RPA 3 - Module 1-13

The SOA/SCL research project supports a retirement income menu design with at least three distinct retirement income generator (RIG) options. What are these three options? (Text, p. 282) The three RIG options are:

(1) A systematic withdrawal program from invested assets in the plan (2) Guaranteed, lifetime annuities offered by an insurance company (3) A temporary payout from plan assets that enables delaying Social Security benefits in order to increase total retirement income.

ACFE has identified company departments where fraud is (a) most likely and (b) least likely to occur. What are these departments? (Text, p. 210)

(a) Accounting, operations and upper management tend to be the most frequent departments where fraudulent activity occurs. (b) Human resources, boards of directors and legal are three of the departments where fraud occurrences are low.

Define a means test, and indicate where it is used. (Text, p. 382)

A means test requires applicants to show that their income and financial assets are below certain levels as a condition of benefit eligibility. A means test is used in public assistance. By contrast, applicants for social insurance benefits have a statutory right to benefits if they fulfill certain eligibility requirements.

DOL has specified the responsibilities fiduciaries have when setting up a monitoring system for the fees associated with an investment. Outline this obligation. (Text, pp. 294-295)

DOL has noted that trustees have an obligation to set up a monitoring system that: (a) Determines the needs of a fund's participants (b) Reviews the services provided and fees charged by a number of different providers (c) Selects the provider whose service level, quality and fees best match the fund's needs and financial situation.

Explain how often a new SPD is required. (Text, p. 40)

Explain how often a new SPD is required. (Text, p. 40) At a minimum, ERISA requires employers to prepare new SPDs and distribute them to participants at least every ten years. For many plans, however, a five-year rule applies. A new SPD must be distributed to plan participants every five years if there has been a material change in the plan during that time. Each time a new SPD is distributed, a new five- or ten-year clock begins to run.

Do all types of retirement plans qualify as QLACs? Explain. (Text, p. 287)

Only DC plans (including 401(k) and profit-sharing plans), traditional individual retirement accounts (IRAs), 403(b) plans and government 457(b) plans are eligible to hold QLACs.

Describe the IPS. (Text, p. 90)

The IPS is the foundation for how the retirement plan investment program is expected to operate. The IPS should provide guidelines for selecting, monitoring, measuring and making decisions for the plan's investments. The IPS should: (a) Define the plan and its purpose (b) Describe responsibilities for those involved with the investment program (c) Establish the investment menu structure (d) Assign investment performance benchmarks and develop performance measurement standards and processes (e) Determine criteria for selecting and terminating investment managers (f) Document the investment decision-making process.

List the factors that a person should consider when determining when to start Social Security benefits. (Text, pp. 389 and Insight 10.1, pp. 390-391)

The factors that a person should consider when determining when to start Social Security benefits are the present need for income, the individual's state of health, life expectancy, labor force involvement and whether or not there are other assets that yield income.

List the key considerations for success when a health care organization is implementing an analytics initiative. (Text, pp. 258-262)

The key considerations for success when a health care organization is implementing an analytics initiative are: (a) Data modeling and analytic logic. Different vendors' analytics solutions feature different data models. Which data model they use can have a significant effect on the cost, scalability and—especially—the adaptability of a plan sponsor's analytics solution to support new use cases. (b) Master reference/master data management. The ability to incorporate data from new and disparate sources into the plan sponsor's analytics solution requires significant expertise in master data management. (c) Metadata repository. Plan sponsors should look for a vendor that provides a tightly integrated, affordable, simple repository with its overall analytics solution. (d) Managing white space data. Does the plan sponsor's analytics solution offer a data collection alternative to the proliferation of desktop spreadsheets and databases that contain analytically important data? White space data is the data collected and stored in desktop spreadsheets and databases that is not being collected and managed in primary source systems, especially electronic medical records (EMRs), or it is being collected in clinical notes and must be manually abstracted for reporting and analysis. This desktop data fills in the missing "white space" of analytic information that is important to the organization. (e) Visualization layer. The best analytics solutions include a bundled visualization tool—one that is both affordable and extensible if licensed for the entire organization. However, the analytics visualization layer is very volatile. The leading visualization solution today will not be the leader tomorrow. Therefore, plan sponsors should look for an analytics vendor that can quickly and easily decouple the underlying data model and data content in the data warehouse from the visualization layer and swap the visualization tool with a better alternative when necessary. (f) Security. The privacy and security of patient data is paramount. (g) Extract, transform and load (ETL). A robust ETL process—how analytics technology extracts data from source systems, applies the required transformations and writes data into the target database—is fundamental to the success of the chosen solution. (h) Performance and utilization metrics. Plan sponsors will need to generate metrics about who is using the system, how are they using it and how well the system operates. Can the vendor's solution track basic data about the environment, such as user access patterns, query response times, data access patterns, volumes of data and data objects? (i) Hardware and software infrastructure. Does the vendor use Oracle, Microsoft or IBM for its hardware and software infrastructure? These three are the only viable options in today's health care market and data ecosystems. (j) Cultural change management. Technology is only part of the equation in creating a successful analytics program. A vendor's solution must also include processes and real-world experience for helping the plan sponsor manage sustainable change in its analytics-driven organization.

When a corporation structures an offer to incentivize an employee to accept an international transfer position, what are four major factors that will substantially influence the nature of the offer? (Text, pp. 495-496) Four major factors that will substantially influence the nature of the offer are:

(1) Duration of the international assignment. Is the international assignment intended to be permanent or a temporary assignment? (2) Location of the international assignment. Some locations are more appealing than others. (3) Immigration and residency rules. How easy or difficult is it to get the employee into the desired jurisdiction to work? (4) Tax treatment of the compensation package. The key is to prevent, if possible, double taxation to the employee.

Identify three types of deficiencies and weaknesses that plan auditors commonly communicate to management. (Text, p. 204) Three types of deficiencies and weaknesses that auditors commonly communicate to management are:

(1) Internal plan processes (2) Regulatory requirements (3) Outside service providers.

An auditor is required to identify control deficiencies and to determine the level of severity of each deficiency. What are the three levels of severity by which an auditor measures deficiencies? (Text, p. 203) The three levels of severity an auditor can use are:

(1) Material weakness. This is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. (2) Significant weakness. This is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness yet important enough to merit attention by those charged with governance. (3) Other weakness. The auditor has the option of discussing other less severe deficiencies in internal control that are not significant or material.

In developing an outline to serve as a guide to the various parties establishing and subsequently administering a qualified retirement plan, identify the key areas of responsibilities and related functions within these areas. (Text, pp. 230-231) In developing an outline to serve as a guide to the various parties establishing a qualified retirement plan, four key areas of responsibilities and their related functions are:

(1) Plan design and implementation • Determine company objectives. • Decide on plan provisions. • Prepare plan and trust documents, summary plan description and adopting resolution. • Obtain proposals/provider search. • Select service providers. • Provide employee enrollment and education. (2) Fiduciary responsibilities with plan investments • Meet with plan committee and fiduciaries at least annually. • Create and maintain investment policy statement (IPS). • Select investments to be offered. • Monitor investments; add, delete or replace investments as directed by the IPS. • Benchmark plan fees and services. • Counsel terminating or retiring employees. (3) IRS and DOL compliance • Prepare year-end compliance testing: (a) Coverage, 401(k) nondiscrimination tests (b) Top-heavy, vesting. • Prepare Form 5500 and applicable schedules. • Prepare required participant disclosures. • File Form 5500 and applicable schedules. • Distribute summary annual report and other required participant notices. (4) Operational compliance • Notify employees of eligibility. • Ensure that contributions are deposited timely. • Ensure that plan operates according to its terms.

Many ERISA plans hire professional investment advisors to enable the plan fiduciaries to obtain expert investment guidance. What are the three possible tiers of investment assistance from which fiduciaries can choose? (Text, pp. 303-304) The three possible tiers of investment assistance from which plan fiduciaries can obtain expert investment guidance are:

(1) Provision of investment data—A plan's recordkeeper, consultant, publication service or other vendor may simply collect and format data to render it accessible to the plan fiduciaries, without making investment recommendations or otherwise injecting its viewpoint into the process. (2) Investment advice, with final decision-making authority reserved to the plan's named fiduciary—This arrangement, often called a 3(21) arrangement, involves the rendering of investment advice for a fee or other compensation. (3) Investment management—A so-called 3(38) arrangement involves a bank, insurance company or registered investment advisor that has acknowledged fiduciary status in writing and that has the authority to make investment decisions without further involvement from the named fiduciary.

An employee welfare benefit plan has four basic elements. What are these elements? (Text, p. 23)

(1) There must be a plan, fund or program. (2) The plan, fund or program is established or maintained by an employer. (3) The plan, fund or program is for the purpose of providing specifically listed benefits, through the purchase of insurance or otherwise. (4) Benefits are provided to participants and beneficiaries.

Section 209 of ERISA requires plan administrators to retain records related to the determination of each employee's benefit for what, in some cases, could turn out to be decades. List the kinds of records needed to document the benefits due and/or paid to employees. (Text, p. 234) The kinds of basic plan and employee/participant information needed to document the benefits due and/or paid to employees may include the following:

(a) Basic plan information • Properly executed plan documents, amendments and/or restatements, including company resolutions adopting each. Any draft copies maintained on file should be clearly labeled as such, and pertinent notes regarding decisions to implement or change plan provisions can be helpful if changes are later questioned. • Timing and details of statutory/regulatory changes operationally implemented prior to being memorialized via an amendment or restatement of the plan document • Participant communications, including summary plan descriptions, summaries of material modifications, educational materials, required notices, etc. • Determination, advisory or opinion letter(s) for all plan document(s). (b) Employee/participant information • Personal details, including name, Social Security number, date of birth and marital/family status • Employment history, including hire, termination and rehire dates (as applicable) and termination details (e.g., voluntary or involuntary discharge, death or disability) • Compensation and hours history used to determine eligibility and calculate contributions • Officer and ownership history and familial relations • Details of employee exclusion by plan terms or employee opt-out elections • Election forms for choices such as deferral amount, investment direction, benefit designation and distribution request • Transactional history of contributions and distributions.

EBSA has conducted studies to determine which factors have an impact on the quality of employee benefit plan audits. What have these studies shown about the relationship between audit quality and (a) a CPA firm's peer review rating and (b) the number of audits performed each year by the CPA firm? (Text, p. 187)

(a) CPA firm employee benefit plan audits are reviewed as part of the AICPA practice-monitoring Peer Review Program. EBSA concluded that a CPA firm's peer review rating had little bearing on the firm's plan audit compliance. In one study, 48% of deficient plan audits were performed by CPA firms with "clean" peer review reports. (b) Based on audit quality results in each of six strata, EBSA concluded that audit firms that perform a smaller number of employee benefit plan audits each year tend to have a greater incidence of audit deficiencies. This finding is consistent with the results of previous EBSA audit quality studies.

Outline a list of general criteria/questions that a health care plan sponsor should discuss with or ask a potential data analytics vendor. (Text, pp. 256-257) The general criteria/questions that a plan sponsor should discuss with or ask a data analytics vendor are:

(a) Completeness of vision. Plan sponsors should look for vendors who can clearly outline how they have evolved to meet—and anticipate—industry needs. (b) Culture and values of senior leadership. It is no cliché, but rather the precise truth: The overall culture of a company starts at the top. Plan sponsors should get to know the senior leadership of the vendors they are evaluating. They should insist on meeting several members of their executive team. Simply put, do the culture and values of a vendor's senior leadership align with those of the plan sponsors? (c) Ability to execute. Do the vendors the plan sponsors are considering have solid, referenced accounts that are similar in size and demographics to the plan sponsor's own company? (d) Technology adaptability and supportability. The underlying engineering and architecture of the software is critically important. Plan sponsors must peel back the covers of the vendor's products and evaluate their software engineering for modern design patterns like object-oriented programming, service-oriented architectures, loose coupling, late binding and balanced granularity of software services. (e) Total cost of ownership. To assess affordability, plan sponsors must understand the total cost of a vendor's solution. (f) Company viability. Will the vendor be around in nine years (the average life span of a significant information technology (IT) investment)?

An audit engagement letter should detail the responsibilities of the plan auditor. What are these responsibilities? (Text, p. 197) The plan auditor's responsibilities are:

(a) Conducting the audit in accordance with GAAS (b) Obtaining reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud (c) Obtaining an understanding of the plan and its environment, including its internal controls, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing and extent of further audit procedures (d) The expression of an opinion on the plan's financial statements.

What are some basic considerations for an ERISA fiduciary in evaluating the possibility of selecting mutual funds as a plan asset? (Text, pp. 305-306) An ERISA fiduciary should consider the following factors when evaluating mutual funds as a plan asset:

(a) Fiduciaries should be sure to understand whether the fund uses an "active" or "passive" strategy. Passive funds typically seek to match an index of securities, while active funds attempt to outperform the market. (b) In selecting a mutual fund, fiduciaries should consider the fund's performance, expenses, alignment with the desired asset class parameters and other relevant factors. (c) Fiduciaries should make sure that they have selected the appropriate share class. For example, plans making a large enough investment may qualify for more favorably priced "institutional" class shares. (d) Fiduciaries need to make sure all selected investment products are prudent and appropriate. (e) Fiduciaries need to review expenses by reviewing more than just the expense ratio. Redemption fees, minimum holdings and other terms must be considered. (f) Fiduciaries need to understand the advantages and disadvantages of revenue sharing. These arrangements involve a fee paid to the plan's recordkeeper directly for certain fund-related services.

Explain how a beneficiary's fee-for-service payment share is determined for (a) hospital care under Part A and (b) skilled nursing care under Part A. (Text, p. 443)

(a) For hospital care covered under Part A, a beneficiary's fee-for-service payment share includes a one-time deductible amount at the beginning of each benefit period. This deductible covers the beneficiary's part of the first 60 days of each period of inpatient hospital care. If continued inpatient care is needed beyond the 60 days, additional coinsurance payments are required through the 90th day of a benefit period. Each Part A beneficiary also has a "lifetime reserve" of 60 additional hospital days that may be used when the covered days within a benefit period have been exhausted. Lifetime reserve days may be used only once, and coinsurance payments are required. (b) For skilled nursing care covered under Part A, Medicare fully covers the first 20 days of SNF care in a benefit period. But for days 21 through 100, a copayment is required from the beneficiary. After 100 days per benefit period, Medicare pays nothing for SNF care.

List the types of plans that are exempt from ERISA. (Text, p. 343) Plans that are exempt from ERISA include:

(a) Government plans sponsored by a federal, state or local government (b) Certain church plans (c) Plans subject to state law, including workers' compensation, disability and unemployment programs (d) Foreign plans established primarily for nonresident aliens (e) Unfunded excess benefit plans (f) Unfunded payroll practices providing benefits such as vacation, sick leave or other types of paid time off (g) Voluntary insurance products if certain criteria are me

Explain the taxability of the following types of retirement accounts: (a) Individual retirement accounts (IRAs), (b) Roth IRAs, (c) simplified employee pension (SEP) plans and (d) employee stock ownership plans (ESOPs). (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, pp. 50-51)

(a) IRAs Employers may offer employees the option to participate in an IRA in addition to a qualified retirement plan. Employer IRA contributions are included in the income of employees but they are not subject to FIT withholding up to the amount the employer reasonably believes employees will be able to deduct on their personal income tax returns. Income earned on contributions is not taxable until distributed to employees. Employer contributions are subject to FICA and FUTA taxes. (b) Roth IRAs Roth IRAs differ from standard IRAs in that contributions are not deductible from employee income, and distributions are excluded from gross income if certain qualifications are met. Employees can contribute the maximum deductible amount for a standard IRA to a Roth IRA, excluding amounts contributed by the employee to other IRAs in the same year. In addition, the amount that can be contributed to a Roth IRA is phased out once the employee's adjusted gross income exceeds certain annual limits. Employees also can transfer amounts from their §401(k), §403(b) or §457(b) retirement accounts to a designated Roth account, provided the retirement plan has a qualified Roth contribution program. The amounts transferred are taxable at the time transferred and are treated as a qualified rollover contribution to the Roth account. (c) SEP plans An SEP plan is an option for employers that do not have the financial resources to administer more complicated deferred compensation plans such as §401(k) plans. Employer contributions to a SEP, up to the annual limit, are not FIT, FICA or FUTA taxable, and any contributions over the limit are wages to employees. Employee elective deferral contributions are excluded from wages up to the deferral limit but are FICA and FUTA taxable. (d) ESOP ESOPs are defined contribution plans that give employees the chance to own shares of the employer's stock. Employer contributions to a qualified ESOP are not taxable wages and not FIT, FICA or FUTA taxable, provided they do not exceed 100% of the employee's annual compensation or the annual inflationadjusted limit, whichever is less.

Define (a) Section 3121(l) agreement and (b) social security totalization agreement. (Text, p. 502)

(a) In the U.S., if the employee transfers to an affiliate host jurisdiction employer, the U.S. employer can file a Section 3121(l) agreement with the Internal Revenue Service (IRS) that allows the employee to continue paying payroll taxes into the U.S. system. IRS permits this because the affiliate in the host jurisdiction is considered to be merely an extension of the U.S. employer. However, the U.S. employer may not want to utilize a Section 3121(l) agreement, and employees will work for a separate host jurisdiction employer that has its own social insurance contribution program. (b) Social security totalization agreements provide relief from dual social security coverage and taxation under both systems and integrates or synchronizes the benefits earned under more than one system. Generally, the employee will be taxed only by the jurisdiction where his or her services are performed.

A health FSA is an arrangement under which employees may reduce their current cash compensation (i.e., they may make pretax contributions) and instead have that amount contributed to a plan for use in reimbursing them or their dependents for medical expenses. Describe the following features of a health FSA: (a) integration into group health plans, (b) unused amount and (c) contribution limits. (Reading A, Taxation of Employee Benefits: Federal, Study Guide, pp. 45-46)

(a) Integration into group health plans Under ACA, group plans must meet certain market reforms, including providing preventive services at no cost to an employee and his or her dependents. The market reforms, however, do not apply to a group health plan that offers excepted benefits. Health FSAs are group plans that must meet the market reform provisions, but they will be considered to provide only excepted benefits if the employer also makes available group coverage that is not limited to excepted benefits, and if the health FSA is structured so that the maximum benefit payable to any participant does not exceed two times the participant's salary reduction election for the health FSA for the year (or, if greater, cannot exceed $500 plus the amount of the participant's salary reduction election). If an employer provides a health FSA that does not qualify as excepted benefits, the health FSA generally is subject to the market reforms, including the preventive services requirements. (b) Unused amounts (Carryover vs. grace period) An employee who has unused funds in their FSA by the end of the year may be eligible to carry over up to $500 of the unused amount from one plan year to the next. Under a prior IRS rule, amounts remaining in an FSA at the end of a plan year are forfeited by the employee at the end of the plan year (referred to as the use-it-or-lose-it rule) or 2.5 months after the end of the FSA plan year if the employer has adopted a grace period. The carryover option provides an alternative to the grace period. A plan may not include both the carryover option and the grace period. The carryover option is not mandatory for employers. In order to adopt the option, the plan document must be amended to provide for the carryover provision and eliminate any grace period if one is provided. The carryover of up to $500 does not count against the statutory maximum contribution for the next plan year. (c) Contribution limits There is a maximum amount, annually adjusted for inflation, that employees may contribute to a health FSA ($2,600 in 2017). The statutory limit does not apply to employer flex credits. Pretax contributions that erroneously exceed the plan-year maximum must be treated as taxable wages.

Describe the primary types of Medicare Advantage plans. (Text, pp. 437-438) The primary types of Medicare Advantage plans are:

(a) Local coordinated care plans (LCCPs), including health maintenance organizations (HMOs), provider-sponsored organizations, local preferred provider organizations (PPOs) and other certified coordinated care plans and entities that meet the standards set forth in the law. Generally, each plan has a network of participating providers. Enrollees may be required to use these providers or, alternatively, may be allowed to go outside the network but pay higher cost-sharing fees for doing so. (b) Regional PPO plans, which offer coverage to one of 26 defined regions. Like local PPOs, regional PPOs have networks of participating providers, and enrollees must use these providers or pay higher cost-sharing fees. However, regional PPOs are required to provide beneficiary financial protection in the form of limits on out-of-pocket cost sharing, and there are specific provisions to encourage regional PPO plans to participate in Medicare. (c) Private fee-for-service (PFFS) plans, which were not required to have networks of participating providers through 2010. Beginning in 2011, this is still the case for PFFS plans in areas (usually counties) with fewer than two network-based LCCPs and/or regional PPOs, and members may go to any Medicare provider willing to accept the plan's payment. (d) Special needs plans, which are restricted to beneficiaries who are dually eligible for Medicare and Medicaid, live in long-term care institutions or have certain severe and disabling conditions.

Describe the payments made to providers of each of the following Medicare services: (a) Part A inpatient hospital services, (b) nonphysician Part B services and (c) physician services. (Text, p. 446-447)

(a) Medicare payments for most inpatient hospital services are made under a reimbursement mechanism known as the prospective payment system (PPS). Under the PPS for acute inpatient hospitals, each stay is categorized into a diagnosis-related group (DRG). Each DRG has a specific predetermined amount associated with it, which serves as the basis for payment. A number of adjustments are applied to the DRG specific predetermined amount to calculate the payment for each stay. In some cases the payment the hospital receives is less than the hospital's actual cost for providing Part A-covered inpatient hospital services for the stay; in other cases, it is more. The hospital absorbs the loss or makes a profit. Certain payment adjustments exist for extraordinarily costly inpatient hospital stays and other situations. Payments for skilled nursing care, home health care, inpatient psychiatric hospitals and hospice are made under separate prospective payment systems. (b) For nonphysician Part B services, home health care is reimbursed under the same prospective payment system as Part A, most hospital outpatient services are reimbursed on a separate prospective payment system, and most payments for clinical laboratory and ambulance services are based on fee schedules. A fee schedule is a comprehensive listing of maximum fees used to pay providers. Most durable medical equipment has also been paid on a fee schedule in recent years but is paid based on a competitive bidding process in some areas. This competitive bidding process will be expanded to all areas. (c) Physician charges have been defined as the lesser of (1) the submitted charges or (2) the amount determined by a fee schedule based on a relative value scale. In practice, most allowed charges are based on the fee schedule, which is supposed to be updated each year by a sustainable growth rate (SGR) system prescribed in the law. However, the SGR system would have required significant fee reductions for physicians, and Congress has passed a series of bills to override the reductions. If a doctor or supplier agrees to accept the Medicare-approved rate as payment in full (takes assignment), then payments provided must be considered as payments in full for that service. The provider may not request any added payments (beyond the initial annual deductible and coinsurance) from the beneficiary or insurer. If the provider does not take assignment, the beneficiary will be charged for the excess (which may be paid by Medigap insurance). Limits now exist on the excess that doctors or suppliers can charge. Physicians are participating physicians if they agree before the beginning of the year to accept assignment for all Medicare services they furnish during the year. Since beneficiaries in the original Medicare fee-for-service program may select their doctors, they can choose participating physicians.

