Ch. 15: Employee Benefits

Although it is sometimes extended, unemployment compensation is limited to a maximum of:

-26 weeks -Generally, unemployment compensation is limited to a maximum of 26 weeks. Extended benefits can continue up to an additional 13 weeks during times of high unemployment.

The 401(k) retirement plan is the most popular type of:

-Defined - contribution plan -The most popular type of defined-contribution plan is the 401(k) plan. These plans were named after section 401(k) of the Internal Revenue Code, which became effective in 1980.

T/F: For group life insurance, physical examination is usually required for coverage.

-False -A physical examination is usually not required for coverage under group life insurance.

T/F: Employee benefits are those rewards given only to employees retiring from an organization.

-False -Employee benefits, sometimes called fringe benefits, are those rewards that employees receive for being members of the organization and for their positions in an organization.

T/F: In a Roth IRA, an employer contributes up to 25 percent of an employee's total salary, with a maximum of $49,000.

-False -The Roth IRA, which was also created by the Taxpayer Relief Act of 1997, allows for nondeductible contributions of up to $5,500 annually ($11,000 married filing jointly), less the total amounts contributed to any other individual retirement accounts (IRAs).

T/F: All employee benefits are legally required benefits.

-False -The law mandates certain benefits. The three benefits that fall in this category are: social security, unemployment, and workers' compensation benefits.

Common insurance-related employee benefits include:

-Survivor benefits -Insurance-related benefits include medical insurance, accident insurance, life insurance, disability insurance, dental insurance, and survivor benefits.

LN Inc. offers a Roth IRA retirement plan to all its employees. Which of the following is true in this context?

-The plan allows for nondeductible contributions and tax-free withdrawals with certain restrictions. -The Roth IRA allows for nondeductible contributions of up to $5,500 annually ($11,000 married filing jointly), less the total amounts contributed to any other IRAs. In order for withdrawals from a Roth IRA to be qualified as tax free, the withdrawals must have been made for at least five years, after the attainment of age 591/2, or due to death or disability, or for first-time home buyer expenses up to a lifetime limit of $10,000.

T/F: Private pension plans can be funded entirely by an organization or jointly by an organization and an employee.

-True -Private plans can be funded entirely by an organization or jointly by an organization and an employee during the time of employment. Plans requiring employment contributions are called contributory plans; those that do not are called noncontributory plans.

T/F: The Affordable Care Act (ACA) allows people who make more than the federal poverty line but less than four times the poverty line to buy insurance subsidized by the government.

-True -The Affordable Care Act (ACA) has provisions that allow certain low-income people to get subsidized health insurance or government-provided Medicaid. People who make more than the federal poverty line ($23,550 for a family of four in 2014) but less than four times the poverty line can buy insurance subsidized by the government.

T/F: Unemployment compensation is designed to provide funds to employees who have lost their jobs through no fault of their own and who are seeking other jobs.

-True -Unemployment compensation is a form of insurance designed to provide funds to employees who have lost their jobs and are seeking other jobs.

Vesting in a pension or retirement plan means that an employee upon departure from the company would:

-be eligible to receive money paid into the fund -Vesting refers to the rights of employees to receive the dollars paid into a pension or retirement fund by their employer if they leave the organization prior to retirement.

Flexible-benefit plans are also called ____ plans.

-cafeteria -Flexible plans are also called cafeteria plans because they provide a "menu," or choice of benefits, from which employees select.

The Employee Retirement Income Security Act (ERISA) is designed to:

-ensure the solvency of pension plans -Congress passed the Employee Retirement Income Security Act (ERISA) in 1974. This law was designed to ensure the solvency of pension plans by restricting the types of investments that could be made with the plan's funds and providing general guidelines for fund management.

Holidays that are observed at the discretion of the employee or employer are termed ____.

-floating holidays -Floating holiday is observed at the discretion of the employee or the employer.

Most employers have dropped the word "fringe" from the term "fringe benefits":

-for fear of minimizing the significance of benefits to total compensation -The term fringe benefits was coined almost 45 years ago by the War Labor Board. Reasoning that employer-provided benefits such as paid vacations, holidays, and pensions were "on the fringe of wages," the agency exempted them from pay controls. However, because of the significance of benefits to total compensation, many employers have dropped the word fringe for fear that it has a minimizing effect.