HRM & Benefits Midterm
In 2014 there were 2.8 active workers for each retiree receiving Social Security benefits. By 2085, the ratio of active workers to retirees will be
1.9
Immigrants as a percentage of the workforce reached what level in 2010
13.5%
Typically, short term plans pay benefits for up to
26 weeks
An example of an employer non-elective contribution would be
3% of pay for all employees regardless of their contribution
For most employers, benefits represent what percentage of the total compensation dollar
30%
The Revenue Act of 1978 added these important benefit programs to the IRS tax code
401(k) and Flexible Benefit Plans
By 2050, women participation in the workforce will reach what percentage
52%
In 1950, 37% of all women were employed in the workforce. By 2050 that percentage is projected to
57%
The most common waiting period for LTD benefits is
6 months and starts at end of STD payments
Social Security retirement benefits are available as early as what
62
When thinking of a "replacement ratio" in retirement as compared to an employee's final earnings, what is the agreed upon percentage
80%
In 2015, the population of the world was 7.2 billion people. By 2050 it is projected to grow to
9.2 billion
A 401(k) Defined Contribution Plan is considered
A Cash or Deferred Arrangement (CODA)
In a self-insurance arrangement, what is stop-loss insurance
A company limits their overall risk by using insurance for losses above a certain amount
What is to insure
A company offloads the risk of a potential insurance loss
There are both compensation and benefit employee stock programs, which of these would be considered a benefit offering
A company stock fund in a 401(k) program
What is to self-insure
A company takes on the risk of a potential insurance loss
Employee benefit plans represent
A strategic necessity for business and HR
In order to be a qualified Deferred Profit-Sharing Plan, a plan must
ALL OF THE ABOVE - Be established by an employer to provide for the participation in profit by employees - Have a predetermined formula for allocating the contributions to participants - Must distribute the funds accumulated
Why do employers integrate with Social Security benefits in a Defined Benefit Pension Plan
ALL OF THE ABOVE To maintain equal levels of income replacement to both lower paid and higher paid To take credit for employer's contribution on behalf of employee
When thinking about older employees, what is the primary reason why older workers stay in the work force
Access to income and health care
In a Defined Contribution Plan,
Accounts are individually specific
Which of the following is "not true" regarding an employer advantage to establishing a Profit-Sharing Plan
Accrues benefits based on the employees' final average pay
What is a "fiduciary" under ERISA? Someone who,
Acts in the best interest of all plan participants
Defined benefit plans require the services of these professions
Actuarial and Investment
From an employer perspective, which of the following is "not" a good reason to offer benefits to your employees?
Administration and cost
Medicare has experienced significant cost increases from these two factors
Age longevity and health care inflation
Asset Allocation refers to the spreading of your savings among stocks, bonds and cash. What are the critical factors in establishing your Asset Allocation
All of the Above - Time Horizon - Risk Tolerance
Labor cost differentials (what different countries pay for labor) has resulted in about 2.5 million US jobs being offshored. Which jobs are most likely to be offshored
All of the above Call-center and customer service Software development, maintenance, testing, R&D Payroll, benefits administration and HRIS transactions
When asked by your CFO, why not just pay salary instead of providing benefits, you would respond
All of the above Because of tax treatment and funding advantages Because of economies of scale purchasing and risk pooling Because of attraction, retention and competitive needs
From an employer's perspective, what are the top objectives for a benefit program
All of the above Employee retention and control of health care costs Increased morale and productivity Attract new employees
When thinking of benefits in society, what role do they play
All of the above Promote economic security by insuring against uncertain events Raise living standards by providing targeted services Add to economic stability by helping to secure the income and welfare of families
Tax deferred means
Amounts contributed by an employee or an employer are not currently taxed until distributed
Generally, premiums charged by an insurance company are calculated based on?
