Compensation Final
Profit Sharing Plan
A plan that focuses on profitability as the standard for group incentive. These plans typically involve one of three distributions: (1) Cash or current distribution plans provide full payment to participants soon after profits have been determined (quarterly or annually); (2) deferred plans have a portion of current profits credited to employee accounts, with cash payments made at time of retirement, disability, severance, or death; and (3) combination plans that incorporate aspects of both current and deferred options
In an attempt to reduce the employee benefits cost to the company, GrindStop Corp. restricts the number of visits to the dentists covered in the dental plan to two per year for each employee. Which of the following cost-containment strategies is being used by GrindStop?
Benefit limitations
Flexible Benefit Plan
Benefit package in which employees are given a core of critical benefits (necessary for minimum security) and permitted to expend the remainder of their benefit allotment on options that they find most attractive
Which of the following best describes the impact of the Maintenance Act (1973) on employee benefits?
It required employers to offer alternative health coverage options to employees.
Contingent Workers
People who have no expectation of continued employment and/or expect their employment to be temporary. (See U.S. Bureau of Labor Statistics.)
A benefit plan that allocates a set dollar amount to employees and allows them to select benefits is called a ________ plan.
a flexible benefit
Steve has a small company with 12 employees. One of his employees, Larry, has been laid off because his work has been outsourced. Larry had health coverage through Steve's company and wants to continue that coverage. According to the Consolidated Omnibus Budget Reconciliation Act, how long can Larry continue his coverage through Steve's company after being laid off?
0 months
Employee Benefits
The parts of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (e.g., life insurance, pension, workers' compensation, vacation)
All of the following are advantages of flexible benefits EXCEPT:
decreased administrative expenses.
Contingent workers receive ________ benefits than regular workers; contingent workers' benefits cost ________ for employers than it does for regular workers.
fewer; less
The first issue in setting up a benefits package is:
finding out who should be protected or benefited.
The rising costs of Social Security have been covered by:
increases in the maximum earnings base and the rate at which that base is taxed.
The typical employee can recall ________ percent of the benefits he or she receives.
less than 15
A health maintenance organization pulls together a group of providers willing to provide services at an agreed upon rate in exchange for employers:
limiting employees to these providers for health services.
Surveys show that the most highly valued employee benefit is:
medical insurance.
The biggest cost-containment strategy in recent years is the movement to:
outsourcing
A survey shows that most employers are responding to increased benefit costs by
requiring employees to pay higher deductibles and copays.
The most widely used benefit survey is conducted by:
the U.S. Chamber of Commerce.
Almost ________ percent of the companies offering child care assistance to employees also offer elder care assistance.
50
Today, ________ percent of workers participate in the pension plan coverage provided by their employers.
53
Approximately ________ percent of private sector employees have access to paid life insurance.
56
Defined Benefit Plan
A benefit option or package in which the employer agrees to give the specified benefit without regard to cost maximum. Opposite of defined contribution plan
Defined Contribution Plan
A benefit option or package in which the employer negotiates a dollar maximum payout. Any change in benefit costs over time reduces the amount of coverage unless new dollar limits are negotiated
Vesting
A benefit plan provision that guarantees that participants will, after meeting certain requirements, retain a right to the benefits they have accrued, or some portion of them, even if employment under their plan terminates before retirement
________ are defined benefit plans that look like a defined contribution plan.
Cash balance plans
Which of the following is a benefit under Social Security?
Lump-sum death payments
Indirect Compensation
Noncash benefits provided to an employee
Short-term Disability
See Worker's Compensation
Limiting the liability for an employee's extended hospital stay costs to $200,000 is a cost-containment measure known as:
benefit ceiling.
In the majority of states, unemployment insurance is financed exclusively by:
employers that pay federal and state unemployment insurance.
Pension Benefit Guaranty Corporation (PBGC)
Agency to which employers are required to pay insurance premiums to protect individuals from bankrupt companies (and pension plans!). In turn, the PBGC guarantees payment of vested benefits to employees formerly covered by terminated pension plans
In an extensive review of employee preference literature, Glueck traced patterns of group preferences for particular benefits. Identify the results of the study.
Among the benefits available, health/medical and stock plans are highly preferred benefits.
Market-Based Customer-Driven Health Care
Costs link consumer choice of more or less expensive options to higher or lower individual costs. Also called consumer-directed health care plans
Experience Rating
Rating system in which insurance premiums vary directly with the number of claims filed. An experience rating is applied to unemployment insurance and workers' compensation and may be applied to commercial health insurance premiums. In a community rating system, insurance rates are based on the medical experience of the entire community
Copay
Requires that employees pay a fixed or percentage amount for coverage
In the context of cost containment, which of the following best describes the practice of "copay"?