What are the two primary types of fraud, and which is most important to plan fiduciaries? (Text, pp. 207-208) The two primary types of fraud are:

(a) Misappropriation, which is the illegal use of the property or funds of another person for one's own use or other unauthorized purpose, particularly by a public official, a trustee of a trust or any person with a responsibility to care for and protect another's assets, for example, a fiduciary duty (b) Financial statement fraud is where auditors have the most concern. The risk is that the plan's financial statements may be compromised in an attempt to deceive plan participants and others who rely on that information when making decisions. It also means that plan participant accounts may not be correct.

Mutual funds are often used as an investment vehicle in ERISA plans. Describe these investment vehicles with regard to their (a) liquidity, (b) governmental regulation and (c) appropriate disclosure documents. (Text, pp. 304-305)

(a) Mutual funds issue redeemable shares, meaning that investors wishing to leave the mutual fund sell their shares back to the fund. Consequently the fiduciary can generally expect the investment to be liquid in normal market circumstances. (b) Mutual funds are not subject to direct regulation by ERISA, but they are subject to regulation under the Investment Company Act of 1940 and must meet regulatory standards regarding liquidity of the portfolio, presence of independent directors on the governing board, compliance oversight and other matters. (c) A mutual fund is required to provide appropriate disclosure documents, meaning that the fiduciaries of a participant-directed plan do not need to design customized fund descriptions for participants.

The data elements that benefit plans typically maintain and are subject to regulatory oversight have been classified as (a) personally identifiable information (PII) and (b) protected health information (PHI). Define the terms. (Text, pp. 145-146)

(a) PII is information that can be used to distinguish or trace an individual's identity, such as their name, social security number, biometric records, etc., both alone or when combined with other personal or identifying information that is linked or linkable to a specific individual, such as date and place of birth, mother's maiden name, etc. (b) PHI is a term derived from the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule standards that address the use and disclosure of individuals' health information. PHI is defined as information that is a subset of health information, including demographic information collected from an individual, and: (1) is created or received by a health care provider, health plan, employer, or health care clearinghouse; and (2) relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual; and (i) that identifies the individual; or (ii) with respect to which there is a reasonable basis to believe the information can be used to identify the individual.

A plan administrator who is seeking to engage a well-qualified auditor will focus all discussions to matters specific to its own plan(s). To encourage a productive discussion, the plan administrator should provide a potential audit firm with a number of items. List these items. (Text, p. 194) The following items should be provided:

(a) Plan documents or summary plan descriptions (b) Prior year Form 5500 and audited financial statements (including who prepares the statements) (c) Scope of the audit (full or limited scope, especially if a change in scope is possible) (d) List of external service providers (such as investment trustee, recordkeeper or actuary, ERISA attorney and payroll processor) (e) Summary of changes in plan provisions and/or service providers (f) Summary of any plan corrections or issues encountered for the year to be audited (g) Information regarding access to prior year audit work papers.

The broad term alternative investments generally encompasses private equity investments, hedge funds and other private vehicles. Although these vehicles vary in design and form of organization, they tend to present a number of similar issues for plan fiduciaries. What are these issues? (Textbook, pp. 315-318) These issues are:

(a) Private investments are complex arrangements and mostly suitable for sophisticated fiduciaries with experienced professional advisors who are knowledgeable about the relevant investment product. (b) If the vehicle is created outside the United States, local counsel should be consulted and fiduciaries should focus on forum selection clauses, governing law clauses and other provisions that may result in the need to litigate any disputes in a foreign country or under foreign law. (c) Fiduciaries also need to determine if the vehicle is governed by ERISA or whether the fund qualifies for one of the exemptions from "plan assets" status in ERISA. (d) Fiduciaries should understand what actions a non-ERISA fund will take if the fund subsequently becomes subject to ERISA. (e) Fiduciaries should know the ways in which the fund's management can control the terms of the fund's governing documents. (f) Fiduciaries should be cognizant of the potential for terms and conditions to be varied for different investors. (g) Liquidity is another consideration for private investments. (h) Alternative investments may be fraught with special tax implications. Because many hedge funds use leverage, a plan may need to invest in an offshore fund if it wants to avoid unrelated, business-taxable income, which adds to the expense and complexity of the investment. (i) Administrative considerations should be taken into account. (j) Fiduciaries need to understand the overall economics. In addition to stated management fees and performance data, fiduciaries should review anticipated expenses, management compensation, possible prohibited transaction problems and how the fund values its assets. (k) Fiduciaries need to be sure that information will be available in time for the plan to meet its audit and annual reporting obligations.

Following a plan audit, the auditor communicates significant findings or issues from the audit. What items are included in this communication? (Text, p. 200) The items included in the auditor's letter following an audit include:

(a) The auditor's views about qualitative aspects of the plan's significant accounting practices, including accounting policies, estimates and financial statement disclosures (b) The process management used to develop accounting estimates, including fair value estimates, and the basis for the auditor's conclusions as to the reasonableness of those estimates (c) Significant difficulties encountered during the audit (d) Disagreements with management about matters that could individually or in the aggregate be significant to the financial statements or auditor's report, regardless of whether the disagreements were satisfactorily resolved (e) Misstatements brought to the attention of management as a result of auditing procedures (f) If management consulted with other accountants with regard to accounting or auditing matters related to the plan.

The U.S. as a nation is becoming less healthy but living longer on the back of the advances in curative medicine. (a) List the eight main drivers of worsening health in the U.S., and (b) explain why these eight drivers are of such great importance. (Text, pp. 510-511, including Figure 1)

(a) The eight main drivers of worsening health in the U.S. are: (1) Poor diet (2) Physical inactivity (3) Smoking (4) Alcohol use (5) Lack of health screening (6) Poor stress management (7) Poor standard of care (8) Insufficient sleep. (b) These factors are of great importance because they drive the incidence and impact of the 15 most common chronic conditions, which in turn account for 80% of the total cost for all chronic conditions worldwide.

An engagement letter to the client from the independent qualified public accountant (IQPA) at the beginning of a plan audit should include a number of important statements. List some of the important things that should be included in such an engagement letter. (Text, p. 197) An audit engagement letter should include, among other things:

(a) The objective and scope of the engagement (b) A statement that due to the inherent limitations of an audit, there is a risk that a material misstatement may not be detected (c) Identification of the applicable financial reporting framework (d) Reference to the expected form and content of reports to be issued (e) A statement that circumstances may occur in which a report may differ from its expected form and content (f) A list of matters regarding the various responsibilities of plan management and the auditor.

Plan fiduciaries need to understand the three main fraud risk factors or conditions that enable fraud. What are these key risk factors? (Text, p. 208) The three fraud risk factors are:

(a) The presence of incentives or pressures to commit fraud (b) Opportunities to carry out the fraud (c) Attitudes and rationalizations to justify the fraud.

Explain the primary disadvantage or problem with each of the following organizational structures that are used for international assignments: (a) foreign employer, (b) dual employment and (c) special services company. (Text, pp. 496-497)

(a) The primary disadvantage of using a foreign employer is the fact that the employee typically cannot continue participation in the home jurisdiction benefit plans, and generally his or her wages will no longer be covered by the home jurisdiction's social security system (for accruing coverage). (b) The primary disadvantage of using dual employment is the fact that dual employment generates some administrative difficulties and can be quite difficult to achieve. Additionally, this approach entails more risk because international taxing authorities have become more proficient at evaluating the use of these arrangements and look to recoup lost revenue. (c) A special service company has the disadvantage of extra associated costs involved in the creation of a special organization to handle expatriates and inpatriates.

Discuss some of the more common deficiencies involved with internal plan processes. (Text, p. 204) Some of the more common deficiencies involved with internal plan processes are:

(a) The processing of participant contributions. Implementation of proper controls associated with the reconciliation process between participant elections, payroll withholdings and the amounts deposited to the participant's account can help ensure accuracy of the plan and the participant's asset/account balances. Plan management should have controls in place to reconcile remittances per the payroll system to plan deposits. (b) Participant loan repayment is another area where deficiencies are found. Many times it is discovered that participant loans selected for testing were not properly set up for repayments in the payroll system. This is often due to the fact that there are different systems in place between the plan sponsor's payroll system and the plan administrator's system. (c) Much like the internal processes for participant loans, hardship withdrawals may also involve multiple departments inside the plan sponsor organization as well as the involvement of an outside service provider. The errors that typically occur include controls not being in place with regard to adequate review of the withdrawal request, including review of the related documentation required to support the financial hardship, and review of the amount being requested. Often there is not a proper control in place over the cessation of participant deferrals (if applicable). This is frequently the result of communication lapses between the payroll and human resources departments.

Describe the contract features of QLACs with regard to (a) the maximum premium that can be paid, (b) the maximum age to commence payments and (c) prohibited contract features. (Text, pp. 287-288)

(a) The total premium cannot exceed the lesser of $125,000 (indexed for inflation) or 25% of a participant's aggregate account balance. (b) The maximum age at commencement of a QLAC is currently set at the age of 85. (c) The following features are currently prohibited: variable contracts, indexed (or similar) contracts, and contracts with commutation benefits or cash surrender values. In addition, there are restrictions on the death benefits that can be available under a QLAC contract.

Multinational corporations may be tempted to develop and manage each country'sDC retirement plan in isolation. What are the problems that arise when a companyattempts to manage a collection of disparate DC structures worldwide? (Text, p. 517) The problems that arise when a company attempts to manage each country's DC retirement plan in isolation are:

(a) There is the possibility that the plans may not suit the enterprise's overarching goals and culture. (b) Hazards may creep in if individual plans do not provide the degree of governance needed by the parent company. (c) Opportunities might be missed to improve efficiency and reduce costs by capitalizing on economies of scale.

Briefly describe the problems or disadvantages associated with each of the above measures. (Text, pp. 506-507) The following are problems or disadvantages associated with each of the above measures.

(a) Tight local procurement of insurance: This approach has rendered some success, but it eventually becomes relatively ineffective as markets stabilize and recurring adverse loss ratios mount. (b) Local self-insurance: Most multinational corporations lack the economies of scale (size) for effective self-insurance because only a handful maintain international locations with over 1,000 employees. Even when a company has the size and willingness to adopt this funding approach, actual execution is impaired due to an often inadequate medical service delivery infrastructure at the local level. Furthermore, many companies that have actually tried selfinsurance have in fact exacerbated the financial performance of their plans due to poor administration. (c) Multinational pooling: Pooling medical plans has not resulted in up-front premium reductions that would be expected from lower premium charges. Furthermore, medical plans are systematically being phased out of multinational pools. (d) Captive reinsurance: First, there are only a few global carriers to front the risk locally with a robust medical service delivery infrastructure that competes with leading local players. Second, low potential for favorable underwriting experience has to be tackled. Third, there can be excessive transactional costs. Fourth, there are employee contribution considerations, including the respective fiduciary controls, and employee consent requirements. (e) Bulk purchasing across countries: This technique is often discouraged by local labor, tax and insurance laws that require locally admitted policies and adherence to local pricing norms. Further barriers are a scarcity of global providers with geographically widespread medical plan offerings.

An audit engagement letter should include a list of the responsibilities of plan management. What are these responsibilities? (Text, p. 197) Plan management is responsible for items such as:

(a) Understanding the objective of the audit (b) The plan's financial statements and the selection and application of the accounting policies (c) Establishing and maintaining effective internal control over financial reporting (d) Designing and implementing programs and controls to prevent and detect fraud (e) Identifying and ensuring that the plan complies with the laws and regulations applicable to its activities (f) Making all financial records and related information available to the auditor (g) Adjusting the financial statements to correct material misstatements.

Describe the benefit period concept in Medicare Part A, and explain how it works. (Text, p. 436)

A benefit period starts when the beneficiary first enters a hospital and ends when there has been a break of at least 60 consecutive days since inpatient hospital or skilled nursing care was provided. There is no limit to the number of benefit periods covered by Part A during a beneficiary's lifetime; however, inpatient hospital care is normally limited to 90 days of inpatient hospital care available in a benefit period, and copayment requirements apply for days 61 through 90. If a beneficiary exhausts the 90 days of inpatient hospital care available in a benefit period, the beneficiary can elect to use days of Medicare coverage from a nonrenewable "lifetime reserve" of up to 60 (total) additional days of inpatient hospital care. Copayments are also required for such additional days.

Describe a cafeteria plan. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 45)

A cafeteria plan is a type of benefit plan permitted by IRS §125 in which the employer offers employees a choice, much like a menu, of benefits that are either in the form of taxable cash compensation or tax-free (qualified) benefits. The plan must include at least one taxable and one qualified benefit. If a plan in which employees are offered this choice does not meet the requirements of §125, IRS-proposed regulations (on which an employer may rely until final regulations are published) provide that all the benefits, even those that would be considered nontaxable benefits, are nonqualified and are taxable income to the employees. The employee will be taxed as though he or she chose the taxable benefit with the greatest value, even if the employee chooses only nontaxable benefits. The amount is included in the employee's gross income in the year the employee would have received the taxable benefit.

Provide three specific advantages compulsory programs have over noncompulsory programs. (Text, pp. 380-381)

A compulsory program has three major advantages. These are: (1) The goal of providing a floor of income to the population can be achieved more easily. (2) Adverse selection is reduced, because both healthy and unhealthy lives are covered. (3) In a large program that is compulsory, fewer random or accidental fluctuations in loss experience are likely to occur, and the necessity of providing margins in contingency reserves is reduced.

Under ACA, group health plans that provide dependent coverage must continue to make such coverage available to an adult child up to the age of 26. For this purpose, dependent includes which types of family relationships? (Text, p. 373)

A dependent includes a biological child, a stepchild, an adopted child or a foster child. Coverage must be available without regard to the child's marital status or whether the child can be claimed as a dependent. It is important to note that state insurance law or a plan provision may have expanded the definition of an eligible dependent beyond the federal standard.

What is the purpose of a management comments letter? (Text, p. 203)

A management comments letter is a written communication intended for plan management and those charged with governance. In this communication the auditor discusses the various significant deficiencies and material weaknesses that have been identified. The auditor also has the option of discussing other less severe deficiencies in internal control. These are matters that have not been communicated to management by other parties and that, in the auditor's professional judgment, are of sufficient importance to merit management's attention. If these other items are communicated orally, the auditor should document the communication. Making such communications in writing reflects the importance of these matters and assists those charged with governance in fulfilling their oversight responsibilities.

List the factors that influence the shape and scope of an organization's benefit communications. (Text, pp. 96-97)

A number of factors influence the shape and scope of an organization's benefit communications program. These factors can be summarized as the need to: (a) Highlight the value of employee benefits (b) Create involvement and ownership with employees (c) Encourage better utilization of benefits (d) Support and facilitate benefits administration (e) Satisfy legal requirements.

Distinguish between fully insured and currently insured, and explain why this distinction is important. (Text, pp. 383-384)

A person is fully insured if they have 40 credits. They are currently insured if they have earned at least six credits during the last 13 calendar quarters ending with the quarter of death, disability or entitlement to retirement benefits. To be eligible for retirement benefits, a person must be fully insured. (For people born before 1929, fewer credits are required.) Survivor benefits require either a fully insured or currently insured status, although certain survivor benefits require a fully insured status.

Explain how workers can increase their future Social Security benefits by working longer. (Text, pp. 388-389)

A person who works longer can increase his or her benefits in two ways: (1) Each additional year of work adds another year of earnings to his or her Social Security earnings record. Higher lifetime earnings may result in higher benefits when the person retires. (2) A delayed retirement credit is available if a person delays receiving retirement benefits beyond full retirement age. The primary insurance amount will be increased by a certain percentage from the time he or she reaches full retirement age until the start of benefits, or until the age of 70. The delayed credit does not extend past the age of 70. The percentage increase varies depending on the year of birth. For workers born in 1943 or later, the primary insurance amount is increased 8% per year (prorated monthly) for each year of delay beyond full retirement age.

Does a plan administrator have the right to examine an auditor's work papers? (Text, p. 191)

A plan administrator does not have the right to examine an auditor's work papers for any purpose, including to assess audit quality.

What are the controls an auditor looks for at the outset of a plan audit? (Text, p. 202)

A plan auditor begins the preliminary audit by seeing if controls are in place to ensure that plan operations are consistent with the plan document. The plan service providers (actuary, trustee, recordkeeper, etc.) should have controls in place to ensure that the appropriate data is used in calculating plan obligations, that employee and employer contributions are complete and accurate, that participant accounts are handled properly, that distributions and plan loans are processed accurately, that welfare benefit plan claim payments (as applicable) are processed correctly and that investments and investment transactions are properly accounted for. The plan sponsor should be able to document both the controls in place at the sponsor and service provider levels and what they do to monitor these controls.

List the penalties or problems a plan sponsor might incur if they do not provide SPDs or SMMs as required. (Text, pp. 47-48)

A plan sponsor may be charged a penalty per day if it does not provide a plan participant with an SPD or SMM within 30 days of an individual's request. (See note on page 13.) (b) Many courts look to the SPD and other plan descriptive material as important evidence of the benefits employees have been promised by the employer. For this reason, a clearly worded SPD is an important line of defense for employers in benefit disputes. (c) The plan may be forced to provide benefits described in any other written documents describing the plan. (d) Participants and beneficiaries may bring a civil action in federal district court to enforce any provision of ERISA. (e) Criminal penalties may be imposed against any individual or company that willfully violates any ERISA reporting and disclosure requirements. (f) Failure to distribute SPDs or SMMs could be used against the plan sponsor, in actions brought by the government or plan participants and beneficiaries, to argue that the sponsor has engaged in a pattern of noncompliance with or violations of ERISA. (A pattern of noncompliance usually would cause DOL or the court to be less sympathetic to any arguments the plan sponsor may use.) In certain situations it might give the government impetus to initiate an audit of the sponsor's benefit programs in order to look for other ERISA violations. Candidate note: The criminal penalties for willfully violating ERISA reporting and disclosure requirements described on page 48 of the text do not reflect current law. The third bullet on page 33 of the text (see Learning Objective 2.5 (c) in Module 1 of this Learning Guide) describes the penalties/fines in effect at the writing of this note.

Discuss the types of samples that are used in administrative claims audit studies. (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, pp. 39-40)

A quality sample that is representative of the entire claim file can be generated only from a statistically valid random sample. Otherwise, the quality and accuracy of the audit could be compromised. Audits conducted under the random sample method rarely present any opportunity for recoveries and are performed mainly for administrative compliance purposes—i.e., to ensure that the carrier/TPA is administering the plan according to the plan document. The likelihood of the random sample including large-dollar claims with opportunities for recovery is slim, although not impossible. On the other hand, if the ASO agreement allows for it, the auditor can handpick the sample. This method allows for more of a focus on the large-dollar claims that may have been overpaid and on where there is potential for a recovery from the provider. A popular variation of these two methods is to split the sample: Handpick the large-dollar claims (with recovery potential) using a portion of the sample, and randomly select the other portion in order to check for administrative compliance with the plan document.

What is a less demanding alternative to an RFP for investment committee members? (Text, p. 95)

A request for information (RFI) process may be somewhat less demanding than a full RFP while still providing some of the benefits, such as comparing costs and services with other providers.

Guidance provided by the Internal Revenue Service (IRS) affirms that a legally married same-sex spouse must be treated as a spouse for all qualified pension and retirement benefit plan purposes. List some of these purposes. (Text, p. 85)

A same-sex spouse must be treated as a spouse in a qualified retirement plan: (a) As a named beneficiary, unless the spouse consents to another beneficiary (b) If a retirement plan provides a qualified joint and survivor annuity or a qualified preretirement survivor annuity, the same-sex spouse would be entitled to these benefits. (c) In regard to minimum distribution and rollover rules (d) In regard to withdrawals, loans and hardship distributions (e) In regard to alternative payee rights for distributions under a qualified domestic relations order (f) In regard to family attribution and other ownership rules applicable to retirement plans.

What is the criteria that a small employer must meet to qualify for a standalone HRA not linked to a HDHP? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 39)

A small employer (i.e., an employer that does not have at least 50 full-time employees, including full-time equivalent employees) that does not offer its employees group major medical coverage may offer standalone qualified small employer health reimbursement arrangements (QSEHRAs) without running afoul of ACA market reform provisions. An employer's contribution into employees' QSEHRAs, however, is limited to specified amounts for employees depending on their marital status. These amounts are adjusted for inflation. Amounts exceeding those limits, and amounts that an employee does not use to purchase an individual policy that offers minimum essential coverage, are taxable to the employee.

Describe a wrapper plan document. (Text, pp. 35-36)

A wrapper plan document is the typical way of supplementing an insurance company's certificate of coverage or insurance contract with the missing ERISA provisions. The wrapper document should make clear to the participants that its contents and the carrier's documents together constitute the plan document for the plan. If more than one benefit program is included under a single ERISA plan number (e.g., health, vision, dental and employee assistance plan benefits), then a wrapper plan document should be prepared to evidence the bundled approach. The result will be a single plan document that lists all of the welfare benefit options under that ERISA plan number. When multiple contracts or benefit arrangements are bundled under a single wrapper plan document, differences among the parts are inevitable. These differences should be identified and addressed at the outset as a matter of wrapper plan design.

What new requirements did ACA impose on the Form W-2, Wage and Tax Statement reporting? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 33)

ACA imposed the following new requirement for Form W-2, Wage and Tax Statement: All employers that provide group health care coverage that is excludable from employees' gross income must report the aggregate cost of the coverage to employees on their Forms W-2 in order to inform them of the cost of the coverage. This requirement is strictly for consumer informational purposes only and does not cause employer-provided health care coverage that is not taxable to become taxable. This includes the portion of the cost paid by the employer and the portion paid by the employee. Among the coverage types and arrangements that need not be reported on the Form are: (a) Long-term care coverage (b) Health Insurance Portability and Accountability Act (HIPAA) "excepted benefits" and dental or vision plan coverage that is not part of a group health plan (c) Medical savings account (MSA) and health savings account (HSA ) contributions (reporting health reimbursement arrangement (HRA) employer contributions is optional) (d) Cost of employee assistance program (EAP), wellness program and on-site medical clinic, unless the employer charges a Consolidated Omnibus Budget Reconciliation Act (COBRA) premium for continued coverage. (e) Salary reduction election amounts contributed to health flexible spending accounts (FSAs). Employers that file fewer than 250 Forms W-2 for the preceding year do not have to report employee health benefits until IRS issues further notice.

