Mod. 6 Employee Group Benefits

All of these statements regarding unemployment insurance are CORRECT except A)unemployment compensation is tax free to the recipient. B)benefits are determined by previous wage levels. C)typically, unemployment benefits are paid out for 26 weeks. D)the employer pays a tax to fund the unemployment benefit to the out-of-work employee.

A

Which of the following statements regarding group long-term care (LTC) insurance is CORRECT? 1. The provisions of a group LTC policy are essentially the same as individual coverage. 2. After separation from service, the employee may continue the LTC coverage on a direct pay basis. 3. Group LTC contracts are underwritten on an individual basis.

1 & 2

Which of the following expenses is typically payable from a flexible spending account (FSA)? 1. Medical 2. Dental 3. Dependent care 4. Individual life insurance premiums

1,2, & 3

Darwin, a key employee of International Container Inc., is covered by the company's noncontributory group term life insurance coverage in the amount of $80,000. He has designated his spouse as a beneficiary of the policy. Which of the following statements apply to this coverage? 1. The employer can deduct the premiums on the first $50,000 of coverage only. 2. Darwin must pay tax on the cost of coverage above $50,000. 3. If the plan is discriminatory, Darwin must pay tax on the cost of the entire $80,000 coverage. 4. Darwin's taxable income will increase by $30,000—the amount of coverage in excess of $50,000.

2 & 3

Allison is a key employee for JEM Company. She is offered group term life insurance for two times her base salary of $100,000, while rank-and-file employees are only offered one times their base salary. Based on this information, how much of the premium on her group term life insurance coverage must be included in her taxable compensation for the year? A)$0 B)The premium for $150,000 of coverage C)The premium for $50,000 of coverage D)The premium on $200,000 of coverage

D

For a group life insurance plan to not be considered discriminatory, A)employees must receive the same dollar amount of coverage. B)benefits would have to be the same for key and nonkey employees. C)it must pass either the ratio percentage test or the average benefits test. D)the same formula for coverage amounts must be applied to all employees.

D

Group long-term disability insurance typically provides benefits for any of the following periods except A)until death. B)until an employee's normal retirement age (usually 65). C)for a specified term longer than two years. D)for six months only.

D

Which of the following is the source from which workers' compensation insurance premiums are paid? A)The employer to the employee B)The employee to the state C)The employee to the employer D)The employer to the state

D

One characteristic of short-term disability coverage used in an employee benefit plan is that it normally provides A)for the same elimination period for disability due to either sickness or accident. B)a weekly benefit for up to a maximum of 52 weeks. C)a benefit of up to 50% of salary. D)for benefits to be paid only after a 60-day elimination period.

B

Which federal law requires employers with more than 20 employees to include in their group insurance plan a continuation of benefits provision for all eligible employees?

COBRA

Which term in a group health insurance plan describes the limits that a person will have to pay in any calendar year for covered medical expenses?

Maximum out of pocket (MOOP)

Which of the following statements regarding workers' compensation is CORRECT? 1. Workers' compensation provides benefits only if the employer was negligent. 2. Workers' compensation is funded by contributions deducted from employees' paychecks. 3. Workers' compensation benefits are excluded from the employee's gross income for tax purposes.

3 only

Jan pays for her qualified long term care policy via a health savings account. What amount of her premium payment would be taxable as ordinary income upon withdrawal? A)0% B)The amount in excess of 2% of adjusted gross income C)50% D)100%

A

Which of the following statements pertaining to prepaid legal services offered by an employer is CORRECT? 1. Prepaid legal services are a fringe benefit that makes legal services available to employees. 2. Examples of benefits that may be included in the plan are bankruptcy assistance, adoption assistance, divorce legal fees assistance, and the preparation of estate planning documents.

Both 1 & 2

Group major medical benefits usually begin after the insured has incurred an initial annual amount of out-of-pocket expense called A)a maximum out-of-pocket limit. B)a coinsurance limit. C)a deductible. D)a stop-loss limit.

C

A cafeteria plan consisting of various tax-free benefits that are funded through salary reductions elected by employees each year is called

a Section 125 plan.

Betty is a highly compensated employee at Sound Trends, a store that sells audio and video items. The company provides its employees with various benefits, including long-term disability (LTD) income coverage, at no cost to the employee. The company provides LTD coverage by purchasing an insurance policy from a nationally known company. The company pays the premiums for all covered employees. Assume that Betty is disabled for six months and receives $3,000 in LTD benefits from the plan. Which of the following explains the income tax implications of this long-term disability coverage? A)The benefits received are tax free to Betty because they are considered a tax-free employee benefit. B)The benefits are taxable to Betty because the cost of the coverage was paid by her employer. C)The premiums paid by Sound Trends are taxable income to Betty. D)The premiums are not deductible by the employer because the policy is underwritten by a third-party insurance company.

B

Joe was involved in an accident at the plant where he works, and as a result, lost his arm. Under the workers' compensation system, this type of injury is considered an example of A)total temporary disability. B)partial permanent disability. C)partial temporary disability. D)total permanent disability.

B

Which of the following statements best describes a characteristic of group life insurance? A)Group life insurance coverage is usually based on a formula that takes into account years of service and compensation. B)The amount of coverage is usually a flat amount for each participant to avoid having the plan be discriminatory. C)Group life insurance coverage is usually based on a percentage (or multiple) of compensation. D)Group life insurance coverage is usually based upon years of service.

C

Which statement represents the main difference between traditional health insurance arrangements and health maintenance organizations (HMOs)? A)Traditional health care insurance companies provide both the health care service and the health care financing, but HMOs provide only the health care service. B)Traditional health insurance companies provide both the health care service and the health care financing, but HMOs provide only the health care financing. C)HMOs provide both the health care service and the health care financing, but traditional health care insurance companies provide only the financing. D)HMOs provide both the health care service and the health care financing, but traditional health care insurance companies provide only the service.

C