Requiring that employees pay a fixed or percentage amount for coverage
________ relieve an employer's liability when a preemployment injury combines with a work-related injury to produce a disability greater than that caused by the latter alone.
Second-injury funds
Unemployment Benefits
See unemployment insurance
Jennifer is hurt at work while driving a forklift. Her employer claims that she was injured as a result of her careless driving and is therefore not eligible for workers' compensation. What will be the outcome of the employer's challenge to her worker's compensation claim?
She will likely receive workers' compensation benefits.
Which of the following benefits is a federally administered program?
Social Security
Unemployment Insurance
State-administered program that provides financial security for workers during periods of joblessness
Individual Retirement Account (IRA)
Tax-favored retirement savings plans that individuals can establish themselves
Outsourcing
The practice of hiring outside vendors to perform functions that do not directly contribute to business objectives and in which the organization does not have a comparative advantage
Which of the following is a feature of defined contribution plans?
They are faster to vest than defined benefit plans.
Which of the following is an advantage of flexible benefit plans?
They increase the involvement of employees in choosing benefit plans.
Which of the following is an objective of the unemployment insurance program?
To provide an incentive for employers to stabilize employment
Trumbrella Corp. is a pharmaceutical company. One of its employees reports that he has suffered an on-the-job injury caused by the slippery factory floor that resulted in severe damage to his backbone. When Trumbrella initiates its claims processing, it should first:
determine whether the accident actually happened.
One of the most preferred benefits is
stock plans
Worker's Compensations
Legally required programs in each state that provide payment of medical expenses and compensation for lost wages resulting from work-related injuries or disabilities
Social Security
Program based on federal law that provides retirement and disability benefits
Which of the following benefits is NOT mandated by either the state or federal government?
Work/life balance
How many weeks of leave does the Family Medical Leave Act (1993) mandate for all workers at companies that employ 50 or more people?
12 weeks
The majority of defined benefit plans calculate average earnings over the last ________ years of service for a prospective retiree.
3 to 5
Employee Stock Ownership Plan (ESOP)
A retirement plan in which the company contributes its stock as the retirement benefit
Cost Containment
An attempt made by organizations to contain benefit costs, such as imposing deductibles and coinsurance on health benefits or replacing defined benefit pension plans with defined contribution plans
Long-term Disability Plan (LTD)
An insurance plan that provides payments to replace income lost through an inability to work that is not covered by other legally required disability income plans
The ________ was enacted by the Congress to provide current and former employees and their spouses and dependents with a temporary extension of group health insurance when coverage is lost due to qualifying events.
Consolidated Omnibus Budget Reconciliation Act
Which of the following companies uses probationary periods as a cost-containment measure?
DLG Corp., which excludes its new recruits from benefit coverage until they complete a year
Paid Time-Off Plans (PTO)
Eliminates the distinction between sick days and other paid days off, thus eliminating the incentive to "fake" illness
Employment Retirement Income Security Act (ERISA)
For employers who choose to have a retirement plan, this act sets some formidable rules that must be followed to be in compliance
Wage and Price Controls
Government regulations that aim at maintaining low inflation and low levels of unemployment. They frequently focus on "cost-push" inflation, limiting the size of pay raises and the rate of increases in prices charged for goods and services. Used for limited time periods only
________ allows employees who resign or are laid off through no fault of their own to continue receiving health coverage under their employer's plan at a cost borne by the employee.
The Consolidated Omnibus Budget Reconciliation Act (1984)
Which of the following requires individuals to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship?
The Patient Protection and Affordable Care Act (2010)
In the context of the Consolidated Omnibus Budget Reconciliation Act, which of the following statements is true?
The biggest concern for individuals getting health insurance under the Consolidated Omnibus Budget Reconciliation Act is the relatively brief qualifying period.
Portability
Transferability of pension benefits for employees moving to a new organization. ERISA does not require mandatory portability of private pensions. On a voluntary basis, the employer may agree to let an employee's pension benefit transfer to an individual retirement account (IRA) or, in a reciprocating arrangement, to the new employer
A ________ plan is a hybrid health plan combining the benefits of a health maintenance organization and a ________.
point-of-service; preferred provider organization
Probationary Periods
Period during which new employees are excluded from benefits coverage, usually until some term of employment (e.g., 3 months) is completed
Cash Balanced Plans
A defined benefit plan that looks like a defined contribution plan. Employees have a hypothetical account, such as a 401(k), into which is deposited what is typically a percentage of annual compensation. The dollar amount grows both from contributions by the employer and by some predetermined interest rate (e.g., often set equal to the rate given on 30-year treasury certificates)
Salary Continuation Plan
Benefit options that provide some form of protection for disability. Some are legally required, such as workers' compensation provisions for work-related disability and social security disability income provisions for those who qualify
Which of the following statements is true of employee benefits?
