are) state initiatives to address workers’ compensation cost growth?

  • I. Larger mandatory subsidies to the residual market
  • II. Creation of competitive state funds
  • III. Deregulation of private insurance market
  • A. I only

B. I and II only

C. I and III only

D. II and III only

E. I, II and III



 All the following are public sector programs that provide disability income benefits


  • A. The Old-Age, Survivors, and Disability Insurance (OASDI) program
  • B. Workers’ compensation
  • C. State retirement systems
  • D. Medicaid
  • E. State-mandated STD plans

 D is the correct answer. Options A, B, C and E are all public sector programs that provide

disability income benefits. Option D, Medicaid, is a public sector program but does not

provide disability income benefits. See page 360 of the text.


 All the following statements set forth a feature of Internal Revenue Code (IRC)

Section 79 EXCEPT:

A. It deals with the regulation of group term life insurance employee benefit plans.

B. It contains eligibility and benefits tests.

C. It has detailed regulations that apply exclusively to collectively bargained plans.

D. It prohibits discrimination in favor of so-called key employees.

E. It excludes employee-pay-all plans from the nondiscrimination requirements.



Types of options often provided under dependent child-care programs include all the following EXCEPT:

A. Emergency or short-term services

B. Adoption services

C. Voucher systems

D. Information and referral services

E. Discount systems



 All the following are permissible benefits under a flexible benefit plan EXCEPT:

A. Education assistance

B. Dental expense benefits

C. Group term life insurance

D. Medical expense benefits

E. Disability income benefits



employers that are seeking to retain or modify their medical expense benefit plans to include coverages for retirees face all of the following types of issues eXCept:

  • How should plan costs be funded?
  • How should plans be integrated with other components of the retiree program?
  • What level of Social Security Administration certification is best suited?
  • What types of grandfather rules and deductibles are appropriate?
  • How should premiums or contributions be shared by the firm and the employees?