ACFE has identified several measures an organization can take to deter and minimize fraud. Briefly describe these measures. (Text, p. 211)

ACFE studies indicate that whistleblower hotlines are the most effective fraud detection tool available. Successful hotlines include provisions for anonymity and strong antiretaliation policies. Employee support programs are effective because they provide employees with psychiatric and credit counseling at a time when they are most needed—before they commit fraud. Also, these programs help redirect employee efforts to more productive solutions to their problems. Codes of ethics and ethics training sessions reduce fraud losses, and they serve critical roles in helping to investigate fraud cases. Another measure an organization can take is to make sure all employees understand what constitutes fraud and to communicate that a zero-tolerance policy exists in the company. Publicize any prior frauds that have occurred and the impact to the company of those frauds, such as lost profits, adverse publicity and lost jobs. Employees should be trained to recognize the warning signs that, when combined with other factors, indicate fraud.

What is the Employee Benefit Plan Audit Quality Center (EBPAQC), and is there any evidence that this entity has any effect on the quality of plan audits? (Text, pp. 186-187)

AICPA established EBPAQC after the 2004 DOL audit quality study. It is a voluntary membership organization for firms that perform employee benefit plan audits, and its purpose is to promote the quality of plan audits. EBPAQC has several membership requirements related to experience, education and audit firm quality control. Although the 2014 EBPAQC study found that members of EBPAQC perform higher quality audits, one or more generally accepted accounting standards (GAAS) deficiencies were found in 30% of audits performed by member firms. Nonmembers of EBPAQC had an 82% GAAS deficiency rate and also tended to have substantially more deficiencies, ranging to as many as 15 major deficiencies in a single audit engagement.

ASC Topic 960 applies to which plans? (Text, pp. 178-179)

ASC Topic 960 applies to all ongoing plans, funded or unfunded, that provide pension benefits for the employees of one or more employers or for the members of a trade or other employee association, including the following: (a) Plans subject to ERISA (b) Plans not subject to ERISA (c) Plans with no intermediary funding agency or plans that may be financed through (1) one or more trust funds, (2) one or more contracts with insurance entities or (3) a combination thereof. Plans maintained outside the United States that are similar to plans maintained within the U.S. are also subject to these rules if the financial statements of such plans are intended to conform to GAAP. ASC Topic 960 does not apply to government-sponsored social security plans. All pension plans that issue financial statements in conformity with GAAP, including plans with fewer than 100 participants, are covered by ASC Topic 960.

Explain the purpose of ASC Topic 960. (Text, p. 179)

ASC Topic 960 establishes financial accounting and reporting standards for the annual financial statements of defined benefit pension plans. FASB believes ASC Topic 960 is generally consistent with the views of the U.S. Department of Labor (DOL) and the American Academy of Actuaries (the Academy). This means that most private pension plans will be able to prepare one set of financial statements in accordance with ASC Topic 960 for filings under the Employee Retirement Income Security Act (ERISA) and for distribution to other users.

The U.S. Supreme Court case Fort Halifax Packing Co., Inc., v. Coyne and a stream of circuit court cases that flowed from it produced a relatively simple test to determine if a severance plan is covered by ERISA. What is this test? (Text, p. 338)

According to Fort Halifax Packing Co., Inc., v. Coyne, and a stream of circuit court cases that flowed from it, the relatively simple test to determine if a severance plan is covered by ERISA is determined by the question: Does the benefit package implicate an ongoing administrative scheme?

In addition to the factors identified above, what are some other factors that might influence the way in which an employee views an international assignment? (Text, p. 496)

Additional factors that might influence the way in which an employee views an international assignment include: (a) Age of the employee (b) Whether the employee has previously done an international assignment (c) Whether the employee has school-aged children who are impacted (d) Whether the employee has a spouse/partner who also has a career that would be impacted, and the opportunities for that spouse/partner in the host jurisdiction.

What are "administrative claims audits"? (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 39)

Administrative claims audits retrospectively look at claims the carrier or TPA has paid in order to identify possible processing errors, overpayments and underpayments. Such audits are conducted by accountants, independent health care cost-containment firms and employee benefits consultants. Some large plans may have their own internal auditing departments.

Briefly describe the Medicare Part B benefits. (Text, pp. 436-437)

All citizens (and certain legal aliens) aged 65 or older and all disabled persons entitled to coverage under Part A are eligible to enroll in Part B on a voluntary basis by payment of a monthly premium. Almost all persons entitled to Part A choose to enroll in Part B. Some, but not all, of the benefits covered under Part B are: (a) Physicians' and surgeons' services, including some covered services furnished by chiropractors, podiatrists, dentists and optometrists (b) Services provided by Medicare-approved practitioners who are not physicians, including certified registered nurse anesthetists, clinical psychologists, clinical social workers (other than in a hospital or SNF), physician assistants, and nurse practitioners and clinical nurse specialists in collaboration with a physician (c) Services in an emergency room, outpatient clinic or ambulatory surgical center, including same-day surgery (d) Home health care not covered under Part A (e) Laboratory tests, X-rays and other diagnostic radiology services (f) Certain preventive care services and screening tests (g) Most physical and occupational therapy and speech pathology services (h) Comprehensive outpatient rehabilitation facility services (i) Radiation therapy and renal (kidney) dialysis and transplants (j) Approved durable medical equipment for home use (k) Drugs and biologicals that are not usually self-administered (l) Certain services specific to people with diabetes (m) Ambulance services, when other methods of transportation are contraindicated. To be covered, all services must be either medically necessary or one of several prescribed preventive benefits. Part B services are generally subject to a deductible and coinsurance. Certain medical services and related care are subject to special payment rules including deductibles, maximum approved amounts and higher costsharing requirements.

Summarize the information that must be reported to employees and to IRS on the new ACA enacted Form 1095-C. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 33-34)

All large, insured employers (i.e., an employer with at least 50 full-time employees, including full-time equivalent employees) must report whether they offer group health insurance to full-time employees and their nonspouse dependents, and whether that insurance provides minimum value and is affordable. Large selfinsured employers must report whether they offer group health insurance to any employees (including part-time employees). This information is reported to employees and to IRS on Form 1095-C. Small self-insured employers (i.e., an employer with fewer than 50 full-time employees) must complete and file Form 1095-B. There are transmittal forms containing summary information that these respective employers must submit to IRS along with Forms 1095-C and 1095-B.

Describe the written plan document requirement, and state the purpose of this requirement. (Text, p. 84)

All plans subject to ERISA must be established and maintained pursuant to a written plan document that describes the benefits provided under the plan, names the individual(s) responsible for the operation of the plan and outlines the arrangements for funding and amending the plan. The purpose of the plan document is to set forth the rules and requirements governing the plan. The plan fiduciary is obligated to follow the terms and conditions of the plan, as long as the plan is compliant with the law. ERISA does not specifically define what should be included in a plan document

Discuss the sample claim size in a typical claims audit. (Reading C, Trust But Verify— Claims Audits, Study Guide Module 7, p. 39)

Almost no carrier or TPA will allow a full audit of 100% of the claims that were adjudicated during the allowed 12- to 24-month time frame. Most auditors will apply a filtering process to the entire data file in order to flag claims that show signs of having been paid incorrectly and/or of being over- or underpaid. From the filtered subset, the claims can then be chosen for the sample that would be a representative cross section of the entire claim file. (If certain kinds of errors are found, this might indicate a systemic error, and the carrier/administrator would be instructed in the audit report to correct the problem going forward so that future claims are paid correctly.)

Can oral severance arrangements become regulated by ERISA? Explain. (Text, pp. 338-339)

Although ERISA requires that employee benefit plans be established pursuant to a written instrument, whether an employer has complied with the ERISA requirements is not determinative of whether a plan has been established. Court cases have concluded that oral arrangements can become regulated by ERISA.

Explain the late spending pattern of health care costs. (Text, p. 454)

Although clients may know that health care inflation grows more quickly than other kinds of inflation, they may be less aware of how much more they will spend during later retirement for copayments, prescription drugs and services not covered by Medicare. The combination of health care inflation and greater use of medical services could mean that for some, the cost of health care in later retirement may begin to crowd out other kinds of spending.

What are key governing laws, enforcement actions and industry standards requiring service provider management of regulated personal information? (Text, p. 131)

Among the governing laws, enforcement actions and industry standards requiring service provider management of regulated personal information are the following: (a) HIPAA and its business associate requirements (b) Federal Trade Commission (FTC) data security enforcement actions against company failures to oversee service providers with access to personal information (c) State information security laws requiring oversight of data-related service providers (d) The Gramm-Leach-Bliley Act controlling the ways financial institutions deal with private information of individuals (e) Payment Card Industry Data Security Standards.

List the types of benefits provided by ERISA health and welfare plans, and provide examples of such plans. (Text, p. 25)

An ERISA health and welfare plan provides: (a) Medical, surgical or hospital care or benefits (b) Benefits in the event of sickness, accident, disability, death or unemployment (c) Vacation benefits (d) Apprenticeship or other training benefits (e) Day-care centers (f) Scholarship funds (g) Prepaid legal services. Examples include medical insurance, dental, vision, prescription drug plans, drug or alcohol treatment programs, health flexible spending accounts (FSAs), employee assistance programs, wellness programs, accidental death and dismemberment, and short- and long-term disability benefits.

What specific liabilities or problems exist for an employer that fails to have a plan document? (Text, p. 33)

An ERISA plan may still exist even without a written plan document. A plan administrator's failure or refusal to put a plan in writing is merely a violation of ERISA and does not avoid coverage of the plan by ERISA. Failure to have a plan established in writing can result in the following liabilities or problems for the employer: (a) Participants and beneficiaries may bring suit to enforce the ERISA written plan document requirement. Legal action may require the preparation of a formal document where none currently exists. (b) A plan document must be furnished in response to a participant's written request. The plan administrator may be charged up to $110 per day if the document is not provided within 30 days of a request.* (c) Criminal penalties may be imposed on any individual or company that willfully violates any requirement of Title I of ERISA, which includes disclosure rules. The penalty per conviction could be $100,000 and/or imprisonment for up to ten years. The fine can be increased up to $500,000 if it is against a company. (d) It can be difficult to prove plan terms and thus enforce plan provisions. (e) Participants and beneficiaries who sue to enforce informal, unwritten plans can base their claims on past practice or other evidence outside the actual terms of a written plan document that is favorable to their position. (f) A plan sponsor may not be able to amend or terminate an informal plan until it first adopts a written plan instrument, complete with the required ERISA procedure for amending the plan and for identifying persons having authority to amend the plan. (g) ERISA requires a fiduciary to act "in accordance with the documents and instruments governing the plan." This duty provides yet another incentive for careful plan drafting since, once reduced to writing as part of the plan document, plan language must generally be followed. * The $110 per day amount along with other civil penalties violating ERISA provisions was increased in August 2016. In addition, the DOL announced that inflation adjustments to these penalties will occur annually.

Briefly discuss the SAR. (Text, pp. 48-49)

An SAR is considered a plan disclosure requirement under ERISA. An SAR is a summary of certain information contained in a plan's Form 5500 Annual Report/ Return, along with notification to participants of their rights under ERISA to receive additional information. ERISA requires that an SAR be given to each participant, including former employees who are still covered by a plan (for example, COBRA participants or retirees with plan coverage), in an ERISA welfare benefit plan. It is not necessary to file an SAR with DOL, because the SAR contains information already reported to DOL on the Form 5500. An SAR does not have to be provided if the plan is a totally unfunded welfare plan under which benefits are paid solely from the general assets of the employer or employee organization maintaining the plan.

Discuss the penalty involved with a violation of ERISA Section 502(c)(1)(B). (Text, p. 350)

An administrator's penalty under this ERISA section was until recently $110 a day. In 2017, the penalty was $149. Note that this civil penalty is very distinct from the well-known provision under which participants or beneficiaries may bring a civil action to recover benefits due to them under the terms of a plan, enforce their rights under the plan's terms or clarify their rights to future benefits under a plan. Additionally, the penalty is distinct from those civil penalties that the secretary of labor is empowered to assess and recover under other parts of Section 502(c), for example, the penalty of up to $1,000 a day (in 2017, $2,097) imposed on a plan administrator who fails or refuses to file the annual report required by the statute.

Outline the administrative claims audit process. (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, pp. 40-41)

An audit typically will begin with a kickoff meeting or call where an overview of the process will be presented, to ensure that the plan sponsor's objectives are fully understood and defined. The auditor will then collect information from both the plan sponsor and its administrator. After receiving the data and information from both the plan sponsor and administrator, most auditors will complete a comprehensive data analysis and scrubbing process. The auditor will typically need to verify key plan information or enrollment data to ensure an accurate audit. The auditor then determines whether suspect claims were processed correctly. The next step would normally be the on-site portion of the audit. The auditors will have direct access to the administrator's system in order to validate potential over-payments and underpayments and possible systemic errors/issues. Once the on-site portion of the audit is complete, along with input from the carrier/TPA, a draft audit report typically will be issued. After the carrier provides feedback to the initial draft audit report, any outstanding discrepancies will be addressed, and a final audit report will be issued. When the final audit report has been reviewed, common practice is to schedule a conference call with all parties to discuss the audit process, results, outstanding issues, recommendations for improvements and the recovery process.

Describe the payroll tax for employees who earn wages above and below the Social Security taxable wage base (TWB). (Text, p. 328)

An employee pays 7.65% of his or her wages up to the Social Security TWB and 1.45% on wages above the TWB. The TWB is an indexed number that has been rising every year. Employers pay the same amount of tax. There is also a new 0.9% payroll tax on higher levels of employee wages but not on employers.

What is the Windsor effect, and what is its impact on plan documents? (Text, p. 83)

As is well known by now, the Supreme Court ruling in United States v. Windsor extended federal tax and benefit rights to couples in a same-sex marriage. The ruling means plan sponsors should review their plan documents to ensure that the plan language is current and compliant.

Briefly discuss the initial procedures a plan auditor follows when beginning to establish a preliminary audit strategy. (Text, p. 202)

As the plan auditor begins to establish a preliminary audit strategy, risk assessment becomes the focus and the auditor begins performing procedures to obtain an understanding of the plan and its environment, including internal controls both in place at the plan sponsor (for example, participant and payroll data) and the controls in place at outside service providers (for example, payroll, investments and recordkeeping).

How often should the investment committee meet? (Text, p. 93)

At a minimum, committees should meet annually, but generally quarterly or twice a year would be considered best practice.

Explain why investments in employer securities pose a significant litigation risk for plan fiduciaries. (Textbook, pp. 314-315)

At present, benefit plan investments in employer securities remain a significant litigation risk. If the price of the employer's stock declines significantly, and particularly if the employer experiences severe distress or bankruptcy, a lawsuit is likely to follow. Conversely, fiduciaries are at risk if they opt to divest employer stock and the price then goes up. Further, fiduciaries who have inside information face a conflict between their fiduciary duties and restrictions imposed by the securities laws.

Distinguish between baseline prudent investment practices under ERISA and enhanced ERISA prudent best practices for innovative investments. (Text, pp. 292-293)

Baseline prudent investment practices resulted when ERISA Section 404 was codified. This section sought to install longstanding principles of fiduciary conduct that had been developed under the common law of trusts with the specific intent of protecting participants in employee benefit plans. With Section 404, Congress mandated baseline or core prudent practices for all ERISA plans using even the simplest of investments. The enhanced fiduciary best practices for innovative investments are a second and necessarily deeper layer that magnifies the baseline. This secondary, supplemental standard has been created by intermittent publications from the Department of Labor (DOL).

Discuss the inherent vulnerabilities and actions taken in managing and adjudicating Medicare claims. (Text, p. 449)

Because of its size and complexity, Medicare is vulnerable to improper payments, ranging from inadvertent errors to outright fraud and abuse. Although providers are responsible for submitting accurate claims, and MACs are responsible for ensuring that only such claims are paid, there are additional groups whose duties include the prevention, reduction and recovery of improper payments. Quality Improvement Organizations (QIOs, formerly called peer review organizations or PROs) are groups of practicing health care professionals who are paid by the federal government to improve the effectiveness, efficiency, economy and quality of services delivered to Medicare beneficiaries. One function of QIOs is to ensure that Medicare pays only for services and goods that are reasonable and necessary and that are provided in the most appropriate setting.

What is the SOC 1 Report, and what is its purpose? (Text, pp. 205-206)

Because plan management is responsible for establishing controls to ensure that plan transactions are timely and accurately processed and reported in its financial statements, when a third-party service provider is involved, plan management obtains and reviews the Report on Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting (SOC 1 Reports). Based on that review, plan management is able to determine whether the plan sponsor has effective controls to ensure the (1) proper and complete transmission of data to the service organization, (2) proper processing of data and complete receipt of data from the service organization and (3) timely reconciliation of data received by the service organization. However, when the auditor notes that management does not document its review of the SOC 1 Report, or does not incorporate proper controls as they relate to processes performed in conjunction with the service provider, it is deemed to be a deficiency in its internal controls.

Describe the regulatory obstacle that, in the past, prevented the use of longevity contracts. (Text, pp. 286-287)

Before release of the final rules, the Internal Revenue Service (IRS) required that the value of any longevity contract must be included as part of a participant's account balance for RMD purposes. If participants included the annuity in their account balance and that balance dropped substantially, they might be required to start taking distributions from the longevity contract much earlier than desired. On the other hand, if they did not include the value of any longevity contract as part of their account balance, they risked incurring substantial penalties. The final regulations provide relief from this situation by allowing participants to exclude the value of a longevity annuity contract for RMD purposes if the annuity meets the definition of a QLAC.

Describe the basic ways in which employee benefit plan communications have changed. (Text, p. 96)

Benefit programs and the information employers are required to communicate to employees are becoming increasingly complex and regulated, such as the relatively new fee disclosure and fiduciary rules from the Department of Labor (DOL).* Along with increased complexity and regulation, benefit programs are now more costly than ever. In addition, they are arguably more closely tied to an organization's overall business strategies. Benefits can play a major role in an organization's ability to attract and retain the diverse workforce necessary to compete in a changing business marketplace. Of course, benefits also clearly affect the organization's "bottom line." Communication is essential for benefits to support an organization's goals. They must be recognized, appreciated and understood by employees to further these goals. * As of this writing, the adoption of the new fiduciary rules from DOL planned for 2016 was uncertain.

Identify the plan documents that, according to best practice guidelines, should be in place, at a minimum, for the management of plan investments. (Text, pp. 88-89)

Best practice guidelines require the following documents for the management of plan investments: (a) SPD (b) Investment committee charter (c) Investment policy statement (IPS).

What are the major challenges older workers confront when they need to convert their DC plan assets to periodic lifetime income? (Text, p. 277)

Challenges for older workers when they attempt to generate lifetime retirement income include: (a) Retirement savings may need to last anywhere from 20 to 30 years. (b) Market volatility adds another level of complexity to the task of managing savings in retirement. (c) Many older workers are unable to accurately calculate the amount of savings needed to generate lifetime retirement income. (d) Not many retirees have a formal strategy for how to draw down their savings. (e) Many older workers with moderate savings do not have access to skilled and unbiased financial advisors, or they may not know how to identify and select them. (f) Older workers looking for retirement income solutions face a rapidly evolving marketplace that is difficult to navigate.

How do closed-end funds differ from open-end mutual funds? (Text, p. 307)

Closed-end funds, in contrast to open-end mutual funds, generally do not redeem their shares, although some do so at specified intervals. Instead, investors sell shares on the market to other investors. This structure often makes closed-end funds problematic for participant-directed plans. Some of these funds tend to be actively managed and thus often are more expensive. (The distinction between the redeemability of closed-end funds and exchange-traded funds (ETFs) requires a deeper discussion than what is provided in the textbook.)

What are "collective investment trusts," and what are some of the important topics fiduciaries of the investing plans should focus on? (Text, pp. 307-309

Collective investment trusts are pooled investment funds offered by a bank that acts as trustee and is managed by the trustee or a professional investment manager. They are offered only to benefit plans. Although similar to mutual funds, assets in the trust are subject to regulation by ERISA and are not subject to the same disclosure requirements as mutual funds. The items that fiduciaries of the investing plans should focus on include: (a) Reviewing the disclosure and filings offered by a particular collective investment trust, in order to understand what will be available to their plan (b) Making sure that they understand the fund's valuation and financial oversight processes (c) Making sure that the valuations provided to them by their plan investment providers are reasonable and appropriate (d) Obtaining copies of all governing documents and reviewing them with legal counsel and their investment professionals (e) Understanding the terms and rules regarding the liquidity of their investment, for example, some funds limit redemptions to specific intervals (f) Understanding whether a fund permits securities lending, what sort of risks and returns are involved, what rules are in place to prevent prohibited transactions and what sort of fees are charged in connection with securities-lending activities.

List the topics that should be covered in investment committee meetings. (Text, pp. 93-94)

Committee meetings should cover the following topics in addition to any pertinent current issues: (a) Followup on discussion from previous committee meetings (b) Review of investment performance and investment options (c) Review of legislative and regulatory updates: Has anything in the regulatory or legislative environment changed that would affect the plan? (d) Review of vendor services and fees (e) Review of the IPS: Is it still in line with the needs of the overall investment program? (f) Discussion of any potential plan improvements.

Describe briefly four common organizational structures that are used for international assignments. (Text, pp. 496-497)

Common organizational structures that are used for international assignments are: (a) Foreign employer. In this structure, the employee is simply made an employee of the host jurisdiction employer and is no longer an employee of the home jurisdiction employer. (b) Employer with secondment. In this structure, the employee is kept as an employee of the home jurisdiction employer and merely "seconded" from the home jurisdiction employer to the host jurisdiction employer. This is much like loaning the employee to the host jurisdiction company. (c) Dual employment. In this situation, the employee becomes an employee of both the home jurisdiction employer and the host jurisdiction employer, and the two organizations agree upon some type of split regarding the employee's compensation. (d) Special service company. In this structure, the employee is made an employee of a special services company (usually located in a tax haven jurisdiction), which seconds the employee to the host jurisdiction employer.

Summarize the SNF benefit in Part A. (Text, p. 435)

Coverage is provided by Part A only if the care follows within 30 days (generally) of a hospitalization of three days or more and is certified as medically necessary. Covered services are similar to those for inpatient hospital care and include rehabilitation services and appliances. The number of SNF days provided under Medicare is limited to 100 days per benefit period, with a copayment required for days 21 through 100. Part A does not cover nursing facility care if the patient does not require skilled nursing or skilled rehabilitation services.

Describe the hospice care benefits provided by Part A. (Text, pp. 435-436)

Coverage is provided for services to terminally ill persons with life expectancies of six months or less who elect to forgo their standard Medicare benefits for treatment of their illness and to receive only hospice care for it. Such care includes pain relief, supportive medical and social services, physical therapy, nursing services and symptom management. However, if a hospice patient requires treatment for a condition that is not related to the terminal illness, Medicare will pay for all covered services necessary for that condition. The Medicare beneficiary pays no deductible for the hospice program but does pay small coinsurance amounts for drugs and inpatient respite care.

Summarize the inpatient hospital care benefit in Part A. (Text, p. 435)

Coverage under the inpatient hospital care benefit includes costs of a semiprivate room, meals, regular nursing services, operating and recovery rooms, intensive care, inpatient prescription drugs, laboratory tests, X-rays, psychiatric hospitals, inpatient rehabilitation and long-term hospitalization when medically necessary, as well as all other medically necessary services and supplies provided by the hospital. An initial deductible payment is required of beneficiaries who are admitted to a hospital, plus copayments for all hospital days following day 60 within a benefit period.