Group insurance has relatively easy qualification standards.
The ________ is designed to lessen an employer's ability to deny coverage to an employee for a preexisting condition.
Health Insurance Portability and Accountability Act
Which of the following is true of the Affordable Care Act?
It is aimed at expanding health care coverage through an individual mandate to purchase health insurance and an employer mandate to provide qualifying health insurance coverage.
In the context of benefits communication methods, which of the following is mostly true about an information portal?
It requires ongoing maintenance and an intuitive user interface.
Jacob, an 18-year-old, has been working at HoldVille Corp. for over a year. If HoldVille offers full vesting after one year, which of the following statements is true?
Jacob is not eligible for pension as he is not over 21.
Family and Medical Leave Act (FMLA)
Legislation passed in 1993 that entitles eligible employees to receive unpaid leave up to 12 weeks per year for specified family or medical reasons, such as caring for ill family members or adopting a child
Benefit Limitations
Limit of disability income payments to some maximum percentage of income and limit of medical/dental coverage for specific procedures to a certain fixed amount
Maxford Corp. offers full vesting after two years. However, it does not offer portability of pension to its employees. Which of the following statements is true in this scenario?
Maxford does not have to provide vested benefits to employees who quit before six months.
DrenchFort Corp. is a small company that pays high wages. As its wages are high, it does not provide any benefits. Recently, it has noticed that its employee turnover has increased, so it decides to provide benefits to retain employees. Which of the following benefits is most likely to reduce turnover?
Medical Coverage
Michael was laid off by his company owing to budget cuts. Before being laid off, he earned $1,000 per week. If he has been receiving unemployment insurance benefits for 26 weeks, which of the following statements is true in this scenario?
Michael is no longer eligible for unemployment benefits.
401(k)
Named for the section of the Internal Revenue Code describing the requirements, is a savings plan in which employees are allowed to defer pretax income
Which of the following is NOT a disadvantage of flexible benefit programs?
New benefits are highly difficult to introduce.
Traditional Time-Off Plans (TTO)
Paid vacations, holidays (or pay if worked), sick leave, and personal leave, tracked separately
The ________ requires individuals to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship.
Patient Protection and Affordable Care Act
Deferred Compensation
Pay approach that provides income to an employee at some future time as compensation for work performed now. Types of deferred compensation programs include stock option plans and pension plans
A key provision of the ________ allows employees in publicly traded companies the freedom to sell off any employer stock purchased through deferrals or after-tax contributions.
Pension Protection Act
Claims Processing
Procedure that begins when an employee asserts that a specific event (e.g., disablement, hospitalization, unemployment) has occurred and demands that the employer fulfill a promise for payment. As such, a claims processor must first determine whether the act has, in fact, occurred
Human Resource Planning System
Put in place by the benefit administrator to make realistic estimates of human resource needs and avoid a pattern of hasty hiring and morale-breaking terminations
Which of the following benefits communication methods allows for personalized communication methods and requires current contact information?
Use of materials
What is the first question that should be asked when determining the amount of retirement income an employer should provide?
What level of retirement compensation would the employer like to set as a target, expressed in relation to preretirement earnings?
If a benefit forecast suggests future cost containment may be difficult, the benefit should:
be offered to employees only on a cost-sharing basis.
In a(n) ________, employees have a hypothetical account into which is deposited what is typically a percentage of annual compensation.
cash balance plan
Experts attribute the stabilization in the dollar cost of workers' compensation since 2010 to:
employer safety programs.
All of the following factors are reasons for the growth of benefits EXCEPT:
foreign lawsuits
An employer experiencing high turnover and seeking to reduce pension costs is likely to prefer:
full vesting after three years.
An employee who changes jobs four or more times during his or her career will likely receive a pension that is approximately ________ as that of an employee whose working career is spent with one employer, assuming that both employees have the same starting salary and receive annual increases equal to inflation rate.
half the size
Point-of-Service Plan (POS)
hybrid plan combining health maintenance organization (HMO) and preferred provider organization (PPO) benefits
Various studies have found that only two specific benefits curtailed employee turnover, namely ________ and ________.
pensions; medical coverage