An employee's "covered pay"
When thinking about the employee benefit program objective of "Income Security", what would be an example
An employer provided health care program
When thinking about the employee benefit program objective of "Income Security", what would be an example
An employer provided life insurance program
When Worker's Compensation claims experience exceeds a "cost threshold" as set by a state, states will apply
An extra premium surcharge
Stocks generally reward the investor with
Appreciation and dividends
These two regions lead the world in population
Asia and Africa
It is estimated that by 2050, the fastest growing group will be
Asians
Tax exempt means
At the time the benefit is provided by the employer, there is no current taxation to the employee
A Career Average defined benefit plan does this
Averages the pay over the years of employment to determine the benefit
Why do employers generally provide less than 100% of salary in a disability program
Because employers do want employees to return to work
Is it better to pay for and save for your retirement benefit programs with
Before tax dollars
Tax free means
Benefit when actually received by the employee is free from taxation
Certain forms of compensation are exempt from constructive receipt, such as
Benefits that are within a qualified plan
One of these four is "not" typically an employer contribution to a defined contribution plan
Bonus
Similar to a Defined Benefit Plan, Defined Contribution participants find
Both the employee and employer contributions go to a trust
Before Worker's Compensation, the only way an employer could receive pay and benefits resulting from an injury or illness at work were
Bring legal action against the employer
Automation will not only result in job displacement but also
Broaden the inequality among workers, nations and income
Money cannot buy happiness
But it does provide choices and opportunities
Investing is not a competition
But it is a way to accomplish your financial goals
Which of the following is "not true" regarding an employee advantage to participating in a Profit-Sharing Plan
Can see benefit increase by strong individual performance
A typical Cash Balance Plan would provide an employee with a percentage of pay (e.g., 5%) for every year worked. What type of defined benefit plan is that
Career Average plan
One of these four is not a defined contribution plan: - Deferred Profit Sharing - 401(k) Savings - Employee Stock Ownership (ESOPs) - Cash Balance Plan
Cash Balance Plan
What is constructive receipt?
Cash or property received for a service is immediately taxable
When you think of Global retirement issues, which of these is a "true" statement
Companies are eliminating guaranteed monthly lifetime benefits
The concept of your "your earnings earning earnings" refers to what investment concept
Compounding
For an employee, a Profit-Sharing Plan allows for the following tax treatments
Contributions are tax exempt and tax deferred
The two types of retirement programs employers can offer to employees are
Defined Benefit and Defined Contribution
A defined benefit Cash Balance Plan
Defines the promised benefit in terms of an account balance
Disability programs voluntarily provided by employers are
Designed to replace income of employees for non-work-related injury or illness
A required HR skill will be designing innovative solutions for offshore outsourcing strategies. What else will HR needed to execute
Develop severance programs for impacted employees
Along with compounding, what is a critically important element in reaching your long-term financial goals
Diversifying your savings to spread the risk among different asset classes
Under the IRS Code, an employee's contribution to a 401(k) plan is called
Elective Deferral
Employee contributions in a defined contribution plan are referred to as
Elective contributions
Which of the following is "not true" regarding an employee disadvantage to participating in a Profit-Sharing Plan
Employee bears none of the investment risk
Social Security is a government social retirement system supported by
Employer and employee taxes paid
Worker's Compensation established "no fault" for an employer meaning
Employer costs are limited regardless of negligence
What role does the Department of Labor play in employee benefit plans
Ensures participants and beneficiaries are treated fairly within qualified plans
One thing you will not find a strategic benefits department doing within an organization is
Ensuring that administration is done internally and that personnel's time is spent completing transactions
Of the following, one is "not" a critical skill for HR professionals in the minds of senior leaders
Excellent transaction and administrative capabilities
Unemployment Insurance is funded by
Federal and state taxes on the employer
A serious miscalculation of life expectancy and population growth had this outcome
Fewer workers are available to support the aging population
Which of the following is "not true" regarding Defined Benefit Pension Plan
Financial risk is on the employee
The two types of Defined Benefit Pensions Plans are
Flat Benefit and Percent of Pay
During a Cash Balance transition, when an employer stops future accrues in the prior plan and begins accrues in the new plan, this is referred to as
Freezing the benefit
An employee's contributions to a Defined Contribution Plan are always vested, an employer vesting schedule might look like
