Question 1

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

Accepted Answer

A defined benefit plan uses a formula ap

Question 2

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.

Accepted Answer

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

Question 3

Which of the following statements about Roth IRAs is false?

Accepted Answer

A)  Contributions made to a Roth IRA are not tax deductible, but are tax-free when withdrawn.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. 
A)  Contributions made to a Roth IRA are not tax deductible, but are tax-free when withdrawn.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 4

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

Accepted Answer

A)  Group health insurance 
B)  Unemployment insurance 
C)  Pension plans 
D)  Group life insurance 
A)  Group health insurance 
B)  Unemployment insurance 
C)  Pension plans 
D)  Group life insurance

Question 5

The popularity of defined benefit pension plans has:

Accepted Answer

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

Question 6

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

Accepted Answer

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 
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 7

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

Accepted Answer

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. 
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 8

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

Accepted Answer

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 
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 9

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

Accepted Answer

A)  Health status 
B)  Medical history 
C)  Disability 
D)  None of the above 
A)  Health status 
B)  Medical history 
C)  Disability 
D)  None of the above

Question 10

Because medical expenses may be covered by more than one policy, health insurance policies normally contain a ________ clause to prevent unnecessary termination of the insured.

Accepted Answer

A)  coordination of benefits 
B)  reinstatement 
C)  pro-rata 
D)  cost containment 
A)  coordination of benefits 
B)  reinstatement 
C)  pro-rata 
D)  cost containment

Question 11

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

Accepted Answer

A)  Cosmetic surgery 
B)  Custodial care 
C)  Emergency medical care 
D)  Mental health expenses 
A)  Cosmetic surgery 
B)  Custodial care 
C)  Emergency medical care 
D)  Mental health expenses

Question 12

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

Accepted Answer

A)  Cost of funding retirement income 
B)  Cost of sick leave and worker absenteeism 
C)  Cost of health insurance 
D)  None of the above 
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 13

Characteristics of group insurance include all the following except:

Accepted Answer

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 
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 14

What does ERISA stand for?

Accepted Answer

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 
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 15

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

Accepted Answer

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 
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 16

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?

Accepted Answer

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

Question 17

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

Accepted Answer

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. 
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 18

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

Accepted Answer

Employers provide employee ben

Question 19

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

Accepted Answer

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 
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

Exam 19: Employee Benefits

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

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.

Which of the following statements about Roth IRAs is false?

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

The popularity of defined benefit pension plans has:

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

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

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

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

Because medical expenses may be covered by more than one policy, health insurance policies normally contain a ________ clause to prevent unnecessary termination of the insured.

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

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

Characteristics of group insurance include all the following except:

What does ERISA stand for?

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

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

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

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

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

Filters