What do DOL and IRS expect auditors to do regarding internal controls? (Text, p. 104)

DOL and IRS have made it clear to auditors that they expect auditors to take a close look at internal controls as part of their routine audit procedures. It is an aspect of employee benefit audits that seems "widely misunderstood, or even widely unknown," says DOL on its website. "Auditors do not merely reconcile financial statements. In addition to their many other audit tasks, auditors review internal controls to determine whether they provide adequate safeguards for plan participants."

DOL can assess significant penalties if a required auditor report for a qualified employee benefit plan is missing or deficient. What is the amount of the penalty, and on whom is it levied? (Text, p. 185)

DOL can assess penalties on plan sponsors of up to $1,100 per day (capped at $50,000 per annual Form 5500 report filing) where the required auditor report is missing or deficient.

How does DOL define a material reduction in covered services or benefits in a health plan that requires SMMs be distributed within 60 days after the modification or change? (Text, p. 39)

DOL defines a material reduction in a health plan as any modification or change that: (a) Eliminates benefits payable under the plan (b) Reduces benefits payable under the plan (for example, from a change in formulas, methodologies or schedules that serve as the basis for benefit determinations) (c) Increases deductibles, copayments or other amounts paid by a participant or beneficiary (d) Reduces the service area covered by a health maintenance organization (HMO), or (e) Establishes new requirements (for example, preauthorization requirements) to obtain services or benefits.

Define data analytics in the health care context. (Reading A, Using Data to Improve Health Plan Performance and Participant Health, Study Guide Module 7, p. 24)

Data analytics is the process of inspecting, cleaning, transforming, interpreting and modeling data to discover trends, patterns and other information that can support benefit plan decisions and changes. The ultimate goal of this work is to (1) reduce costs and (2) improve clinical outcomes and/or the participant experience.

List data breaches that occurred with retirement plans. (Text, p. 129)

Data breaches that a government agency identified as having occurred with retirement plans are: (a) Failure to install security system updates (b) E-mail hoax (phishing attack) (c) Downloads of plan information to a home computer (d) Social Security numbers mailed to wrong addresses (e) Using the same password for multiple clients.

List data breaches that occurred with medical plans. (Text, p. 129)

Data breaches that a government agency identified as having occurred with medical plans as part of an audit of HIPAA-covered entities are: (a) Unencrypted information on laptops (b) Failure to implement physical safeguards at workstations (c) Return of photocopiers without erasing data contained on hard drives (d) Lost documents with PHI (e) Disposal of prescriptions in trash containers accessible to the public.

How has the level of significant deficiencies in plan audits changed in recent years? Explain. (Text, p. 185)

Despite the efforts of the DOL Employee Benefits Security Administration (EBSA) Office of Chief Accountant (OCA) to work closely with the American Institute of Certified Public Accountants (AICPA) to oversee the quality of employee benefit plan audits performed by certified public accountants (CPAs), the level of significant deficiencies in plan audits has continued to increase.

Discuss the issues in the FTC service provider case against the provider of medical transcription services GMR Transcription Services, Inc. (Text, p. 131)

Discuss the issues in the FTC service provider case against the provider of medical transcription services GMR Transcription Services, Inc. (Text, p. 131)

Define each of the following ERISA terms: a) plan administrator/plan sponsor, b) participant and c) beneficiary. (Text, pp. 29-30)

ERISA defines these terms in the following way. (a) Plan administrator/plan sponsor A plan administrator is a person with statutory responsibility for ensuring that all of the required filings with the federal government are timely made and is the person upon whom the statute imposes authority to make important disclosures to participants about plan benefits. Generally, the plan administrator is designated in the plan document. However, if the plan administrator is not so designated, then the responsibility defaults to the plan sponsor, which is usually the employer. Generally, in a single employer situation, the employer is the plan sponsor. Therefore, the employer is ultimately responsible for all reporting and disclosure requirements and should implement a process to make certain those responsibilities are being followed. Participant The term participant has been interpreted broadly to include employees in, or reasonably expected to be in, currently covered employment. This would include employees who are eligible for a plan but who are not enrolled. However, employees in a class not eligible to participate in a plan are not participants under the ERISA definition. In addition, because the definition is not limited to current employees, it can include Consolidated Omnibus Budget Reconciliation Act (COBRA)-qualified beneficiaries, covered retirees and other former employees who may remain eligible under a plan. (c) Beneficiary A beneficiary is any person designated by a participant (or by the terms of an ERISA plan) who is or may become entitled to a benefit under the plan. A beneficiary has rights provided under the plan in question, and the plan fiduciaries owe fiduciary duties to plan beneficiaries as well as to plan participants. A beneficiary may sue under ERISA for plan benefits and to remedy ERISA violations. A beneficiary also has the right to examine and request copies of plan documents.

Explain the purpose of the SBC. (Text, p. 43)

ERISA disclosure requirements have been expanded by the health care reform requirement to provide a four-page SBC to applicants and enrollees before enrollment or reenrollment. The summary must accurately describe the "benefits and coverage under the applicable plan or coverage." The SBC requirement applies in addition to the SPD and SMM requirements under ERISA.

ERISA imposes an exacting standard of conduct for fiduciaries of employee benefit plans. To what extent does ERISA set forth specific guidelines as to the types of investment vehicles and other property that a plan can own or the types of investment transactions in which a plan can engage? (Text, p. 302)

ERISA does not have any specific restrictions or guidelines on the types of investments a plan can hold. It also does not have any guidelines or restrictions on the types of investment transactions in which a plan can engage—other than the fact that fiduciaries must confirm that making the investment (and engaging in any other activities associated with the purchasing, holding and eventual redemption or sale of the investment) will not constitute a "prohibited transaction."

Who can seek a penalty under Section 502(c)(1)? (Text, p. 352)

ERISA empowers only participants and beneficiaries to seek enforcement of the civil penalty sanctions. It does not authorize any other person, such as a plan fiduciary or the secretary of labor, to bring such an action.

Explain the general relationship between ERISA and state laws. (Text, pp. 343-344)

ERISA provides for an express preemption provision, stating that "the provisions of this title IV shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan," meaning that a state law cannot regulate an employee benefit plan that is subject to ERISA. Within this broad exemption, however, ERISA specifically allows states to regulate the business of insurance.

Explain the two often-conflicting requirements embodied in SPDs. (Text, p. 36)

ERISA provides that an SPD must be "written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." Great care must be taken in composing the SPD language to meet these two often-conflicting requirements. In addition, plan sponsors generally want SPDs and other communication materials to convey positive messages to employees about their benefits.

Define plan document, and explain why it is vital to meet the written document requirement. (Text, p. 31)

ERISA requires that every ERISA health and welfare plan be established and maintained in writing, and the scope of an ERISA plan is defined by the official plan document. The plan document describes the plan's terms and conditions related to the operation and administration of a plan. An insurance company's master contract, certificate of coverage or summary of benefits is usually not sufficient to serve as a legal plan document and rarely fully protects the plan sponsor. Every plan participant has the right to examine the plan document.

Discuss employee benefit plans' vulnerability to cyberattacks and other data breaches. (Text, pp. 127-128)

Employee benefit plans are susceptible to cyberattacks, identity theft and other forms of data malfeasance due to the broad range of personal, identifiable information involved in plan administration and its potential market value. Health care systems and insurers appear to be at significant risk for cyberattack because electronic health records are particularly valuable to cyber criminals, and the security measures for these records are often not properly implemented, making breaches quite common. Significant costs are incurred when cyberattacks succeed.

Describe the problem commonly encountered by auditors in employee benefit plan audits with the allocation of funds to employee accounts. (Text, p. 106)

Employee contributions to plans often are administered by payroll deductions. Auditors sometimes find that while contribution amounts are deducted from payroll according to a sound method, the funds are not always remitted timely to the employee benefit plan. For plans with more than 100 participants, funds must be remitted as soon as they reasonably can be segregated but not more than 15 days into the month following the month in which they are withheld from payroll. The timing on this transaction is critical, but it is not uncommon to find plan administrators are not following a sound process for ensuring it.

Are contributions to §401(k) plans considered wages? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, pp. 50-51)

Employee elective (i.e., pretax) deferrals to §401(k) plans and employer matching contributions are not considered wages and are not subject to FIT withholding. Only distributions from the plan are taxable. However, employee elective deferrals are subject to FICA and FUTA taxes, even though employer matching contributions are not. Employee contributions to a §401(k) plan are subject to an annual, inflation-adjusted limitation amount. Employees who will be aged 50 or older by the end of the plan year are allowed to make catch-up contributions above the annual contribution limit up to an annual maximum amount. These amounts are adjusted annually for inflation. In addition, the IRC §415 limits the total amount of all elective deferrals, employer matching contributions and employee after-tax contributions in a year to an annual amount, which is also adjusted annually for inflation. An annual amount of compensation can also be taken into account when determining the maximum contributions to an employee's defined contribution plan account for each plan year (indexed annually). Pretax elective deferrals to a §401(k) plan are included in an employee's compensation when determining the maximum contribution limit for the employee.

Explain the extent to which the confidentiality protections afforded by the Health Insurance Portability and Accountability Act (HIPAA) apply to data collection associated with wellness programs. (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, p. 32)

Employees must be made fully aware of all potential benefits and disadvantages of joining a wellness program, including not just health effects but also privacy risks. As a consequence of their experience with doctor offices and hospitals, some employees may wrongly assume that HIPAA protects all health information, including those collected by wellness program vendors. While it is a fact that HIPAA applies to health care providers, which include hospitals, doctor offices and insurance companies, it is not settled law that wellness program vendors meet the definition of health care provider. This means that whether wellness programs fall under HIPAA jurisdiction is still an open debate. Given the issue of the liminality of health information collected by wellness programs, employees should be made aware that their personal health information (PHI), as collected by wellness program vendors, may not enjoy the protections afforded by HIPAA, such as confidentiality attached to the information and the worker's right to demand a copy of the information and to direct how said information may be used.

Are employer contributions made on an employee's behalf to a health insurance plan considered wages? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 28)

Employer contributions made on an employee's behalf to a health insurance plan are generally not considered wages and, therefore, are not FIT, FICA or FUTA taxable. On the other hand, employee contributions to such plans are included in the employee's taxable income for purposes of all of these taxes unless the contributions are made through a cafeteria plan in accordance with Internal Revenue Code (IRC) §125. Thus, if the employer does not offer the benefits through a cafeteria plan, and if the employee may choose whether to have the employer pay health insurance premiums in lieu of receiving the same amount in wages, the amounts are fully taxable to the employee whether they are received as wages or as employer-paid premiums.

Summarize the taxation requirements of a cafeteria plan. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 47)

Employer contributions to a qualified cafeteria plan that relate to tax-free benefits chosen by an employee are not included in the employee's income and are not taxable for FIT, FICA taxes or FUTA taxes. If the employer contributions relate to taxable benefits, they are included in the employee's income and are subject to FIT, FICA taxes and FUTA taxes. Employee salary reduction contributions made on a pretax basis, whether made to purchase taxable or qualified benefits, are not included in the employee's income and are not FIT, FICA or FUTA taxable

What requirements must be met for employer contributions to be exempted from FICA and FUTA taxation? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 29)

Employer contributions toward health insurance must be made under a plan to be free from FICA and FUTA taxation. A plan exists if any one of the following requirements is met: (a) The plan is in writing and copies of the plan details are made available to employees either in print (e.g., in a booklet, pamphlet or other periodical) or electronically by e-mail. (b) The plan is referred to in an employment contract. (c) The employer can document that employees contribute to the plan. (d) Employer contributions are kept in a separate account from the employer's salary account. (e) The employer is required to make the contributions. In addition, the plan must benefit employees and their dependents for the tax exclusion to apply.

How are contributions to HSAs taxed? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 41)

Employers and employees can contribute to HSAs up to the annual limits. Contributions made by or for a covered individual up to the maximum annual limit are deductible by the individual. Employer contributions are excluded from the employee's gross income and are not taxable wages for purposes of withholding FIT, FICA taxes and FUTA taxes if, when the contributions are made, the employer reasonably believes it is excludable. Any employer contributions that exceed the annual limit or that are made for a noneligible individual are included in the employee's gross income. In addition, the HSA beneficiaries will pay a 6% excise tax on the excess contributions. HSAs and HDHPs can be offered as part of a cafeteria plan.

Describe the general types of information that must be maintained for an ERISA welfare benefit plan and the record retention requirement for these documents. (Text, p. 50)

Employers are required to keep sufficiently detailed information and data necessary to verify, explain, clarify or check on documents for accuracy and completeness, including vouchers, worksheets, receipts and applicable resolutions. Records must be maintained for six years for ERISA purposes, but other laws may require record retention for longer periods. Candidate note: ERISA stipulates that records be maintained for at least six years from the date the plan's associated Form 5500 is filed; however, because of filing extensions, practitioners recommend retaining records for eight years after the end of the applicable plan year.

What is a total compensation statement, and what is its purpose? (Text, p. 97)

Employers can increase the return on their investment in benefits by making employees aware of the cost of benefits and the effect of the cost on the company. This is often accomplished by a total compensation statement, wherein the cost of the benefits is computed and added with pay to reveal the employee's actual total compensation. Good communication can increase employee appreciation of the value of their benefits and create a positive attitude toward the company.

How are sick pay benefits for lengthier absences treated for tax purposes? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, pp. 41-42)

Employers may provide sick pay under a plan for lengthier absences, either as shortterm or long-term disability pay. These benefits are paid either by the employer or a third party such as an insurance company. Benefits that can be attributed to employee contributions made with after-tax dollars are not taxable income to the employee. Benefits that can be attributed to employee pretax contributions or employer contributions are included in the employee's taxable income and may be taxable for FIT, FICA taxes and FUTA taxes. If both the employer and employee contribute, the benefits are taxable only to the extent of the employer's contribution. The manner in which any required taxes are withheld while benefits are being paid out is dependent on several factors: Is the employer self-funding the benefits? Are the benefits administered by a third-party agent? Is the third-party payer an insurer that is not the employer's agent?

Describe both the income tax and payroll tax treatment of contributions to qualified retirement plans. (Text, pp. 327-328)

Employers receive an immediate income tax deduction for contributions made to a qualified retirement plan. Employees are not subject to income tax corresponding to the employer's plan contributions; instead, employees are subject to income tax when they receive distributions. As for payroll taxes, employers and employees are not taxed at any time on employer contributions. When an employee makes elective contributions to a 401(k) or 403(b) program, however, those contributions are subject to payroll taxes on both the employer and employee at the time of the contribution.

Does ASC Topic 960 require financial statements that compare more than one year's information? Explain. (Text, p. 180)

Even though the primary objective of pension plan financial statements is to provide financial information that will help users assess the plan's present and future ability to pay benefits when they are due, ASC Topic 960 does not require comparative financial statements. It recommends, but does not require, supplementing the financial statements with voluntary disclosures of matters deemed important.

Provide examples of common cyberthreats in the environment where benefit plans operate. (Text, p. 143)

Examples of cyber threats that are common today in the environment where benefit plans operate include: (a) Ransomware, where cybercriminals encrypt and seize an entire hard drive and will only release it for a high ransom (b) Phishing, where fraudulent e-mails are sent with the objective of enticing the user to interact and inadvertently provide an avenue for a cybercriminal to infiltrate a computer network (c) Wire transfer e-mail fraud, where cybercriminals pretend to be senior executives asking employees to transfer funds (d) Malware via external devices, where intrusive and harmful software is stored on an external drive that is inserted into and executed on a network computer.

Provide examples of noncommercial contracting issues that a service provider contract should address related to privacy and data security. (Text, p. 134)

Examples of privacy and data security issues that a service provider contract should address are: (a) Privacy and data security obligations should be separate from confidentiality obligations. (b) The service provider should agree to cooperate with the plan fiduciary to enable the plan fiduciary to meet its regulatory and legal obligations. (c) The service provider's use of personal information must be limited as necessary to the delivery of the services. (d) As between service provider and the plan fiduciary, the plan fiduciary is the owner of the personal information. (e) The service provider's use of subcontractors should be subject to the plan fiduciary's consent and subject to the service provider's obligation to flow-down privacy and data security obligations. (f) Security obligations should be detailed and added to the minimum security requirements as dictated by law. (g) The service provider's reporting obligations should be specified with respect to any compromise of personal data or compromise of any system(s) containing personal data. (h) The service provider should be required to reimburse the plan fiduciary for expenses, costs and the like associated with any data breach occurring under its control. (i) The service provider's auditing requirements must be specified. (j) The service provider's obligations for data retention, disposal and destruction should be consistent with the plan fiduciary's regulatory obligations.

Aside from the structural factors that are driving medical costs for multinational corporations, there are exogenous factors that preclude an employer's ability to manage medical costs. What are these exogenous factors? (Text, pp. 507-50

Exogenous factors that preclude an employer's ability to manage medical costs are: (a) Acquired rights. Acquired rights labor laws exist in most international locations where multinationals operate. Essentially, these laws make it difficult or impossible for a plan sponsor to amend existing plans in order to introduce costcontainment features, since these measures are seen as taking away benefits already earned by the employees. This effectively reduces the employer's ability to fight the annual medical trend through plan design changes. (b) Mounting regulatory requirements. Regulations to explicitly or implicitly mandate employer-sponsored plans or to enhance medical plan coverage are rapidly emerging.

Explain how Medicare Part A is financed by payroll taxes. (Text, p. 439)

Explain how Medicare Part A is financed by payroll taxes. (Text, p. 439) The financial operations of Part A are handled through the HI trust fund. The fund is financed primarily through a mandatory payroll tax. Almost all employees and self-employed workers in the United States work in employment covered by Part A and pay taxes to support the cost of benefits for aged and disabled beneficiaries. The Part A tax rate is 1.45% of earnings, to be paid by each employee and a matching amount by the employer for each employee, and 2.90% for self-employed persons. This tax is paid on all covered wages and self-employment income without limit. An additional Part A payroll tax of 0.9% will be collected on earned income in excess of $200,000 (for those filing income tax singly) and $250,000 (for those filing jointly; the earnings thresholds are not indexed). The Part A tax rate is specified in the Social Security Act and cannot be changed without legislation.

The Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Codification (ASC or Codification) as the single source of authoritative, nongovernmental, U.S. generally accepted accounting principles (GAAP). The Codification is updated through the issuances of FASB Accounting Standards Updates (ASUs). What are the purposes of these ASUs? (Text, p. 177)

FASB does not consider ASUs as authoritative in their own right. Instead, new ASUs serve only to update the Codification and provide background information about the guidance.

List supplemental information that FASB recommends be included in the annual financial statements of a plan. (Text, pp. 180-181)

FASB recommends, but does not require, supplementing the financial statements with voluntary disclosures of matters deemed important, including all of the following: (a) A statement that includes information regarding the net assets available for benefits as of the end of the plan year (b) A statement that includes information regarding the changes during the year in net assets available for benefits (c) Information regarding the actuarial present value of accumulated plan benefits as of either the beginning or end of the plan year (d) Information regarding the effects, if significant, of certain factors affecting the year-to-year change in the actuarial present value of accumulated plan benefits.

List the suggestions financial planners might make to their clients to help them manage their health care costs during retirement. (Text, p. 453)

Financial planners can suggest three steps that might help clients manage their health care costs during retirement. These are: (1) Make a one-time estimate of how much clients might pay for their retirement health care (2) Encourage retired clients to reevaluate their plans each year during Medicare's annual enrollment period (3) Encourage retired clients to track their health care expenses.

Explain how financially self-supporting social insurance programs are financed.(Text, p. 382)

Financially self-supporting programs are almost completely financed from the earmarked contributions of covered employees, employers and the self-employed and from interest on the trust fund investments.

Countries around the world have taken a variety of policy approaches to DC retirement plans. Based on differences in investment options and government involvement, identify five different policy approaches taken by different countries. (Text, pp. 516-517)

Five different policy approaches that have been identified are: (1) An open-architecture, broad-investment choices system where the administrative provider offers a large range of funds from which employers and employees can select. This system is used in largely Anglo-Saxon countries. (2) A government-mandated or collectively bargained guaranteed-return system in which insurance contracts provide set returns on participant savings (Germany and Belgium) (3) A government- or state-approved provider system where employees may have a degree of investment choice (Chile and New Zealand) (4) Personal pension brokered markets in which participants use DC savings to purchase individual pensions through brokers (Czech Republic and Israel) (5) A state insurance market in which participants make payments into the state's insured funds (Morocco and Pakistan).

List five main ERISA reporting and disclosure requirements. (Text, p. 83)

Five of the important reporting and disclosure requirements of ERISA plans are: (1) A written plan document (2) A summary plan description (3) A summary of material modification (4) An annual financial report (Form 5500) (5) A summary annual report. Qualified pension benefit plans are subject to additional disclosure and reporting requirements.

What is the full retirement age for Social Security retirement benefits? Explain. (Text, p. 385)

For persons born in 1960 or later, the full retirement age is 67. For individuals born before 1960, the full retirement age ranges from 65 to 67.

What is the beneficiary's fee-for-service payment share for Part D benefits? (Text, pp. 444-445)

For the standard Part D benefit design, there is an initial deductible. After meeting the deductible, the beneficiary pays 25% of the remaining cost, up to an initial coverage limit. A coverage gap starts after an individual's drug cost reaches the initial coverage limit and stops when the beneficiary incurs a certain threshold of out-ofpocket costs. For costs incurred after reaching the out-of-pocket threshold, catastrophic coverage is provided, which requires the enrollee to pay the greater of 5% coinsurance or a small defined copayment amount. Many Part D plans offer alternative coverage that differs from the standard coverage described above. In fact, the majority of beneficiaries are not enrolled in the standard benefit design but rather in plans with low or no deductibles, flat payments for covered drugs and, in some cases, additional partial coverage in the coverage gap.

Explain how Medicare administrative contractors (MACs) developed, and describe their functions. (Text, pp. 447-448)

From the beginning of Medicare, fee-for-service claims have been processed by nongovernment organizations or agencies under contract to serve as the fiscal agent between providers and the federal government. These entities apply the Medicare coverage rules to determine appropriate reimbursement amounts and make payments to the providers and suppliers. Their responsibilities also include maintaining records, establishing controls, safeguarding against fraud and abuse, and assisting both providers and beneficiaries as needed. In summary, these fiscal intermediaries processed most of the Medicare claims. Legislation mandated the replacement of the older system with a new system of entities known as Medicare administrative contractors (MACs). Each MAC processes and pays fee-for-service claims for both Part A and Part B services to all providers and suppliers within its geographic jurisdiction. MACs are selected through a competitive procedure. This system is intended to improve Medicare services to beneficiaries, providers and suppliers, who now have a single point of contact for all claims-related business. Also, the system enables the Medicare fee-for-service program to benefit from economies of scale and competitive performance contracting.