Fully vested after 3 years of service
Unlike a Defined Benefit Plan, Deferred Profit-Sharing Programs do not have to worry about this
Funding, disclosure and plan termination issues
What is the rationale behind the U.S. benefit system
Get government out of social care by incenting employers to provide coverage
For an insurance company, a claim loss ratio of 1.00 is considered break even, what is .97 is considered
Good
During a Cash Balance transition, certain employees are allowed to continue to participate in the prior plan. This is referred to as
Grandfathering the benefit
Which benefit category generally cost the employer the most
Health care and insurance
Employer payments are tax deductible, tax exempt to the employee and tax free when received. What benefit plan has these tax advantages features
Health care programs
Bonds with lower quality credit ratings generally receive
Higher interest
Of legal immigrants in the U.S., which two groups have the highest percentage of immigrants
Hispanic and Asian
The Retirement Equity Act of 1984 did this
Improved the treatment of and guarantee of benefits for widows and spouses of participants in plans
What role does the Internal Revenue Service play in employee benefit plans
Incent employers to provide plans through special tax treatment
Workers' Compensation, Unemployment Benefits, Disability and Life Insurance are referred to as
Income Protection programs
Which of these is "not" an employer approach to diversity in the workforce
Incorporating bias based recruiting practices to secure talent
The primary HR goal of an ESOP is to
Increase employee motivation, efficiency and productivity through ownership
To address the Social Security insolvency, which of these is an appropriate approach
Increase taxes and reduce benefits
Employee choice within a benefit program
Increases loyalty and engagement
Which of the following is "not" a recent development in 401(k)'s
Installing restrictive vesting provisions
Which of the following statement is "not true" regarding investments
Intense trading is the key to accumulating wealth
When thinking of an ESOP, this plan
Invests primarily in a company's stock
Unlike a Defined Benefit Pension Plan, financial risk in a Defined Contribution Plan,
Is on the employee
What does vesting of a benefit mean
It is a non- forfeitable right (you own it) to a benefit accrued in a plan
What does it mean when you vest in a plan benefit
It is a non- forfeitable right to the contributions in a plan
What is Claim Experience
It is the total amount of claims paid for the insured group compared to total premiums collected
One of the biggest employer issues with ESOPs is
Lack of diversification
Social Security is a progressive benefit, meaning
Lower income workers get a higher proportion of the earnings
Non-discrimination requirements are in place to
Make sure than benefits that receive favorable tax treatment do not benefit just highly paid workers
Employers are starting to recognize that employee wellness is not only important in health but also in
Managing finances
Worker's Compensation is
Mandated by federal government and administered by states
Unemployment Insurance is
Mandated by federal government but administered by states
When you think of Global Retirement Issues, which of these is a true statement
Many employees will be forced to work beyond age 65
Typical benefits in a Worker's Compensation programs are
Medical, income and rehabilitative
Of the four generation groups, this is the largest in the workforce
Millennials
When thinking of risk tolerance and the number of years you will be saving, how might you want to consider investing
Moderately Aggressive and Aggressive
Gen X, Millennials and Gen Z will contribute _______ to meet the economic security and access to services needs of the Baby Boomers
More
Employers generally provide employees life insurance based on
Multiple of salary
These are typically used by employers to provide investment options to employees
Mutual funds
Government programs also provide Income Security as well as Access to Services. It is interesting that
Nearly all Americans will participate in a private or public benefit program in their lifetime
A trust, once qualified and established for participants can
Never be used by the company to help pay business expenses
All mutual funds have expenses. Unless a compelling performance record, always select funds with
No load and low expenses
ESOPs structures can be
Non leveraged and leveraged
An employer's contribution to a 401(k) can be either "matching contributions" to employee deferrals or
Non-elective contributions
Worker's Compensation provides coverage for
Occupational injuries and illness
When annual limitations on pension benefits or salary used to limit Defined Benefit Plan benefits, what do most employers do
Offer non-qualified type arrangements to compensate for the limitation
In response to the increasing costs of a guaranteed retirement benefit, companies have eliminated defined benefit pension plans and began
Offering defined contribution plans that shifts retirement responsibility to employees
The amount used to tax an individual and employer for Social Security is referred to as a "wage base", meaning
Only amounts up to the wage base are taxed
Cash is liquid and safe; bonds are debt holdings, what is stock
Ownership
One of the following is not a requirement of Defined Contribution Plans under ERISA?