Four primary areas have been identified as areas where global companies that sponsor DC retirement plans in a number of countries might seek economic efficiencies. What are these areas? (Text, pp. 526-527)

Global companies that sponsor DC retirement plans in a number of countries might seek economic efficiencies in the following areas: (1) Investment. Plan sponsors might be able to reduce costs by negotiating global investment management fees with large asset managers. (2) Cross-border plan structures. Pooling assets across borders is becoming increasingly feasible in certain regions. This may allow a corporation to use a single vehicle rather than a large number of separate DC plans. (3) Employee administration. Some recordkeepers are starting to move toward cross-border efficiencies, in particular by developing pan-European capabilities that include multilanguage member platforms and call centers. (4) Communication. Using a single set of communication materials across markets would be tremendously convenient and efficient for plan sponsors.

Explain the HHA care provided by Part A. (Text, p. 435)

HHA is covered by Parts A and B. The Balanced Budget Act transferred from Part A to Part B those home health services furnished on or after January 1, 1998 that are unassociated with a hospital or SNF stay. Part A continues to cover the first 100 visits following a three-day hospital stay or a SNF stay; Part B covers any visits thereafter. Home health care under Parts A and B has no copayment and no deductible. HHA care, including care provided by a home health aide, may be furnished parttime by an HHA in the residence of a homebound beneficiary, if intermittent or part-time skilled nursing and/or certain other therapy or rehabilitation care is necessary. Certain medical supplies and durable medical equipment may also be provided, although beneficiaries must pay a 20% coinsurance for durable medical equipment. There must be a plan of treatment and periodic review by a physician. Full-time nursing care, food, blood and drugs are not provided as HHA services.

How does HIPAA provide oversight? (Text, p. 146)

HIPAA requires health plan sponsors to manage their plans in accordance with its data privacy and security rules. In addition, HIPAA specifies rules for business associate agreements that plan sponsors enter with TPAs and other service providers. Business associate agreements establish each party's obligations under HIPAA in connection with the plan's HIPAA-protected information.

Medical Savings Accounts (MSAs) were made obsolete (although existing ones were grandfathered) by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) with the creation of HSAs. What are some of the unique features of HSAs? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, pp. 40-41)

HSAs are tax-exempt accounts used by employees to pay for medical expenses for themselves, their spouses and dependents. Employers can offer HSAs to employees who are enrolled in an HDHP. This plan has higher annual deductibles than a typical health insurance plan for self-only coverage and for family coverage. Annual out-ofpocket expenses are statutorily limited to certain amounts for both types of coverage. In addition, annual caps apply to the amount of contributions that may be made to an HSA for both types of coverage. All of these statutory amounts are adjusted annually for inflation. Extra catch-up contributions can be made to an HSA by individuals aged 55 and older until they are eligible to enroll in Medicare. No contributions of any kind can be made once an individual enrolls in Medicare. (Note that while Archer MSAs were replaced by HSAs in 2003, there are Medicare MSAs. They are uncommon but available with an HDHP through Medicare private health plans called Medicare Advantage plans.)

Does hiring an investment advisor or investment manager eliminate the fiduciary's liability? Explain. (Text, p. 304)

Hiring an investment advisor or investment manager does not relieve the named fiduciary from understanding the nature of the plan's investments and chosen investment strategies. It is in the interest of fiduciaries to understand the investment professional's strategy and to make sure they obtain enough information about investments to verify that the chosen strategy remains appropriate and that the plan's actual investments align with the strategy.

Discuss the frequency of administrative claims audits. (Reading C, Trust But Verify— Claims Audits, Study Guide Module 7, p. 41)

How often should an audit be conducted? Every three to four years for most plan sponsors if they keep the same carrier/administrator, although some prefer to do it more often. Items that should trigger an audit are: (a) A new carrier/administrator (b) A significant plan design change (c) Administrative concerns by the plan sponsor.

A survey by a major international consulting firm recently found a sharp increasein the number of firms using international pension plans (IPPs). What purposes areserved by these plans? (Text, p. 528)

IPPs have traditionally been used to help globally nomadic employees save forretirement, but companies have begun using these plans to serve other purposes. An IPP may also be used as a plan option in locations with weak retirement systems, e.g., in some cases because of political or economic challenges. Another use of these plans is as a retirement plan for expatriates who are ineligible for local retirement systems that require citizenship.

How has IRS helped organizations with their internal control obligations? Explain. (Text, pp. 109 and 110)

IRS has taken note of where it most often sees control problems with employee benefit plans, and it provides checklists to help companies keep their plans in compliance. IRS also provides tools on its website that can be helpful to companies reviewing their controls or establishing controls in a more formal way.

Identify two global trends taking place in DC retirement plans. (Text, p. 525)

Identify two global trends taking place in DC retirement plans. (Text, p. 525) Two global trends taking place in DC retirement plans are: (1) There is a global trend toward default-led plans, particularly in the U.S. and the United Kingdom. (2) There is a trend toward greater simplicity, since an overwhelming majority of participants lack the knowledge, interest and time to make optimal investment choices.

Under a cafeteria plan, if an employee elects to receive cash rather than to purchase benefits, how is the cash treated for tax purposes? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 49)

If an employee elects to receive cash rather than to purchase benefits, the cash is wages and is FIT, FICA and FUTA taxable. Also, if a cafeteria plan discriminates in favor of highly compensated employees or key employees, those individuals are FIT, FICA and FUTA taxable on the combined taxable benefits with the highest total value.

Severance arrangements may or may not be considered an employee benefit plan and subject to regulation by ERISA. In Donovan v. Dillingham, the U.S. Court of Appeals for the Eleventh Circuit explained the factors necessary to establish such an ERISA plan. What are these factors? (Text, pp. 336-337)

In Donovan v. Dillingham, the court explained that to establish an ERISA severance plan, a reasonable person must be able to ascertain: (a) The intended benefits (b) The intended beneficiaries (c) The source of financing (d) The procedures to follow for receiving benefits.

According to the FTC website, its mission is to prevent business practices that are anticompetitive or are deceptive or unfair to consumers, to enhance informed consumer choice and public understanding of the competitive process and to accomplish this without unduly burdening legitimate business activity. How have FTC enforcement actions demonstrated what is expected from an employer that shares personal data with external service providers? (Text, p. 131)

In a number of its enforcement actions, the FTC has critiqued companies for inadequate third-party management and, most recently, has taken enforcement actions to make the point. The message is clear that the FTC is now requiring companies to: (a) Exercise due diligence before hiring data-related service providers (b) Have appropriate protections of personal information in their contracts with data-related service providers (c) Take steps to verify and monitor that the data-related service providers are adequately protecting the information.

IRS has stated the reasons for urging plan sponsors to establish a strong internal control environment. What are they? (Text, p. 104)

In a recent presentation on internal controls, IRS examination leaders stated the reasons they favor strong internal controls. These are: (a) Good internal controls can eliminate or reduce errors in the operation of the plan. (b) They can help a plan sponsor quickly identify errors and initiate their own corrections without relying on regulators to catch mistakes, which reduces the cost of corrections. (c) Good controls can help keep an audit of the plan focused, reducing the time dedicated to conducting an examination. (d) They can shorten the turnaround time on any requests for additional information. (e) They generally promote clear communication between examiners and representatives of the plan.

Explain why organizations over the past few years have moved steadily from fully insured health plans to self-funded, administrative services only (ASO) health plans. (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 37)

In a self-funded arrangement, the plan sponsor assumes the liability and risk associated with uncertain health care costs, but self-funded plans offer opportunities to lower costs and increase flexibility in plan design. Self-funding can give organizations tax benefits, better cash flow and reduced administration costs.

Part A is generally provided automatically and free of premiums to persons aged 65 or older who are eligible for Social Security or Railroad Retirement benefits, whether they have claimed these monthly cash benefits or not. List the ways in which Part A is financed in addition to payroll taxes. (Text, pp. 439-440)

In addition to payroll taxes, Part A receives income from: (a) A portion of the income taxes levied on Social Security benefits paid to highincome beneficiaries (b) Premiums from certain persons who are not otherwise eligible and choose to enroll voluntarily (c) Reimbursements from the general fund of the U.S. Treasury (d) Interest earnings on its invested assets (e) Other small miscellaneous income sources.

EBSA has found numerous audit cases where no audit work was performed orwhere there was a lack of evidence of work performed. What are the signs a plan sponsor should look for to see that audit work is actually being performed on the plan? (Text, p. 189)

In general, if the auditor is not making inquiries to understand how the plan operates and is not asking to see plan sponsor records to complete audit testing, there is a good chance the audit work is deficient. More specifically, the plan sponsor should realize: (a) The plan sponsor must be involved in internal control and fraud inquiries for the audit firm to properly plan the audit. (b) The audit testing that occurs during the fieldwork phase cannot be completed without records maintained by the company (such as personnel files, payroll records, deferral elections, benefit payments and participant loan packages). (c) The financial statements cannot be completed without the involvement of the plan administrator, who will ultimately sign the management representation letter to take responsibility for the plan's financial reporting.

Describe the 2013 U.S. Supreme Court decision in Heimeshoff v. Hartford Life & Accident Insurance Company, and explain the impact of this decision. (Text, p. 330)

In the Heimeshoff v. Hartford Life & Accident Insurance Company decision, the Supreme Court gave its blessing to a contractual limitations period, provided that it is reasonable in length and not subject to a controlling statute to the contrary. This decision had a major impact because in virtually all cases prior to this ruling, a court would consider a three-year period, and perhaps even a two-year period, commencing with a benefit claim denial or other definitive action of a plan administrator, to be reasonable. Furthermore, with this decision it is now hard to argue that an ERISA plan should not have a contractual limitations period.

Explain why administrative claims audits are more important in self-funded health plans than they are in insured plans. (Reading C, Trust But Verify—Claims Audits, Study Guide, p. 39)

In the case of fully insured plans, most insurance carriers will offer only a limited number of "standard" plan designs. But with a self-funded plan, the sponsor has greater flexibility in design and administration. Because the number of plan designs for a self-funded ASO client is potentially unlimited, complexity increases for the carrier or TPA and creates the potential for more administrative mistakes.

Explain how the purpose of employee benefit plan communications has changed recently. (Text, p. 96)

In the past, benefit communication was very basic. An employer's main communication objectives were keeping benefit booklets updated, making sure claim forms were available and issuing an occasional memo or newsletter summarizing updates and improvements to benefits. No longer is benefit communication merely concerned with providing employees with information about plans over which they have little or no influence. Instead, employers must change their communication objectives to focus on motivating employees to make decisions about how to best utilize their benefits in a way that is economical to both the plan sponsor and the employees' families.

What is a SOC 1 Report? (Text, p. 108)

It is difficult to review and assess controls at an outside service organization, which is why third-party administrators should provide plan sponsors with an audit report of their own, commonly called a SOC 1 Report. Under professional standards, it is known more formally as a Report on Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting. A SOC 1 Report is prepared by an auditor engaged by the third-party administrator to review and assess controls at that service organization, and the service organization provides the report to any entity relying on its controls. This is a more efficient means of showing controls are in place and operating effectively than having the service organization consent to audit requests from each of its individual clients.

Is it likely that a one-time payment to an executive at the termination of employment will constitute an ERISA-regulated severance plan? Explain. (Text, p. 339)

It is not likely that a one-time payment to an executive at the termination of employment will constitute an ERISA-regulated severance plan, because a number of cases have established the requirement of an ongoing administrative scheme.

Many parties are involved in an ERISA retirement plan. However, when selecting plan investments, only the needs of two parties must be served. Identify these parties. (Text, p. 293)

It is the needs of the participants and their beneficiaries solely upon which the decision to add an investment to an ERISA retirement plan portfolio must be based. A detailed checklist is recommended to cover all known conflicts of interest, and documentation should be maintained to demonstrate that the decision was made solely in the interest of the participants.

The Organisation for Economic Co-operation and Development (OECD) recently identified a number of key difficulties for firms that are attempting to make DC retirement plans work effectively on a global scale. What are these key difficulties? (Text, pp. 517-518)

Key difficulties that OECD identified for firms that are attempting to make DC retirement plans work effectively on a global scale are: (a) Employees lack confidence in their plans' ability to provide for their retirementneeds. (b) Contribution levels are too low. (c) People struggle to choose appropriate investments. (d) Investment options may not be up to the task. For example, funds may provide insufficient protection and exhibit excessive volatility, or retirement income options may be unclear or inadequate.

Plan sponsors that want to help retirees convert DC plan assets to retirement income while recognizing their fiduciary duties will want to conduct a due diligence process that includes which steps? (Text, pp. 282-283)

Key steps to be taken by plan sponsors that want to conduct a due diligence process to help retirees convert DC plan assets to retirement income include: (a) Assess the needs and abilities of their older workers. (b) Learn about various RIGs, including the retirement planning goals each RIG addresses, their advantages and disadvantages, and how much income can be reasonably expected. (c) Learn about the capabilities, costs and communications support that can be provided by their existing plan administrator and the capabilities of alternative vendors. (d) Develop criteria for the design of the retirement income program, and assess how each potential RIG and retirement income solution meets these criteria. (e) Develop a reasonable timetable with the plan administrator for implementing and communicating the retirement income program.

Leaders in the analytics industry developed a Healthcare Analytics Adoption Model that has eight levels of analytics adoption which an organization passes through as it gains sophistication in using its data to drive improvement. What are the eight levels? (Text, p. 263)

Level 1 Enterprise Data Warehouse Collecting and integrating the core data content Level 2 Standardized Vocabulary and Patient Registries Relating and organizing the core data content Level 3 Automated Internal Reporting Efficient, consistent production of reports and widespread availability in the organization Level 4 Automated External Reporting Efficient, consistent production of reports and adaptability to changing requirements Level 5 Waste and Care Variability Reduction Reducing variability in care processes and focusing on internal optimization and waste reduction Level 6 Population Health Management and Suggestive Analytics Tailoring patient care based upon population metrics. Fee-for-quality includes bundled per case payment. Level 7 Clinical Risk Intervention and Predictive Analytics Organizational processes for intervention are supported with predictive risk models. Fee-for-quality includes fixed per capita payment. Level 8 Personalized Medicine and Prescriptive Analytics Tailoring patient care based on population outcomes and genetic data. Fee for-quality rewards health maintenance.

Explain the relationship between modern portfolio theory (MPT) and the diversification requirement in ERISA. (Text, p. 299)

MPT constructs a risk/reward frontier that assumes diversification always eliminates nonsystematic risk. Since MPT is a bedrock tenet of ERISA, the diversification requirement is very important. It reduces the risk of large losses ". . . by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so."

When first implemented in 1966, Medicare covered most persons aged 65 and older. Now, a number of other groups are also eligible for Medicare benefits. List those other groups. (Text, pp. 433-434)

Major groups of Medicare beneficiaries added in the years following its establishment include: (a) Persons entitled to Social Security or Railroad Retirement disability cash benefits for at least 24 months (b) Most persons with end-stage renal disease (ESRD) (c) Certain otherwise noncovered aged persons who elect to pay a premium for Medicare coverage (d) Persons with Lou Gehrig's disease who are allowed to waive the 24-month waiting period.

Explain why making a one-time estimate of health care costs during retirement is beneficial. (Text, pp. 455-456)

Making a one-time estimate of health care costs during retirement has three benefits: (1) Clients will be aware of the potential costs and may be motivated to manage them. (2) By seeing several estimates, clients will understand that costs may vary widely. (3) In discussions with their financial planners, clients may come to realize that the bulk of their health care spending will probably occur in later retirement.

Name areas that have been identified as especially in need of internal controls. (Text, pp. 106-108)

Many areas have been identified as especially in need of internal controls. Some of them are: (a) Distributions and loans (b) Hardship withdrawals (c) Nondiscrimination testing (d) Contributions (e) Compensation and personal data.

Discuss the question of who owns and controls the data collected in a wellness program. (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, p. 33)

Many wellness programs employ electronic wearable fitness devices, and if these devices are owned by the employer, then any data collected from them may legally also be the property of the employer. But the law is not well settled that employees own and can control the usage of the data that are collected as part of wellness programs. Thus, an employee might find that a PHI file shared with an employer's wellness program continues to live on, long after the employee has left the firm. Or, such information could be sold (in ostensibly anonymized form) to entities far outside the realm of the employee's contemplation when the file was created. For the employee, joining a wellness program is an act of trust, an act of investment in betterment of health. Most employees would not foresee that their PHI would serve ends other than helping them better their health and that the data they share with wellness programs might be traded or used in ways that benefit the wellness program vendors more than it benefits employees. Yet investigations have confirmed that wellness vendors do frequently sell the data entrusted to them by employee participants.

Discuss the popular default options of DC plans before and after the Pension Protection Act of 2006 (PPA). (Text, p. 240)

Money market funds were often the default option for DC plans prior to PPA. This is a lower risk approach, but it is probably not an effective way to grow assets for the long-term retirement purpose. Interest accrual here was assumed to be commensurate with the variable one-year certificate of deposit, which can be viewed as the lower bound to gauge the role of savings. The worker was assumed to save 6% of her or his salary each year. TDFs are the most popular default DC investment in the post-PPA world. TDFs seek higher returns by taking greater risk when workers are younger, because they have earnings as a cushion and they have a longer investment horizon to weather shortterm volatilities. As the worker gets older, the risky proportion in the TDF gradually decreases so as to mitigate potential loss.

Describe the non-HIPAA compliance issues associated with the information accumulated by medical plans and their service providers. (Text, p. 128)

More than just HIPAA compliance is at stake with protecting the massive amount of information accumulated by medical plans. A plan fiduciary cannot assume that service providers will handle all compliance obligations. Failure to identify and address privacy and security considerations with service providers may create exposure for Employee Retirement Income Security Act (ERISA) fiduciaries. Section 404(a) of ERISA generally requires a fiduciary to discharge his or her duties with respect to a plan "solely in the interest of the participants and beneficiaries" and with "the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." Hiring a service provider to provide services to an ERISA-covered employee benefit plan is itself a fiduciary act, because it requires discretionary control or authority over plan administration. Similarly, removing or retaining a service provider is a fiduciary act.

Describe the audit time frame for most administrative claims audits. (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 39

Most agreements will allow for only a 12- to 24-month look-back from the date the audit begins. And while the ASO agreement might allow for up to 24 months, the provider network contracts in place usually will allow for only 12 months when it comes to recovering claims that were identified as overpaid. A clear understanding of this difference in time frames will help set the right expectations about how much money can actually be recovered.

What is the percentage of claims found in most administrative claims audits that has been overpaid or incorrectly paid and is possibly recoverable? (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 39

Most audits find that 1-3% of the total amount spent on claims annually is potentially overpaid or incorrectly paid.

What is the relationship between the Employee Retirement Income Security Act (ERISA) and administrative claims audits of health plans? (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 37)

Most insurance carriers and third-party administrators (TPAs) do a good job of administering self-funded plans, but maintaining regular oversight of health care expenses is always prudent and is, in fact, a plan sponsor's fiduciary responsibility. According to ERISA, it is the duty of plan trustees and other fiduciaries to act in the best interests of plan participants, including reducing claims expenses and ensuring the quality of administrative processes.

Which type of employers must provide unemployment benefits? (Text, p. 409)

Most private firms, state and local governments, and nonprofit organizations must provide unemployment benefits. A private firm is subject to the federal unemployment tax if it employs one or more employees in each of at least 20 weeks during the calendar year (or preceding calendar year), or it pays wages of $1,500 or more during a calendar quarter of either year. State and local governments must provide unemployment coverage, although they are not required to pay the federal unemployment tax but instead may elect to reimburse the system for the benefits paid to government employees. In addition, nonprofit charitable, educational and religious organizations are covered if they employ four or more workers for at least one day in each of 20 different weeks during the current or prior year. A nonprofit organization has the right either to pay the unemployment tax or to reimburse the states for the benefits paid.

Explain the meaning of the term no employer endorsement in the previous learning objective. (Text, pp. 27-28)

No employer endorsement means an employer can publicize, collect premiums, remit premiums, provide employee information to an insurance company and maintain a file on the voluntary plan. However, an employer cannot express positive normative judgment and cannot urge/encourage employee participation. The participation of the employer or employee organization should be limited to the duties specified in the regulation, none of which involve the exercise of discretionary duties. An employer hoping to rely on this exemption should also be careful not to create the impression that the benefit is part of its benefit package by, for example, including it in enrollment materials or encouraging employees to enroll. DOL warns in the final Family and Medical Leave (FMLA) regulations that if a plan is intended to be exempt from ERISA under this provision, the employer should not pay an employee's premium while the employee is on FMLA leave.

Describe the procedures required to establish an ERISA employee welfare benefit plan (Text, pp. 23-24)

No particular formalities are required to create an ERISA plan, and no single action in and of itself necessarily constitutes establishment of an ERISA employee welfare benefit plan. Thus, ERISA plans have been deemed to be "established or maintained" by a practice that would cause a reasonable employee to perceive an ongoing commitment by the employer to provide employee benefits. This would include any contributions by the employer toward payment of benefits or by the employer simply administering the benefit. It is easy to have a plan, fund or program—generally any ongoing administrative scheme will satisfy this condition. Showing that an employer maintains a plan is also easy—any contribution by the employer toward payment of benefits or administration of the plan is enough (including a contribution toward insurance coverage).

Are health and accident insurance plan payment benefits received by an employee taxable? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 28)

No, health and accident insurance plan payment benefits received by an employee, the employee's spouse and eligible covered dependents are not taxable income to the employee so long as the employee's expenses are for medical care. The Internal Revenue Service (IRS) defines what constitutes medical care.

How much administration is needed to create an ERISA-regulated severance plan? (Text, p. 338)

Not much administration is required. The U.S. Court of Appeals for the Ninth Circuit held that a severance plan that covered ten top executives and that was triggered when a covered employee was not offered "substantially similar" employment required the administrator to engage in an ongoing, particularized, administrative analysis.

ERISA makes it clear that a person will be identified as the plan administrator so that a specific person will be held legally responsible for each plan's administration. Explain how this issue is handled by ERISA. (Text, p. 350)

Not to be confused with the broader ERISA term fiduciary, ERISA defines administrator to mean: (a) The person specifically so designated by the terms of the instrument under which the benefit plan is operated (b) If an administrator is not so designated, then the plan sponsor; or (c) In the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, then such other person as the U.S. secretary of labor may prescribe by regulation.

Discuss the deficiency involved with ERISA Section 408(b)(2), and explain why this deficiency is important. (Text, p. 205)

One deficiency commonly noted by auditors is the lack of proper monitoring of service provider fees and disclosures as required under ERISA Section 408(b)(2). Many plan sponsors do not follow these regulations. They require the plan's covered third-party service providers to disclose the administrative and investment costs incurred by the plan and plan participants and the compensation received by the service provider. This type of deficiency is important because a plan service provider is considered a party in interest, and its services are considered party-in-interest transactions. Without the proper written disclosure required under ERISA Section 408(b)(2), the amounts received by the service provider are considered unreasonable, per se, and the related statutory exemption does not apply, resulting in a prohibited transaction.

The right to recover the civil penalty under Section 502(c)(1) is limited to only certain individuals. Who are they? (Text, p. 351)

Only participants and beneficiaries may recover the civil penalty under Section 502(c)(1).

In addition to possible excise taxes, what are the other penalties or problems for group health plans sponsored by nonfederal government entities and insurance companies that fail to conform to ACA insurance market reforms? (Text, p. 371)

Other penalties or problems for group health plans that fail to conform to ACA insurance market reforms are penalties assessed by the U.S. Department of Health and Human Services, penalties from the U.S. Department of Labor (for noncomplying group health plans subject to ERISA) and participant lawsuits.

In addition to the financial reports cited in the previous question, what other records must be preserved? (Text, p. 233)

Other records that must be preserved include the following. (1) Proof of the fidelity bond covering the plan (2) Data supporting all required nondiscrimination testing, that is: • Highly compensated employee and key employee determinations • Controlled group and affiliated service group determinations • Payroll and hours information for all employees used to determine eligibility, exclusions and allocations.

What are the other types of audits that may be performed in conjunction with a primary claims audit? (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 41)

Other types of audits that may be performed in conjunction with a primary claims audit include: (a) Operational audits, which look at procedures associated with enrollment including identification card processing, customer service standards, etc. (b) Reinsurance audits, to discover charges that should have been submitted to a re-insurer for reimbursement but were not (c) Transitional audits, to ensure a plan has been set up appropriately in an administrator's systems when a plan is moving to a new carrier, from fully insured to self-insured or to significantly different benefit designs.

What is the basic purpose of Medicare Part C plans? (Text, p. 437)

Part C, also known as the Medicare Advantage program, expands beneficiaries' options for participation in private-sector health care plans. Medicare Parts A and B constitute the original fee-for-service Medicare program. Although all Medicare beneficiaries can receive their benefits through the traditional fee-for-service program, most beneficiaries enrolled in both Part A and Part B can choose to participate in a Medicare Advantage plan instead. Medicare Advantage plans are offered by private companies and organizations and are required to provide at least those services covered by Parts A and B, except hospice services. These plans may (and in certain situations must) provide extra benefits (such as vision or hearing) or reduce cost sharing or premiums.

Is SMI synonymous with Part B? Explain. (Text, p. 434)

Part D activities are handled within the SMI trust fund but in an account separate from Part B. It should thus be noted that the traditional treatment of SMI and Part B as synonymous is no longer accurate, since SMI now consists of Parts B and D. The purpose of the two separate accounts within the SMI trust fund is to ensure that funds from one part are not used to finance the other.

Which part of Medicare has the greatest cost variation from year to year? (Text, p. 456)

Part D plans have the greatest cost variation of any type of Medicare coverage, with up to fourfold price differences for identical sets of drugs.

Briefly describe Medicare Part D. (Text, p. 438)

Part D provides subsidized access to prescription drug insurance coverage on a voluntary basis, upon payment of a premium, to individuals entitled to Part A or enrolled in Part B, with premium and cost-sharing subsidies for low-income enrollees. Beneficiaries may enroll in either a standalone prescription drug plan (PDP) or an integrated Medicare Advantage plan that offers Part D coverage. Part D coverage includes most Food and Drug Administration (FDA)-approved prescription drugs and biologicals. However, plans may set up formularies for their prescription drug coverage, subject to certain statutory standards. Part D coverage can consist of either standard coverage or an alternative design that provides the same actuarial value. For an additional premium, plans may also offer supplemental coverage exceeding the value of basic coverage.

Explain the taxation of permanent disability benefits. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 44)

Payments made to employees who are permanently disabled and not returning to work are subject to FIT withholding to the extent that the premiums were paid by the employer or the employee on a pretax basis. Payments made under a plan after the employment relationship ends because of disability, retirement or death are not subject to FICA taxes or to FUTA taxes unless the payments would have been made even if the employment had not ended for one of those reasons. In addition, special rules apply to permanent disability payments made under a plan to an employee who is receiving Social Security disability insurance benefits.

Explain why people are more concerned about their medical expenses during retirement when other expenses, such as housing, transportation and food, are greater. (Text, p. 452)

People are concerned about their medical expenses during retirement for two reasons: First, medical expenses are unpredictable. Paying for an unforeseen serious illness can wreak havoc on a retirement plan. Second, people often know from their own experience that health care spending increases at faster rates than other types of spending.

Identify the categories of persons who are entitled to monthly Social Security retirement benefits. (Text, p. 387)

Persons who are eligible for Social Security retirement benefits are: (a) Retired workers. Monthly retirement benefits can be paid at full retirement age to a fully insured worker. Reduced benefits can be paid as early as the age of 62. (b) Spouses of retired workers. The spouse of a retired worker can also receive monthly benefits if she or he is at least aged 62 and has been married to the retired worker for at least one year. A divorced spouse is also eligible for benefits based on the retired worker's earnings if she or he is at least aged 62 and the marriage lasted at least ten years. (c) Unmarried children younger than the age of 18. Monthly benefits can also be paid to unmarried children of retired workers who are younger than the age of 18 (or 19 if full-time elementary or high school students). (d) Unmarried disabled children. Unmarried disabled children aged 18 or older are also eligible for benefits based on the retired worker's earnings if they were severely disabled before the age of 22 and continue to be disabled. (e) Spouses with dependent children younger than the age of 16. A spouse at any age can receive a monthly benefit if the spouse is caring for an eligible child younger than the age of 16 (or is caring for a child of any age who was disabled before the age of 22) who is receiving a benefit based on the retired worker's earnings. The mother's or father's benefit terminates when the youngest child attains the age of 16 (unless the mother or father is caring for a child who became disabled before the age of 22).

What challenges do plan sponsors and fiduciaries confront in dealing with cyberattacks and other data breaches? (Text, pp. 144 and 159)

Plan sponsors and fiduciaries may be challenged by limited resources, insufficient technical expertise and lack of clear standards. Individuals responsible for benefit plan management rarely have expertise in cybersecurity, yet benefit plans contain significant sensitive individual data that could be prone to a cyber breach. Consequently, plan sponsors and fiduciaries may want to carefully consider whether to consult with a cybersecurity expert when developing a cybersecurity strategy for their plans. In addition, firms that are small or do not have the resources or capacity to develop a customized, robust cybersecurity risk management strategy may need to consider using cloud-based resources to offload cybersecurity burdens onto the cloud provider. Alternatively, cyber insurance or other tools may be useful in designing a cost effective program.

What arrangements linked to employee benefit plan administration are likely to increase privacy risks? (Text, p. 128)

Plan sponsors assume greater privacy risks when providing sensitive personal data of participants to service providers for plan administration. This additional risk is unavoidable, since administering an employee benefit plan typically involves the assistance of service providers such as third-party administrators (TPAs), outside payroll providers, benefits consultants, investment funds, investment advisors and others. Service providers acting on behalf of employee benefit plans collect and process large amounts of personal, medical and financial information with respect to participants and beneficiaries. Among the information stored are Social Security numbers, email accounts, retirement assets and income figures. The collection and processing function is done through automated systems that rely upon the Internet and thus call for close monitoring of the way service providers will manage this information.

Explain how health plan sponsors can use data analytics and predictive modeling. (Reading A, Using Data to Improve Health Plan Performance and Participant Health, Study Guide Module 7, pp. 26-27)

Plan sponsors can use data analytics and predictive modeling to: (a) Identify claims trends (b) Target high-risk users (c) Identify gaps in care (d) Steer patients to the best providers (e) Measure vendor performance (f) Uncover cost-sharing strategies (g) Engage participants in their own care (h) Investigate waste, abuse and fraud.

What has been the effect on the recordkeeper marketplace of employers looking for more or better services at lower costs from these providers? (Text, pp. 222-223)

Plan sponsors facing regulatory pressures and participant lawsuits have been demanding more or better services from recordkeepers at lower costs. In this environment where profits are being squeezed, the marketplace is becoming extremely competitive, and the industry is consolidating. The median recordkeeping fee in 2015 was $64 per plan participant, down significantly from a decade ago when it was $118. In the past, recordkeepers could survive in the marketplace by just servicing about one million participants; today, to stay in business, record-keepers need about 2.5 million to three million participants. Industry observers believe that market consolidation may eventually lead the marketplace to have just a handful of recordkeeper providers. Economies of scale is what these players have in common, industry experts say. Things like mobile apps, automatic features and other online educational tools used to be the specialties that got recordkeepers noticed. Today, to be competitive, providers need top-line technology and services. And because the market is changing so rapidly, plan sponsors are being encouraged by plan advisors to put their recordkeeping provider contracts out to bid more frequently.

ERISA applies to any welfare benefit plan, fund or program established or maintained by an employer, an employee organization or both that provides certain types of benefits through the purchase of insurance or otherwise. List these benefits. (Text, p. 343)

Plans covered by ERISA include: (a) Plans that provide medical, surgical or hospital care (b) Benefits in the event of sickness, accident, death or unemployment (c) Vacation benefits (d) Apprenticeship or other training programs (e) Day-care centers (f) Scholarship funds (g) Prepaid legal services.

List the ways in which predictive modeling can be leveraged by health plans. (Reading A, Using Data to Improve Health Plan Performance and Participant Health, Study Guide Module 7, pp. 24-25)

Predictive modeling can be leveraged to: (a) Review a plan's disease burden (health status) and how this burden will change over time (b) Stratify a plan's population by risk level to identify at-risk and catastrophic claimants for targeting disease management and case management, respectively (c) Identify risk factors likely to generate future plan costs that should be targeted with more intensive outreach, including finding at-risk individuals who— although they may be low-cost today—may generate significant costs in the future (d) Compare relative resource consumption by groups for budgeting and underwriting forecasts. Consumption refers to how intensively plans use physician visits, hospital stays and other resources to care for members. (e) Compare providers fairly, adjusting for differences in health risk among patient populations. Such comparisons can be used to profile providers for utilization review and quality of care. (f) Analyze a medical management program to see what the true savings are, as opposed to those that are regression to the mean. Regression to the mean involves outcomes that are at least partly due to chance. It refers to the phenomenon of "averaging out" in statistics.

Define predictive modeling in the health care context. (Reading A, Using Data to Improve Health Plan Performance and Participant Health, Study Guide Module 7, p. 24)

Predictive modeling is a statistical technique commonly used to forecast future behavior. It involves analyzing historical and current data to generate a model to forecast future outcomes. Predictive modeling can be used to quantify risk and costs for individuals and groups of individuals enrolled in a health plan.

Explain the nondiscrimination requirements that the Patient Protection and Affordable Care Act (more commonly known as ACA) enacted for health insurance plans and its current enforcement status. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 32)

Prior to ACA, employers could structure health insurance plans offered through a third party insurance company to favor highly compensated employees (HCEs) without jeopardizing the tax exclusion for employer contributions and reimbursements. ACA changed the rules to require such plans to meet the same nondiscrimination requirements that self-insured plans must meet in order to retain tax-favored status. However, IRS has said that it will not require employers to comply with the new nondiscrimination provisions or enforce the penalties until it issues regulations or administrative guidance on the new requirements. Candidate Note: In January 2017 President Trump signed an executive order (EO) giving the Department of Health and Human Services and "other executive departments and agencies" the authority and discretion to roll back certain aspects of the ACA. As of this writing, because of the EO the IRS is easing off the enforcement of some ACA provisions; however, the law remains on the books, and only Congress can repeal the law.

List the changes that have been proposed to reduce the long-range deficit in the OASDI program. (Text, p. 405)

Proposed changes include the following: (a) Use progressive indexing to determine benefits. For purposes of determining the worker's average monthly indexed earnings, a price index rather than a wage index would be used, which results in substantial cost savings. However, the indexing method for lower income groups would still be based on a wage index, as is now the case. As covered earnings increase, a combination of wage and price indexing would be used. For upper-income groups, the indexing method would be based largely on a price index. The overall result would be a substantial reduction in the long-range deficit. (b) Increase the Social Security payroll tax for both employers and employees. (c) Move up scheduled increase in full retirement age, or increase the age beyond the age of 67. (d) Reduce benefits for future retirees across the board. (e) Increase the OASDI taxable wage earnings base to cover a larger percentage of earnings. (f) Make all OASDI benefits subject to the federal income tax (instead of a maximum of 85% as is now the case). (g) Extend OASDI coverage on a compulsory basis to all new state and local government employees. (h) Increase the number of years used in calculating retirement benefits from 35 to 38 years. (i) Invest part of the trust fund assets in private investments, such as common stock. In addition, the general revenues of the federal government could be used to fund part of the program. However, the federal budget is experiencing huge deficits at the present time. Thus, increased reliance on general revenue financing to reduce the long-range deficit is unlikely.

In the Sulyma v. Intel case, the Intel plantiffs argued that the Intel ERISA investments underperformed a passive index and therefore should be considered imprudent. Does poor investment performance constitute imprudent investment management under ERISA? Explain. (Text, p. 301)

Prudent investing is not judged on the investment results in hindsight, but rather by the process employed to investigate and monitor the investment. So the mere fact that the Intel investments underperformed the passive index does not create an imprudent process.

Describe QLAC required features other than those described in the previous question. (Text, p. 288)

QLACs must contain specific language in the contract that identifies it as a QLAC. Also, QLACs are subject to an annual reporting requirement that includes, among other things, information about the plan and plan sponsor, the annuity starting date, the amount of the payment and whether the starting date may be accelerated.

Describe the basic purpose of a QLAC. (Text, p. 286)

QLACs provide retirement income to individuals starting at an advanced age. They are designed to provide added financial security to retirees in case they exhaust their retirement investments—such as by "living too long" or experiencing a major market downturn.

Discuss the quality of the information provided by wellness programs on wearable electronic devices and gadgets. (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, p. 32)

Research on the functioning of wearable electronics indicates irregularities in the data being collected and that wearable devices are unreliable in, for example, accurately capturing the amount and intensity of physical activity. A lack of education as to the limitations of wearable technologies would belie informed consent, particularly as the participant employee comes to rely on the wearable technology as a representation of activity levels.

Explain the specific steps a retiree can take to estimate his or her medical expenses. (Text, p. 457)

Retirees can call their insurance companies to find out how much they've paid in cost sharing—deductibles, copayments and coinsurance payments. Then they can add the premiums they have paid, including Part B premiums. And if they wish, they can add estimates of how much they have paid for services that Medicare does not cover, including routine dental and vision care, hearing aids and over-the-counter drugs.

List the actions that fiduciaries should take each time they meet for the purpose of monitoring the performance of the plan's investments. (Text, pp. 219-221) Each time the fiduciaries meet to monitor plan investments, it is recommended that they take the following actions:

Review the quarterly report prepared by the investment advisor to evaluate the performance of investment funds over relevant time periods, including performance over quarter, year-to-date, and three-, five- and ten-year periods. The report should also show performance relative to benchmark and peer groups and whether any management changes have taken place within the fund. (b) Review whether institutional share classes are available for the plan's investment funds. If an institutional share class is available, but the plan is ineligible for it because it fails to have a minimum level of assets invested in the fund, fiduciary duties would require the plan committee to ask the fund manager to make an exception on behalf of the plan. The switch to the institutional share classes should be evaluated carefully, not automatically pursued. Other factors including revenue sharing should be considered. (c) Evaluate the investment funds to determine if they represent all the desired asset classes and if there has been "style drift" since the funds were last evaluated. (d) Review recent changes in the law with ERISA counsel, including court cases and government pronouncements. (e) If applicable, plan committees should take care to evaluate their target-date funds (TDFs) on a quarterly basis. The fee structure of the TDF family (as well as the underlying investment funds) should be confirmed, and the performance of each TDF versus appropriate indexes should be noted. (f) Review all fees that are directly or indirectly paid by the plan, and make sure the fees are reasonable. This exercise may be performed annually or semiannually instead of quarterly.

Describe risk allocation provisions that should be scrutinized in any contract between a plan sponsor and a service provider. (Text, pp. 134-135)

Risk allocation provisions related to privacy, data security and confidentiality ought to be carefully scrutinized. These are not regulatory issues; rather, they are commercial issues indicative of the leverage and relationship between the parties. Among these issues are: (1) Whether damages for violations of confidentiality, privacy and data security obligations are unlimited or capped by a limitation of liability or by a special limitation of liability devoted to these issues (i.e., a "super cap"); and (2) Whether the recommended service provider's full hold-harmless indemnity for third-party claims based on privacy and data security violations is unlimited or capped by a limitation of liability or by a super cap.

Explain how the SMI trust fund differs fundamentally from the HI trust fund with regard to the nature of its financing. (Text, pp. 440-442)

SMI is composed of two parts, Part B and Part D, each with its own separate account within the SMI trust fund. The nature of the financing for both parts of SMI is similar, in that both parts are primarily financed by contributions from the general fund of the U.S. Treasury and (to a much lesser degree) by beneficiary premiums. For Part B, the contributions from the general fund of the U.S. Treasury are the largest source of income, since beneficiary premiums are generally set at a level that covers 25% of the average expenditures for aged beneficiaries. There are, however, provisions that can alter the premium rate for certain enrollees. For Part D, general fund contributions account for the largest source of income, since Part D beneficiary premiums are to represent, on average, 25.5% of the cost of standard coverage. Beneficiaries with income above certain thresholds are required to pay an income-related monthly adjustment amount, in addition to their monthly premiums. In addition to contributions from the general fund of the U.S. Treasury and beneficiary premiums, Part D also receives payments from the states. With the availability of prescription drug coverage and low-income subsidies under Part D, Medicaid is no longer the primary payer for prescription drugs for Medicaid beneficiaries who also have Medicare, and states are required to defray a portion of Part D expenditures for those beneficiaries. The SMI trust fund also receives income from interest earnings on its invested assets, as well as a small amount of miscellaneous income. It is important to note that beneficiary premiums and general fund payments for Parts B and D are redetermined annually and separately.

Discuss the acceptable methods of distributing required ERISA disclosure documents. (Text, pp. 41-42)

SPDs and SMMs must be furnished in a manner "reasonably calculated to ensure actual receipt of the material." Acceptable methods include: (a) In-hand delivery to employees (b) First-class mail (c) Second- or third-class mail, but only if return and forwarding postage is guaranteed and address correction is requested (d) Inclusion in a union or company publication, but only if certain requirements are met (e) Disclosure to participants (both employees and nonemployees) may be made electronically (for example, by e-mail, an intranet or the Internet). This option is not without limit, however. DOL issued a safe harbor rule, meaning that plans are not required to comply with its conditions; however, compliance ensures that DOL will find a plan's electronic delivery method acceptable. As outlined in the rule, all ERISA Title I plan documents and notices, including SPDs, SMMs and summary annual reports (SARs), may be furnished electronically. Compliance with the safe harbor rules for electronic distribution depends on whether the plan participant has work-related computer access or non-work-related computer access.

List some of the health care services that are not covered by Medicare. (Text, pp. 438-439)

Services that are not covered by Medicare include long-term nursing care, custodial care and certain other health care needs, such as dentures and dental care, eyeglasses and hearing aids. These services are not part of the Medicare program, unless they are a part of a private health plan under the Medicare Advantage program.

Explain the tax advantage of shifting ordinary W-2 wages (or future wage increases) into employer contributions to a qualified retirement plan. (Text, p. 328)

Shifting ordinary W-2 wages (or future wage increases) into employer contributions to a qualified retirement plan creates a relief from payroll taxes for both the employer and employee.

How is pay for sick days associated with brief minor illnesses treated for tax purposes? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 41)

Sick pay is usually provided by employers so that employees do not lose wages when they are absent from work because of brief minor illnesses, such as a cold or the flu. This type of sick pay is subject to FIT, FICA taxes and FUTA taxes when paid.

Explain how Social Security benefits are financed. (Text, pp. 395-396)

Social Security benefits are financed by a payroll tax paid by employees, employers and the self-employed; interest income on the trust fund investments; and revenues derived from the taxation of part of the monthly cash benefits. The combined payroll tax rate for both OASDI and Medicare is 7.65%, which is paid by both the employee and employer. The Social Security portion (OASDI) is 6.2% on covered earnings up to the maximum taxable earnings base. The maximum taxable earnings base automatically increases if wages in the national economy increase.

Explain how inflation affects Social Security benefits. (Text, pp. 391-392)

Social Security cash benefits are automatically adjusted each year for changes in the cost of living, which maintains the real purchasing power of the monthly benefits during periods of inflation. Whenever the consumer price index for all urban wage earners and clerical workers on a quarterly basis increases from the third quarter of the previous year to the third quarter of the present year, the benefits are automatically increased by the same percentage for the December benefits (payable in January).

Contrast the concepts of social adequacy and individual equity. (Text, p. 381)

Social adequacy means that the benefits paid should provide a certain standard of living to all contributors. This means that the benefits paid are heavily weighted in favor of certain groups, such as low-income persons, large families and the presently retired aged. In technical terms, the actuarial value of the benefits received by these groups exceeds the actuarial value of their contributions. In contrast, the individual equity principle is followed in private insurance. Individual equity means that contributors receive benefits directly related to their contributions; the actuarial value of the benefits is closely related to the actuarial value of the contributions.

Explain how benefits are related to earnings in social insurance programs. (Text, p. 381)

Social insurance benefits are loosely related to worker earnings. The higher a worker's covered earnings, the greater will be the benefits. The relationship between higher earnings and higher benefits is loose and disproportionate, but it does exist. Thus, some consideration is given to individual equity.

Explain why social insurance programs are deemed necessary in the United States. (Text, pp. 379-380)

Social insurance programs are necessary in the U.S. for several reasons: (a) Social insurance programs are enacted to solve complex social problems. A social problem affects most or all of society and is so serious that direct government intervention is necessary. For example, the Social Security program came into existence because of the Great Depression of the 1930s, when massive unemployment required a direct government attack on economic insecurity. (b) Social insurance programs are necessary because certain risks are difficult to insure privately. For example, unemployment is difficult to insure privately because it does not completely meet the requirements of an insurable risk. However, the risk of unemployment can be insured by state unemployment insurance programs. (c) Social insurance programs provide a base of economic security to the population. Social insurance programs provide a layer of financial protection to most persons against the long-term financial consequences of premature death, old age, occupational and nonoccupational disability, and unemployment.

Explain how beneficiaries are taxed on OASDI benefits. (Text, p. 395)

Some beneficiaries who receive monthly cash benefits must pay an income tax on part of the benefits. The amount of benefits subject to taxation depends on the amount of combined income. Combined income is the sum of adjusted gross income, plus tax-free interest, plus one-half of the worker's Social Security benefits. If the combined income exceeds certain dollar thresholds, some benefits are taxable. The threshold amounts depend on the person's filing status (individual, married with a joint tax return or married with a separate return) and the amount of income. For example, a married person filing a joint tax return will pay no tax on Social Security benefits if the combined income is less than a certain amount but will pay tax on up to 50% of the benefits if income is in a higher bracket and will pay tax on up to 85% of the benefits if income is in an even higher bracket.