PBGC termination Insurance
These benefits are fully taxable when received
Paid Time Off programs
Most ESOP's will allocate stock to employees based on their
Pay
When paid, Social Security benefits are referred to as
Primary Insurance Amount
Which of these job categories will not see job growth over the next 10 years
Production and manufacturing
Which of the following is "not true" regarding an employer disadvantage in establishing a Profit-Sharing Plan
Profits can be distributed based on age, service or performance
Which of the following is "not" a goal of Unemployment Insurance
Provide cash income to workers during periods of voluntary unemployment
A real business impact opportunity for HR can be realized by
Providing financial education
You would always like your savings to grow at rate greater than inflation. In investing, this is referred to as
Real rate of return
Smart investors generally will do this to bring their asset allocation back to their desired ratio
Rebalance their portfolio
A lifetime annuity from a Defined Benefit Pension Plan, means the recipient
Receives a fixed monthly payment for lifetime
A joint and survivor annuity from a Defined Benefit Pension Plan, means the recipient
Receives lower fixed monthly payments until both the retiree and the survivor die
When an employer ends a retirement plan and starts a new retirement plan, that accrued benefit cannot be
Reduced from what was earned on the date of the change
What did ERISA, the granddaddy of all benefit legislation, "not" do
Required employers to establish and administer plans for all employees
Which of these is "not true" regarding a Mutual Fund
Requires that cash, bonds and stocks are never combined in one fund
Stock Option programs are also a way to reward and retain employees. How do they work
Shares of stock are given to employees and they can buy those shares within a set time period
Companies will use stock programs to reward and retain employees. A Restricted Stock Award program does this
Shares of stock are granted to employees
The two types of most common employer provided disability programs are
Short term disability (STD) and Long term disability (LTD)
To avoid paying out more than salary, LTD benefits usually integrate with
Social Security payments
When you think of investment advice, which statement is "true"
Start saving early in life
Which asset class has had the best overall return since 1926
Stocks
An IRA is a personal savings vehicle that is
Tax Deductible and Tax Deferred
Beneficiaries who receive life insurance payments receive those benefits
Tax Free
If LTD is fully contributed to by an employee, when benefits are paid those benefits are
Tax Free
To get government out of social care, the government has traded
Tax and funding advantages for voluntary employment-based programs
In any savings strategy, you want your contributions and earnings to grow
Tax deferred until I take a distribution
Benefits paid to employees under Workers Compensation are
Tax free from federal and state taxes
When STD payments are made, they are
Taxable as federal and state income and subject to all legally required taxes
A Roth IRA is a personal savings vehicle that is
Taxable but Tax Deferred and Tax Free
Unemployment benefits when paid to a recipient are
Taxed
The first $50,000 of life coverage provided by the employer to the employee is tax exempt, what about amounts above $50,000
Taxed to the employee, referred to as imputed income
Which is not a primary demographic of the labor force
Technology
ERISA requires Defined Benefit Pension Plans to do all of the following except one, which is it
That employers provide pensions plans to their employees
HIPPA, the Health Insurance Protection and Privacy Act of 1996, requires
That organizations set up and follow patient privacy and information security rules
Employers must perform 401(k) non-discrimination tests, referred to as
The ADP and the ACP
Tax credit for the employee means
The benefit when paid for receives a credit against the employee's income taxes
What are Premiums
The costs paid for insurance coverage to an insurer
Pension Funding is the cash contribution to a plan, what is Pension Accounting
The disclosure of a plan's assets and liabilities on a company's financial statements
Generally, employers offer several investment funds for the employee to invest in and employees can place their savings in one fund or spread their savings among a number of the funds. What happens to employer contributions
The employer contributions are invested in the employee's fund choices
What happens if the ADP and the ACP 401(k) tests are not satisfied
The employer must reduce HCE contributions and return excess amounts taken
Tax deductible for a company means
The expense for providing a benefit is treated as a deduction to their income
People retiring today will pay more in taxes than they receive in benefits. Why
There are not enough workers to support those receiving benefits
Cash Balance plans have become popular today because of this reason
These plans provide for more consistent plan cost for employers
What are Reserves and why do insurance companies collect them
They are additional charges that are intended to build a fund to offset future, not yet reported claims
The fastest growing segment of the population is what age category?