List the elements that would be prudent to include in a plan document. (Text, p. 84)

Some elements that would be prudent to include in a plan document are: (a) The name(s) of the plan fiduciary(ies) (b) Policies and procedures relating to plan administration (c) Funding requirements (d) A description of how benefit payments will be made (e) Claims and appeals procedures (f) Plan amendment and termination authority and procedures (g) Method for distribution of plan assets upon plan termination (h) A statement that plan assets can be used to pay reasonable costs of plan administration.

List some of the most popular measures used by multinational corporations to control the rising cost of health care. (Text, pp. 506-507)

Some of the most popular measures used by multinational corporations to control the rising cost of health care outside the U.S. are: (a) Tight local procurement of insurance (b) Local self-insurance (c) Multinational pooling (d) Captive reinsurance (e) Bulk purchasing across countries.

What special rules apply to 401(k) plans and group-term life insurance offered under a qualified cafeteria plan? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, pp. 48-49)

Special rules apply to 401(k) plans and group-term life insurance. Pretax §401(k) plan employer contributions under a qualified cafeteria plan are subject to FICA and FUTA taxes and must be reported on an employee's Form W-2 along with amounts withheld. Elective deferrals (contributions made on a pretax basis) are also reported on the Form W-2. In addition, cafeteria plans may offer employees more than $50,000 of group-term life insurance to an employee as a qualified benefit. (IRC §79 provides an exclusion for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. There are no tax consequences if the total amount of such policies does not exceed $50,000. The imputed cost of coverage in excess of $50,000 must be included in income, using the IRS Premium Table, and are subject to Social Security and Medicare taxes.) Contributions to a qualified cafeteria plan made with posttax dollars are included in the employee's income and are FIT, FICA and FUTA taxable, but the benefits purchased are not taxable.

Briefly describe the fiduciary duties that are involved when annuity contracts are purchased by an ERISA plan. (Text, p. 310)

Specific rules apply to a fiduciary's selection of an annuity contract. Fiduciaries should document their conclusions regarding the ways in which the chosen annuity provider meets the criteria outlined in the regulations and should work with a professional advisor familiar with the annuity marketplace.

What role have state attorneys general exercised in the sphere of privacy protection? (Text, p. 132)

State attorneys general have required companies to incorporate vendor management programs in settlement agreements for violations under state consumer protection statutes. In one case, six state attorneys general collectively entered into an agreement with one company to resolve the states' investigation into whether the company had engaged in any unlawful or deceptive trade practices in violation of the state consumer protection statutes. As part of its settlement agreement and for the protection of its consumer information, the company was required to implement a privacy program that included taking reasonable steps to select and use only certain third-party service providers. Those providers must either agree to comply with the company's privacy policies and data security protocols or be subject to policies and protocols that are at least equivalent to those of the company. Also, a number of states require all companies that process personal information of a resident of that state—regardless of industry—to implement safeguards designed to protect such information. Under these state information security laws, the term personal information generally is defined to include an individual's name in combination with some other piece of data that could be used to commit fraud or identity theft, such as a payment card number, financial account number, Social Security number or any other government-issued identifier.

Explain briefly how unemployment insurance is financed. (Text, p. 411)

State unemployment insurance programs are financed largely by payroll taxes paid by employers on the covered wages of employees. Three states also require minimal employee contributions. All tax contributions are deposited in the Federal Unemployment Trust Fund. Each state has a separate account, which is credited with the unemployment tax contributions and the state's share of investment income. Unemployment benefits are paid out of each state's account. Experience rating is used by firms with favorable employment records to pay reduced tax rates. The major argument in support of experience rating is that firms have a financial incentive to stabilize their employment.

What are the steps that a plan fiduciary should consider when selecting and contracting with service providers? (Text, pp. 132-135)

Steps that a plan fiduciary should consider when selecting and contracting with service providers include: (a) Define security obligations. (b) Identify reporting and monitoring responsibilities. (c) Conduct periodic risk assessments (ongoing monitoring, reviewing, and updating of agreed-upon practices). (d) Establish due diligence standards for vetting and tiering providers based on the sensitivity of data being shared. (e) Consider whether the service provider has a cybersecurity program, how data is encrypted, liability for breaches, etc.

Studies by the Association of Certified Fraud Examiners (ACFE) have identified the most common methods for detecting fraud. What are these methods, and which one is overwhelmingly the most common detection method? (Text, p. 210)

Studies by ACFE have shown that tips are overwhelmingly the most common detection method. Employees are the best source for tips and valuable information, because many employees do not want to see their company negatively impacted, so they step forward or go through anonymous hotlines. There are many other detection methods, but the most common ones identified by ACFE include: (a) Internal audit (b) Management review (c) Reconciliations (d) External audit (e) Surveillance (f) Confessions.

Identify the categories of family members who are entitled to Social Security survivor benefits. (Text, pp. 392-393)

Survivor benefits can be paid to eligible family members in the following categories: (a) Unmarried children younger than the age of 18. Survivor benefits can be paid to unmarried children younger than the age of 18 (younger than 19 if full-time elementary or high school students). (b) Unmarried disabled children. Unmarried children aged 18 or older who become severely disabled before the age of 22 are eligible for survivor benefits based on the deceased parent's earnings. (c) Surviving spouse with children younger than the age of 16. A widow, widower or surviving divorced spouse is entitled to a monthly benefit if she or he is caring for an eligible child who is younger than the age of 16 (or who became disabled before the age of 22) and is receiving a benefit based on the deceased worker's earnings. The benefits terminate for the surviving spouse when the youngest child reaches the age of 16, or the disabled child dies, marries or is no longer disabled. (d) Surviving spouse aged 60 or older. A surviving spouse aged 60 or older is also eligible for survivor benefits. The deceased worker must be fully insured. A surviving divorced spouse aged 60 or older is also eligible for survivor benefits if the marriage lasted at least ten years. (e) Disabled widow or widower the ages of 50 through 59. A disabled widow, widower or surviving divorced spouse who is aged 50 or older can receive survivor benefits under certain conditions. The benefits can be paid as early as the age of 50 if the widow or widower is disabled and the disability started before or within seven years of the spouse's death. The deceased must be fully insured. (f) Dependent parents. Dependent parents aged 62 and older can also receive survivor benefits based on the deceased's earnings. The deceased worker must be fully insured. (g) Lump-sum death benefit. A lump-sum death benefit of $255 can be paid when a worker dies. The benefit, however, can be paid only if there is an eligible surviving widow, widower or entitled child.

List the core promises that have been suggested for an ethical workplace wellness program to adopt. (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, p. 34)

Ten core promises that an ethical wellness program should adopt are: (1) Commit to accountability in data collection and use (2) Guarantee no penalty for nonparticipation (3) Adopt gold-standard practices for data security (4) Provide awareness of discriminatory potential of data (5) Allow for portability of data by employees (6) Minimize data lifespan to the period of employee participation (7) Disclose to employees that collected health information may not fall under the protection of HIPAA (8) Guarantee that all health recommendations are backed by peer-reviewed research that is provided to the employee (9) Provide clear information about the irregularities and unreliability of data from wearable electronic devices (10) Inform employees about the potential of the data to be used as evidence in court.

Define the "prudent man" standard required of ERISA plan investments. (Text, p. 297)

The "prudent man" standard requires investments to be made "with the skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims."

What were the results of the 2014 DOL audit quality study? (Text, p. 186)

The 2014 DOL audit quality study showed that nearly four out of ten employee benefit plan audits had "Unacceptable-Major" deficiencies that adversely affected overall audit quality and that the remaining plan audits either complied with professional auditing standards or had minor deficiencies.

Discuss the regulations issued in 2016 by the IRS that codified a nationally uniform rule regarding the tax treatment of benefits provided to individuals in a same-sex marriage. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 30)

The 2016 IRS final regulations define the terms spouse, husband and wife in a gender neutral way, for all federal tax purposes, to mean an individual lawfully married to another individual; the phrase husband and wife means two individuals lawfully married to each other. According to these regulations, if a couple is married in a state, territory or possession that recognizes same-sex marriage, the marriage is legal for all federal tax purposes regardless of where the couple lives. Marriages performed in a foreign country are recognized as valid in the United States for all federal tax purposes if at least one state, territory or possession recognizes the marriage as valid. This requirement is easily met because of the 2015 Supreme Court decision mandating that all states have to recognize same-sex marriage.

Some of the ACA market reform requirements can prove to include costly hidden traps for group health plans. The ACA cost-sharing restriction requirement warrants special attention. Explain why this is true. (Text, p. 371)

The ACA cost-sharing restriction requirement can prove to include costly hidden traps for group health plans because there is a difference between the ACA-imposed cost-sharing limits and the health savings account (HSA) cost-sharing limits imposed on high-deductible health plans (HDHPs). In 2016 the out-of-pocket (OOP) limit was $13,700 for other than self-only coverage, but it was $13,100 for HDHPs. Not only are the OOP limits different, but the way they are applied can differ as well. For example, the cost-sharing limit for ACA purposes only applies to in-network essential health benefits (EHB) provided under nongrandfathered group health plans, including nongrandfathered self-insured and large group health plans. For HSA purposes, all in-network expenses count toward the OOP limit.

Explain how the Codification treats the accounting and reporting standards for employee benefit plans. (Text, pp. 177-178)

The Codification addresses employee benefit plans by locating their treatment in three separate topics. These topics are concerned with reporting standards: (1) FASB ASC Topic 960, Plan Accounting—Defined Benefit Pension Plans, establishes the accounting and financial reporting standards for defined benefit retirement plans. (2) FASB ASC Topic 962, Plan Accounting—Defined Contribution Plans, includes the accounting and financial reporting standards for defined contribution retirement plans. (3) FASB ASC Topic 965, Plan Accounting—Health and Welfare Benefit Plans, provides the accounting and financial reporting standards for health and welfare benefit plans.

What various agencies and entities at the federal and state levels have administrative responsibilities for the Medicare program? (Text, p. 450)

The Department of Health and Human Services (HHS) has the overall responsibility for administration of the Medicare program. Within HHS, responsibility for administering Medicare rests with the Centers for Medicare and Medicaid Services (CMS). The Social Security Administration (SSA) assists, however, by initially determining an individual's Medicare entitlement, withholding Part B premiums from the Social Security benefit checks of most beneficiaries, maintaining Medicare data and handling a number of other responsibilities. A Medicare Board of Trustees, composed of two appointed members of the public and four members who serve by virtue of their positions in the federal government, oversees the financial operations of the HI and SMI trust funds. The Secretary of the Treasury is the managing trustee. State agencies (usually state health departments under agreements with CMS) identify, survey and inspect provider and supplier facilities and institutions wishing to participate in the Medicare program. In consultation with CMS, these agencies then certify the facilities that are qualified.

A recent study identified common HR problems that might be encountered by a multinational corporation. Discuss the major conclusions of this study. (Text, pp. 492-493)

The HR executives involved in this study drew different conclusions. One executive emphasized the importance of a company advancing its corporate culture rather than the legal requirements. Another HR leader observed that the local country culture was also a crucial part of the equation. A general conclusion was that even knowing the law in each country still leaves open the questions as to what degree a multinational corporation will seek to assert a common culture across national boundaries and to what degree it will embrace local cultural values and assumptions.

How are ACA-mandated preventive services treated by a qualified HDHP used in conjunction with an HSA? (Text, p. 374)

The Internal Revenue Service (IRS) issued guidance in 2013 that affirms that ACA-mandated preventive services can be covered by the qualified HDHP used in conjunction with an HSA without requiring the satisfaction of a deductible.

Describe how the earnings test works. (Text, p. 392)

The OASDI program has an earnings test that can result in a reduction or loss of monthly benefits for workers with earned incomes above certain annual limits. The earnings test applies to the following: (a) Beneficiary under full retirement age. If a beneficiary is under full retirement age for the entire year, $1 in benefits will be deducted for each $2 of earnings in excess of the annual limit. (b) Calendar year in which the beneficiary attains full retirement age. The earnings test is liberalized for this age group. In the calendar year in which the beneficiary attains full retirement age, $1 in benefits will be deducted for each $3 of earnings above the annual limit. However, only earnings before the month in which the beneficiary attains full retirement age are counted. (c) Earnings test eliminated after attainment of full retirement age. The earnings test does not apply in and after the month the beneficiary attains full retirement age. Beneficiaries who have reached full retirement age or beyond can earn any amount and receive full OASDI benefits. The earnings test does not apply to investment income, dividends, interest, rents or annuity payments. The purpose of this exception is to encourage private savings and investments to supplement OASDI benefits.

What is the beneficiary's fee-for-service payment share for Part B services? (Text, p. 444)

The Part B beneficiary's payment share includes the following: the annual deductible, the monthly premiums, the coinsurance payments for Part B services, a deductible for blood, certain charges above the Medicare-allowed charge (for claims not on assignment) and payment for any services not covered by Medicare. For services reimbursed under the outpatient hospital prospective payment system, coinsurance percentages vary by service and currently fall in the range of 20% to 50%. There are no deductibles or coinsurance for certain services, such as clinical lab tests, HHA services and some preventive care services.

Describe the regulatory suggestion made in the SOA/SCL study for helping retirees convert DC plan assets to retirement income. (Text, p. 283)

The SOA/SCL study suggested a safe harbor guidance for the design and implementation of a program that would apply during the decumulation phase, which would be analogous to the safe harbors that apply for investments during the accumulation phase.

What is a summary plan description (SPD), and when must it be given to participants? (Text, p. 86)

The SPD contains a summary of the provisions of the plan, including details about eligibility, benefits, plan operations, funding and claims procedures as well as a statement of ERISA rights. The initial SPD must be distributed to participants and beneficiaries within 120 days of the date the plan becomes subject to ERISA disclosure requirements. Subsequent to the initial distribution, an SPD reflecting plan changes must be distributed every five years (every ten years if no changes are made to the plan). The SPD must be distributed by the 210th day following the close of the relevant plan year to which the SPD applies, unless there is a material reduction in benefits. New participants must be provided an SPD within 90 days of becoming participants in the plan.

Briefly describe the SPD for a retirement plan. (Text, p. 89)

The SPD outlines the key features of the retirement plan. This document fulfills the legal requirements and provides participants with an understanding of basic plan provisions. A plan SPD outlines the rules by which the plan is governed and covers such topics as employer contribution and vesting information, eligibility, plan loans and withdrawals, distributions and contact information for questions. The SPD should be written in language participants can easily understand.

What is the strict definition of disability that individuals must meet to receive Social Security disability benefits? (Text, p. 394)

The Social Security program imposes a strict definition of disability on individuals to receive disability benefits. That is: The worker must have a physical or mental condition that prevents him or her from doing any substantial gainful activity and that is expected to last (or has lasted) at least 12 months or is expected to result in death. The impairment must be so severe that the worker is prevented from doing any substantial gainful work in the national economy. In determining whether a person can do substantial gainful work, his or her age, education, training and work experience can be taken into consideration. If the disabled person cannot work at his or her own occupation but can engage in other substantial gainful work, the disability claim will not be allowed.

What was the result of the Supreme Court Tibble decision? (Text, p. 216)

The Supreme Court decision in Tibble removed the impediment that blocked plan participants from filing a lawsuit relating to an improperly monitored plan investment where the initial decision to add that investment occurred beyond the ERISA six-year statute of limitations. In other words, although the selection of an investment fund for an ERISA plan would generally be insulated from claims of fiduciary breach after six years, the Court ruled that the failure to properly monitor an investment fund once selected would still be exposed to claims for six years from the date of such monitoring failure. Furthermore, if there is a continuing monitoring failure, participants would never lose their ability to sue.

The U.S. health care system is unique in a number of ways in comparison to the systems in other countries. Briefly summarize the ways in which the U.S. system is different. (Text, pp. 504-505)

The U.S. health care system is unique in the following ways: (a) The U.S. is the only large economy in the world that does not offer its citizens universal access to medical care. (b) Medical benefit service pricing has not been subject to legal ceilings or regulated pricing controls. (c) There is a significant layer of cost caused by inordinate malpractice insurance premiums. (d) Labor law is flexible relative to that of most other countries. The employer is generally able to unilaterally adjust plan provisions in order to reduce benefits or require employees to share a higher proportion of the annual cost. (e) There are very few restrictions and/or deterrents in terms of funding vehicle choices available for employer medical plans.

Summarize the accounting and reporting requirements of ASC Topic 960. (Text, p. 179)

The accounting and reporting requirements of ASC Topic 960 can be summarized as follows. (a) The plan financial statements should be prepared on the accrual basis of accounting and should include a statement of net assets available for benefits as of the end of the plan year and a statement of changes in net assets available for benefits for the plan year then ended. (b) Plan investments should be presented at their fair value, except for insurance contracts, which should be presented in the same manner as required for filing under ERISA (i.e., fair value or contract value). (c) Information should be included about: • The actuarial present value of accumulated plan benefits • Significant changes therein. (d) Accumulated plan benefit information may be disclosed in one of three places: on the face of the statements of net assets available for benefits and on changes in net assets available for benefits, in separate statements or in the notes to the financial statements. (e) The actuarial present value of accumulated plan benefits should be based on employees' earnings and service rendered before the measurement date. Plan actuaries should not consider future salary increases or benefit improvements unless they have been specified (e.g., automatic cost-of-living adjustments).

List the additional compensation benefits that might be involved when an employee takes an international assignment. (Text, pp. 499-501)

The additional compensation benefits that might be involved when an employee takes an international assignment are: (a) Tax equalization or tax protection. Tax equalization requires an employee to pay a tax equal to the same home jurisdiction tax he or she would have paid had he or she remained in his or her home. Tax protection is designed to reimburse the employee only in the event he or she pays higher taxes as a result of the international assignment. (b) Cost-of-living allowances. These are payments to compensate the employee if he or she has to cover a higher cost of living than he or she had in the United States. (c) A housing differential allowance compensates for any higher housing costs. (d) Relocation bonus (e) Moving expenses (f) Reimbursement of expenses related to the sale or rental of a principal residence (g) Dependent education allowance (h) Automobile allowance (i) A home leave allowance compensates for the cost for the employee (and/or the employee's family) to return to the U.S. for visits.

What are the advantages to retiring employees of an employer-sponsored program of taking retirement income from a DC plan? (Text, pp. 283-284)

The advantages to retiring employees of an employer-sponsored program of taking retirement income from a DC plan include: (a) Institutional pricing has the potential to increase retirement incomes by 10% to 20% compared to retail solutions. (b) Solutions are more likely to be implemented successfully if it is easy for retiring employees to implement their decision. (c) The employer's plan is a safe place to keep retirement savings away from fraudsters who target seniors.

Based on an analysis that ran simulations using historical data, how do fees measure up in connection with the contributions of saving and investing? (Text, pp. 242-243, Table 2)

The analysis showed that, on average, 68% of worker wealth accumulation upon retirement can be attributable to savings, 38% to investing and 6% negatively to fees. Individual investment experiences vary, but this ordering of attributions held for the majority of cases across various savings patterns, glide paths in TDFs and levels of fees observable in the market. The results clarify that to get ready financially for retirement, the foremost force is rigorous savings on a persistent basis and that the power of long-term investing (namely, compounding returns) builds on this foundation.

Describe the basic steps involved in moving to a market-driven approach to an employee benefit plan communication system. (Text, pp. 99-100)

The basic steps involved in moving to a market-driven approach to an employee benefit plan communication system are: (a) Research the audience to find out who they are, how they currently feel, what they want to hear, what will motivate them or change their attitudes, and how and when to reach them. (b) Set goals based on the anticipated results of a communication. Consider the knowledge needed or actions taken by employees as a result of the communication. Goals should be measurable, such as a stated percentage of employee participation in a managed care medical plan. (c) Plan the messages and media so that they are targeted to the appropriate market segments in the audience. Last century, it was print, telephone calls, promotions and more. This century, things have changed so quickly that it is imperative to meet the target audience where it sits (which will be somewhere on its smartphone). (d) Implement the communication campaign, which should be developed based on the results of the research step. In addition, the employer can test-market the communication along the way to make sure the messages are reaching the targeted audience. This can be done by soliciting feedback from a sample of employees prior to widescale distribution of the communication. (e) Test and measure the results of the communication.

Must ERISA investments always follow mainstream and popular strategies to be considered prudent? (Text, pp. 291-292)

The belief by many is that ERISA investments, particularly participant-directed investments, must always follow mainstream and popular strategies and that deviation from such strategies is imprudent. However, on a historical basis, this is not the case. Many innovative investment developments have occurred since the passage of ERISA. A few examples of such innovations include index funds, stable value investment options, emerging market mutual funds and TDFs.

Explain how the calculation outlined above supports the adequacy principle and the floor-of-income principle. (Text, p. 388)

The calculation of the monthly benefit supports the adequacy principle because lowincome workers have a much higher percentage of their career-average earnings replaced by Social Security than workers at higher income levels. This is a result of the weighted benefit formula that weights the benefits heavily in favor of low-income groups. The floor-of-income principle is also evident in the calculation because Social Security benefits provide only a floor or a base of income, rather than a full replacement of earnings.

List the characteristics of social insurance programs that distinguish them from other government insurance programs. (Text, p. 380)

The characteristics of social insurance programs that distinguish them from other government insurance programs are: (a) Compulsory programs (b) Floor of income (c) Emphasis on social adequacy rather than individual equity (d) Benefits loosely related to earnings (e) Benefits prescribed by law (f) No means test (g) Full funding unnecessary (h) Financially self-supporting.

Describe the investment committee charter. (Text, p. 89)

The committee charter is an important component of plan governance. It does not need to be elaborate but should outline some fundamentals, providing committee members with the scope and range of authority to empower them to manage the plan and fulfill their fiduciary responsibilities. The committee charter should: (a) Specify activities for which the committee is responsible, such as coordinating vendor analysis and recommending plan design features (b) Define the governing bodies with whom the committee must consult and to whom they need to provide recommendations (c) Define how committee members are selected or appointed (d) Establish how often regular committee meetings should occur (e) Define the roles of any outside consultants.

What common goal do plan advisors and TPAs share? (Text, p. 229)

The common goal plan advisors and TPAs share is to design a plan that meets the objectives of the plan sponsor yet falls within the framework allowed by Internal Revenue Service (IRS) and Department of Labor (DOL) rules. First, the advisor and TPA have to prompt plan sponsors to communicate what is important to them. While a free-form conversation can be productive, it is generally more helpful to have a worksheet or outline to guide the conversation and stimulate discussion. As a prospective plan sponsor begins speaking, it may also be hard to resist the inclination to mentally race ahead, searching for ways in which the plan sponsor's needs can be molded into a qualified plan design. Occasionally, what the plan sponsor or prospect needs or wants simply is not within the scope of what the TPA can provide. The desired objective might be best met by something other than a qualified retirement plan. Under such circumstances, the advisor is in the best position to offer other options after actively listening to the plan sponsor.