Those over age 65
The underlying goal of Pension Accounting disclosure is
To ensure financial statements provide a transparent view of the liability or gain from promised pension benefits
For an employer, a Profit-Sharing Plan is a good way to
To fund employee's retirements on a tax favored basis
Besides an understanding of benefits, the goal of this course is
To have you think as a business professional with a specialty in HR
From an employer's perspective, one of the main reasons for installing a Profit-Sharing Plan is
To motivate greater productivity, efficiency and loyalty
Social Security benefits are reduced for early commencement for what primary reason?
To recognize that benefits will be paid out over a longer period of time
Which of the following is "not" likely to be important to employers regarding benefit programs
Transactional administration
Employers many times will use Cash Balance Plans to do what
Transition away from a prior Final Average Pay defined benefit plan
Of the following, one is a critical HR/Benefits initiative in the minds of senior leaders
Tying benefit programs to organizational strategy and business success.
From an employee's perspective, which is considered to be most important regarding an employer benefits program
Understands the financial pressures on me and my colleagues
When you think of demographics and its impact on companies, what are these demographic factors are "not" causing an impact?
Unlimited supply of workers with right skills and experiences
A Final Average Pay Plan uses this method to determine earnings
Uses the earnings earned in the last 3 to 5 years of work
What is offshore outsourcing
Using a third party to manufacture or provide services in a country other than the country where it originated
Currently Social Security has a $2.9 trillion surplus. If no changes are made to the system, by 2034 that surplus will
Vanish altogether
What is a Claim
When an event occurs and the employee makes claim to the benefit provided
An Income Protection plan is designed to maintain an employee's income
When they are unable to work through no fault of their own
Worker's Compensation established "no fault" protection for an employee meaning
Workers are guaranteed benefits regardless who's at fault
Employee benefits became very popular because of this event
World War II wage freeze
Whole Life Insurance means
You pay more premium and build equity
Term Life Insurance means
You pay premiums for a specified period of time
You cannot receive Unemployment Insurance benefits if
You voluntarily leave a job
Some plans allow for employee loans from a 401(k) but it has a risk
Your loan amount taken is out of the market for the duration of the loan
In a Defined Contribution Plan, the focus is on
contributions
By 2050, it is estimated that whites in the workforce will
decrease from 63% to 53%
TRUE OR FALSE - When you self-insure, you off load the risk to a third party
false
TRUE OR FALSE - Funding means to put money aside to meet future benefit obligations
true
TRUE OR FALSE - If you are an insurer, you take on the risk from a third party
true
TRUE OR FALSE - Pay as you go means a company paying currently for goods and services provided
true
TRUE OR FALSE - Elements to formulating a Business Strategy include: Establishing clear and measurable goals Not worrying about the competition or the government Developing an organizational culture and spirit to succeed Limiting resources to reduce costs Throwing in the towel if thrown off track - False
true false true false false
TRUE OR FALSE - An HR Strategy is very similar and is focused on recruiting and retaining the right human capital to do what? Drive business strategy Establish and maintain the desired culture Resist needed change Develop future micro-managers Reward contributions to success
true true false false true
TRUE OR FALSE - The 6 elements of a good benefits strategy framework are Establishing the benefit level Deciding on employee choice Pushing for internal administration of all programs Not worrying about funding and costs Ensuring all programs are compliant with ongoing governance
true true false false true