List the components that should be included in a well-constructed IPS. (Text, p. 91)

The components that should be included in a well-constructed IPS are: (a) Statement of purpose (b) Statement of roles and responsibilities (c) Asset allocation (d) Investment goals and objectives (e) Investment guidelines (f) Investment performance review and evaluation.

Define the concept of a floor of income. (Text, p. 381)

The concept of a floor of income is difficult to define. One extreme view is that the floor of income should be so low as to be virtually nonexistent. Another extreme view is that the social insurance benefit itself should be high enough to provide a comfortable standard of living, so that private insurance benefits would be unnecessary. A more realistic view is that social insurance benefits, when combined with other income and financial assets, should be sufficient for most persons to maintain a reasonable standard of living. Any group whose basic needs are still unmet would be provided for by supplemental public assistance (welfare) benefits.

Although ASC Topic 960 does not identify any one group as the primary users of plan financial statements, the content of plan financial statements should focus on the needs of one group. Which group is this, and why are its needs paramount? (Text, pp. 179-180)

The content of plan financial statements should focus on the needs of plan participants because pension plans exist primarily for their benefit. However, plan financial statements should be useful to others who have any of the following characteristics: (a) Advise or represent participants (b) Are current or potential investors or creditors of the employer (c) Are responsible for funding the plan, or (d) For other reasons have a derived or indirect interest in the status of the plan.

Differentiate between the core services provided by TPAs and those provided by plan advisors. (Text, p. 228)

The core services provided by TPAs are plan documents and amendments, compliance testing, Forms 5500 preparation and processing of loans and distributions. The advisor's role, however, can span a wide spectrum of services, from investment selection and monitoring to conducting the plan reviews to engaging in provider negotiation and benchmarking to providing employee education. Some advisors act only at the plan level and leave employee communication to others, while some are involved with group meetings and some even provide one-on-one employee counseling.

What is the typical cost of an audit, and is this cost usually worth the investment? (Reading C, Trust But Verify—Claims Audits, Study Guide Module 7, p. 41)

The cost of an audit is typically less than 1% of total annual claim spending and generally is worth the investment. Most of the time, recoveries will more than cover the cost, although that is not guaranteed. Depending on the size of the group and the audit approach, total costs will normally range from $25,000 to $50,000 but could be higher for very large groups. The fees are usually fixed but can also be paid on a contingency basis tied to recoveries, although some ASO agreements do not allow for this type of fee arrangement.

To which federal taxes are benefits such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans subject? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 28)

The different types of benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans, are funded by employers and in part by employee contributions through salary reductions. Whether employer and employee contributions and benefit payments received by employees are subject to withholding for federal income taxes (FIT), Social Security and Medicare (Federal Insurance Contributions Act (FICA)) taxes or Federal Unemployment Tax Act (FUTA) taxes varies among benefit types.

Discuss the obligation that the plan administrator for an ERISA welfare benefit plan has when electronic recordkeeping has been delegated to another party. (Text, pp. 53-54)

The duty to maintain records as required by ERISA cannot be avoided by contract, delegation or otherwise. Thus, the use of a third party to provide an electronic recordkeeping system does not relieve the person responsible for maintaining and retaining records under ERISA of those duties. For example, the preamble states that when a plan administrator contracts with a service provider for the preparation, maintenance and retention of the plan's records, it nonetheless remains the plan administrator's obligation to ensure that the records are properly maintained and retained under ERISA. In addition, in the event of a DOL investigation, the plan administrator would be required to provide the necessary equipment and resources (including software, hardware and personnel) for inspecting, examining and converting electronic records into legible and readable paper copies.

What was the essence, or gravamen, of the plaintiffs' complaint in Tibble v. Edison? (Text, pp. 215-216)

The essence of the plaintiffs' complaint was that defendants (plan sponsors) had breached their duty of prudence by offering six higher priced mutual funds when virtually identical lower priced mutual funds were available at exactly the same time. The Employee Retirement Income Security Act (ERISA) "statute of limitations" provision specifies that a lawsuit claiming a breach of fiduciary duty is timely if it is filed no more than six years after the date of the last action that constituted a part of the breach or violation. Based on this provision, lower courts ruled that the plaintiffs' fiduciary-breach claims were inapplicable since the funds were added to the plans more than six years before the complaint was filed.

If termination benefits are paid out over a period of years, will these payments become subject to ERISA regulation? Explain. (Text, p. 340)

The fact that termination payments extend out over a period of years will not subject the plan to ERISA. For example, in Delaye v. Agripac, Inc., the Ninth Circuit stated that the fact that an executive's severance payments were to be made each month over a period of two years did not require an ongoing administrative scheme.

The depletion of the DI trust fund is a serious problem. The funding shortfall is largely due to the substantial increase in the number of DI beneficiaries receiving benefits. What are the factors that account for most of the increase in the number of individuals receiving DI benefits? (Text, p. 406)

The factors that account for most of the increase in the number of individuals receiving DI benefits are: (a) Growth in the labor force (b) Aging of the population and baby boomers (c) Increased number of women in the labor force (d) Higher recipiency rates for women. Women have caught up with men with respect to the rate of becoming disabled. (e) Higher full retirement age. Increasing the full retirement age means disabled workers are kept on the DI rolls for additional years. (f) Downturns in business cycles lead to surges in DI applications.

A recent study identified 21 common HR problems that might be encountered by a multinational corporation. The problems clustered under distinct areas of concern, and the study focused on five specific areas. What were these five problem areas? (Text, p. 485)

The five problems studied were: (1) The labor relation issues involving the restructuring of workplace operations (2) Discrimination involving a request by a Muslim employee to pray three times a day (3) Privacy involving video monitoring in the workplace (4) Wrongful discharges involving critical blog comments posted publicly by an employee (5) Requests for equal pay and benefits by members of a virtual team, each operating in different countries but doing equivalent work.

What type of plans may be offered under cafeteria plan? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 45)

The following are a few common types of qualified benefits that may be offered under a cafeteria plan: (a) A §401(k) plan (b) Health and accident insurance plan coverage (c) HSA contributions (d) Long-term and short-term disability coverage (e) COBRA continuation coverage premiums.

During the due diligence process, the focus should be on what main subject areas? (Text, p. 133)

The following are among the main subject areas that a due diligence process should focus on: (a) What is the track record of the service provider? What are its resources? (b) How will the service provider use the personal information? (c) Where will the personal information be stored and processed? (d) Does the service provider itself intend to use subcontractors, including its affiliates, and where are they located? (e) What security does the service provider apply to personal information? (f) Will the service provider utilize the security that the plan fiduciary requires based on its own obligations? (g) What reporting does the service provider supply? (h) What auditing is done (i.e., Service Organization Controls (SOC) 1 and SOC 2 reports)? Robust documentation of due diligence may provide plan fiduciaries with a defensible record should a data breach occur and its service provider practices be challenged.

Describe the five recommended steps that plan sponsors should take to implement data analytics and predictive modeling tools. (Reading A, Using Data to Improve Health Plan Performance and Participant Health, Study Guide Module 7, p. 28)

The following are recommended steps that plan sponsors should take to implement data analytics and predictive modeling tools. (a) Determine who will perform the data analytics. Only the very largest plans have the capabilities to handle data analytics on their own. Most need to decide if the analytics offered by their existing health care vendors are sufficient or whether they should outsource their data analytics. (b) Use data analytics and predictive modeling to identify and map the most prevalent clinical risk characteristics and associated costs in the plan population. Plan sponsors should then evaluate the programs in place to address these risks. (c) Establish a three-year health-management strategy. This strategy should have a budget, goals and performance targets that increase over time (e.g., improving wellness program participation from 10% in year one to 50% in year two and 75% in year three). (d) Develop a formal participant communications strategy. While data analytics can reveal the cost outliers to plan sponsors, effective communications can have an immediate, direct and positive impact. (e) Identify how plan participants will react to change. It is important to remember that any changes a plan sponsor implements affect people directly.

Although an investment policy statement (IPS) is not expressly required under ERISA, fiduciary best practices indicate that an IPS should be in place. List the features or characteristics of a good IPS for innovative investments. (Text, p. 300)

The following are the features or characteristics of a good IPS for innovative investments: (a) It should be more detailed than an IPS for standard investments, to help assess the innovative investment and, most importantly, to help monitor the innovative investment on an ongoing basis. (b) It should be flexible enough that it can be implemented in a complex and dynamic financial environment. (c) It should not be so detailed as to require constant revisions and updates. (d) It should be drafted in a way that does not increase the risk of failure by the investment fiduciaries. (e) It should be carefully drafted, typically by an attorney familiar with employee benefit issues working in concert with the fiduciaries and their investment consultants. (f) The investment criteria in the IPS should be written in the context of meeting the needs of the participants.

List benefits that are non-qualified, are taxable income to employees and may not be offered as part of a cafeteria plan. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 45)

The following benefits are non-qualified, are taxable income to employees and may not be offered as part of a cafeteria plan: (a) Scholarships and fellowships (b) Nontaxable fringe benefits under §132 (c) Educational assistance benefits (d) Meals and lodging provided for the employer's benefit (e) MSA contributions made by the employer (f) Certain HSAs (g) Certain long-term care insurance benefits (h) Certain group-term life insurance benefits (i) Tax-sheltered annuity plan elective deferrals under §403(b).

List the benefits that an employer may provide to an employee's same-sex spousetax-free under federal law. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 31)

The following benefits may be provided by an employer to an employee's same-sex spouse on a tax-free basis under federal law: (a) Health benefits (b) Qualified tuition reduction (c) Meals and lodging provided as a condition of employment (d) Dependent care benefits (e) No-additional-cost services (f) Qualified employee discounts (g) Working condition fringe benefits (h) Qualified transportation fringe benefits (i) De minimis fringe benefits (j) Qualified moving expenses (k) Qualified retirement planning services (l) Access to on-premises gyms and other athletic facilities.

What items should be considered when customizing a strategy to meet the challenges of employee benefit plans confronting cyberthreats? (Text, pp. 155-159)

The following items should be considered when customizing a strategy to confront cyberthreat challenges: (a) Identify the data (how it is accessed, shared, stored, controlled, transmitted, secured and maintained). (b) Consider frameworks (a set of standards, guidelines and practices arising from a combination of government actions, government-industry collaboration and industry-based initiatives) as a basis for evaluating and developing a robust cybersecurity strategy. (c) Establish process considerations (protocols and policies covering testing, updating, reporting, training, data retention, third-party risks, etc.). (d) Customize a strategy (resources, integration, cost, cyberinsurance, etc.). (e) Strike the right balance based on size, complexity and overall risk exposure of the organization. (f) Consider applicable state and federal laws.

Medicare originally consisted of two parts: hospital insurance (HI) and supplementary medical insurance (SMI), which have been known simply as Part A and Part B, respectively. List the categories of health care services covered under Part A of Medicare. (Text, p. 435)

The four categories of health care services that are covered under Part A of Medicare are: (1) Inpatient hospital care (2) Skilled nursing facility (SNF) (3) Home health agency (HHA) care (4) Hospice care.

Most companies have goals for their DC retirement plans that fall into one or more of three categories. What are these three types of fundamental goals? (Text, pp. 519-520)

The fundamental goals for most of the DC retirement plans of most international companies are: (1) Paternalism. This is the desire, or perhaps the feeling of obligation, to help employees prepare adequately for retirement. (2) Competitive benefits. In many markets, a retirement plan of some sort is necessary to attract and retain workers. (3) Strategic workforce management. Supporting employees' ability to retire when the time is right for both the employee and the employer is another key goal.

What is the hallmark of a prudent, systematic monitoring process for plan investments? (Text, pp. 219-220)

The hallmark of a prudent, systematic monitoring process is to have a written "to do" list of items that need to be accomplished each time plan fiduciaries meet to evaluate their plan's investments. Best practice is for plan fiduciaries to meet quarterly to monitor their plan's investments. Each time the fiduciaries meet, it is recommended that they address the items discussed in the next question (to the extent applicable). These items should be included in the plan's investment policy statement or in a separate document (such as the minutes) that is adopted and ratified by the committee.

When a plan invests in individual securities, the plan fiduciary needs a detailed investment management agreement with an investment manager. List the important items or features that this agreement should contain. (Text, p. 312)

The important items or features that this agreement should contain include: (a) The guidelines for investment and proxy voting (b) The identification of any special brokerage arrangements or restrictions (c) The manager's compensation (d) Representations by the manager regarding its fiduciary status and professional qualifications (e) Protection for the confidentiality of plan information (f) Provision for appropriate indemnity protection (g) Identification of any threshold insurance requirements (h) Expectations regarding recordkeeping and reporting by the manager to the plan (i) The procedure for amendment and termination that ensures that the plan can terminate on reasonably short notice without penalty

List the important terms that should be included in an agreement for the international assignment of employees. (Text, pp. 498-49

The important terms that should be included in an agreement for the international assignment of employees are: (a) Term of the assignment. How long does the organization expect the assignment to last? (b) Position title and duties (c) Terminations. Under what rules can the employee be terminated? (d) Restrictive covenants. These restrictions may not be enforceable in the same manner from jurisdiction to jurisdiction. (e) Choice of law. Which law will apply to disputes? (f) Written acceptance by the employee (g) Compensation package.

Explain why the introduction of the Medicare program in 1965 led to an explosive demand and cost acceleration in the U.S. (Text, pp. 508-509)

The introduction of the Medicare program in 1965 led to an explosive demand and cost acceleration in the U.S. because it introduced: (a) A fee-for-service reward structure for providers that generated incentives for unnecessary volumes of medical procedures (b) Adoption of "usual, customary and reasonable" rates, which essentially engendered uncontrolled wholesale price increases by providers (c) A third-party payment system (the state) which essentially removed the consumer's ability to "bargain for best value."

Comment on the composition of an investment committee. (Text, pp. 91-92)

The investment committee should include a representative of senior management (typically either the chief financial officer (CFO) or chief operating officer (COO)), as well as anyone who serves as a fiduciary to the plan. The organization's legal counsel should either be on the committee or simply attend committee meetings in an advisory capacity. Although they are not usually voting members, committee meetings should be attended by representatives from plan providers such as the trustee, investment consultant and recordkeeper. It is important that the committee represents the participants, since it will be making decisions for the participant population. For this reason, committees may want to include members from different disciplines and different areas of the organization, such as human resources and finance. A diverse mixture including more than just managers will help to create a more representative group. Committee membership should be voluntary. Most committees elect at least a chairperson and a secretary; other elected positions depend on the needs of the committee. Establishing a term of service for committee members can help to keep the committee fresh. Bringing in new members periodically can add the benefit of new perspectives to the team and keep it flexible. On the other hand, the experience and knowledge of long-term committee members can be of great value. Finding a balance may mean rotating some committee positions while retaining others for longer time periods.

The Society of Actuaries and the Stanford Center on Longevity (SOA/SCL) collaborated to produce a study that provides an analytical framework for planning retirement income. What were the key results from this study? (Text, pp. 279-281)

The key results from the SOA/SCL reports were: (a) There is a distinct, quantifiable trade-off between liquidity and maximizing income. (b) For most retirees, using a portion of retirement savings to delay Social Security benefits increases expected total lifetime income and helps protect surviving spouses. (c) Once a retiree achieves a basic level of guaranteed income, optimal solutions could significantly invest remaining assets in equities. (d) Required minimum distributions (RMDs) can be a reasonable solution that can be implemented with ease by plan sponsors and retirees. (e) Funds fully allocated to target-date funds (TDFs) right up to retirement render older workers vulnerable to stock market crashes. (f) Combination solutions that generate income from invested assets until an advanced age with qualified longevity annuity contracts (QLACs) delivering income thereafter can be difficult to implement as a "set and forget" solution.

DOL considers the plan administrator, not the plan service provider, responsible for maintaining required plan records. What kinds of records can DOL commonly request from the plan administrator? (Text, p. 232)

The kinds of records DOL may commonly request from the plan administrator include specific plan information (such as plan documents, operational compliance logs, communications to employees and payroll records used to calculate contributions) as well as specific employee information (such as personal information, employment history, deferral elections, investment selections and beneficiary designations).

What are the main requirements that pertain to ERISA plan assets? (Text, p. 31)

The main disclosure requirements for ERISA plan assets are: (a) Plan assets, including participant contributions, may be used only to pay plan benefits and reasonable administration costs. (b) For some plans, plan assets may have to be held in trust. (c) A fidelity bond must be purchased to cover every person who handles plan funds.

What are the main disclosure requirements under ERISA? (Text, p. 30)

The main disclosure requirements under ERISA are: (a) A plan document must exist for each plan. (b) A summary plan description (SPD) must be furnished automatically to participants. (c) A summary of material modifications (SMM) must be furnished automatically to participants when a plan is amended. (d) A four-page summary of benefits and coverage (SBC) must be provided to applicants and enrollees before enrollment or reenrollment. (e) Copies of certain plan documents must be furnished to participants and beneficiaries upon written request. (f) Claim procedures must be established and followed when processing benefits claims and when reviewing appeals of denied claims.

List the major challenges facing the Medicare system. (Text, p. 451)

The major challenges facing the Medicare system include: (a) The solvency of the HI trust fund, which fails the Medicare Board of Trustees test of short-range financial adequacy, as annual expenditures are projected to exceed annual assets in the near future (b) The long-range health of the HI trust fund, as the trust fund fails the Trustees long-range test of close actuarial balance (c) The rapid growth projected for SMI costs as a percent of gross domestic product. (The Part B and Part D accounts in the SMI trust fund are automatically in financial balance—in both the short range and the long range—since premiums and general revenue financing rates are reset each year to match estimated costs.) (d) The substantial reductions in Part B physician payment rates required under the SGR system in current law. In recent years, Congress has consistently passed legislation that overrides the reductions. (e) The likelihood that the lower payment rate updates to most categories of Medicare providers, as mandated by the Affordable Care Act (ACA), will not be viable in the long range. (As of this writing, the future status of many ACA provisions remains uncertain.)

Identify the major groups of individuals who are entitled to Social Security disability income (DI) benefits. (Text, pp. 394-395)

The major groups of individuals who are entitled to Social Security disability-income benefits are as follows: (a) Disabled worker. A disabled worker under full retirement age receives a benefit equal to 100% of the primary insurance amount. The worker must meet the definition of disability, be disability insured and satisfy a full five-month waiting period. (b) Spouse of a disabled worker. Benefits can be paid to the spouse of a disabled worker at any age if she or he is caring for a child younger than the age of 16 or a child who became disabled before the age of 22 and is receiving benefits based on the disabled worker's earnings. If no eligible children are present, the spouse must be at least the age of 62 to receive benefits. (c) Unmarried children younger than the age of 18. Disability benefits can be paid to unmarried children younger than the age of 18 (or younger than 19 if a fulltime elementary or high school student). (d) Unmarried disabled children. Unmarried children aged 18 or older who became severely disabled before the age of 22 are also eligible for benefits, based on the disabled worker's earnings.

What is meant by the cautionary statement "You can outsource the work, but you cannot outsource the responsibility?" (Text, p. 130)

The message behind the cautionary statement "You can outsource the work, but you cannot outsource the responsibility" is to be prudent in selecting service providers capable of protecting sensitive participant and beneficiary information and to obligate the providers, by written contract, to protect the information. Essential is verification that the service provider implements appropriate privacy and security systems and that all groups with access to the plan's sensitive personal information are obligated to protect that information. These service provider relationships should be subject to substantially similar risk management, security, privacy and other protection policies that would be expected if the plan fiduciary were conducting the activities directly. Following a data breach, regulators often review and evaluate the role of the service provider, the due diligence that was performed before selecting the service provider, and the contract provisions with respect to privacy and data security obligations and responsibilities. Plan fiduciaries that fail to address these issues in a rigorous manner can be vulnerable on many fronts.

Summarize the monetary and nonmonetary eligibility requirements an unemployed worker must meet to receive benefits. (Text, pp. 409-410)

The monetary requirements that an unemployed worker must meet to receive benefits are: (a) Earn qualifying wages and employment during the base year. (b) Be able to work and be available for work. (c) Actively seek work. (d) Meet a waiting period. The nonmonetary eligibility requirements that a worker must meet refer to provisions in the law that disqualify certain weeks of unemployment because of actions by the worker who filed the claims. These actions include: (a) Voluntarily quitting without good cause (b) Refusal of suitable work without good cause (c) Discharge for misconduct related to the job (d) Inability or unwillingness to accept full-time work (e) Unemployment because of participation in a labor dispute. The application of these disqualification provisions vary by states.

Outline the steps involved in calculating a person's Social Security retirement benefit. (Text, pp. 387-388)

The monthly retirement benefit is based on the worker's primary insurance amount (PIA), which is the monthly amount paid to a retired worker at full retirement age or to a disabled worker. The PIA, in turn, is based on the worker's average indexed monthly earnings (AIME), which is a method that updates the worker's past earnings based on increases in the average wage in the national economy. A worker's past earnings are adjusted by changes in the average wage index, which brings them up to their approximate equivalent value at the time of retirement or eligibility for other benefits. The indexing of covered wages results in a relatively constant replacement rate so that workers retiring today and in the future will have about the same proportion of their work earnings replaced by Old-Age, Survivors, and Disability Insurance (OASDI) benefits. For persons born after 1928, the highest 35 years of indexed earnings are used to calculate the worker's AIME for retirement benefits. The AIME is then used to determine the worker's primary insurance amount. A weighted benefit formula is then used that weights the benefits heavily in favor of low-income groups.

Comment on the number of committee members that should comprise an investment committee. (Text, p. 91)

The number of committee members that sit on an investment committee is important. Very large committees begin to lose their effectiveness and ability to make decisions efficiently; large groups can end up paralyzed and unable to reach consensus. A smaller group that has enough diversity to engender meaningful discussion and healthy debate is optimal. There is no perfect number, but five to seven members seem to meet objectives, while more than ten is typically too unwieldy. Lastly, having an odd number of committee members can prevent votes from being tied up.

Is the overall approach to investing in closed-end funds or ETFs the same as that for investing in mutual funds? Explain. (Text, p. 307)

The overall approach to investing in closed-end funds or ETFs is similar to the approach to investing in mutual funds. The fiduciaries select the asset class and management style that suits the plan's needs and then select an appropriate fund. Fiduciaries should pay particular attention to the anticipated market for the shares and the exit strategy in the event the plan decides to discontinue its investment. Investment strategies involving these funds also call for special attention to the valuation of the fund's underlying assets versus its share price.

Discuss whether plans that involve payroll practices are treated as ERISA health and welfare plans. (Text, p. 26)

The payment of an employee's normal compensation in full or in part out of the employer's general assets for periods when the employee is physically or mentally unable to work—that is, an unfunded short-term disability plan—is generally not a welfare benefit plan subject to ERISA. However, if a disability program provides more than an employee's normal compensation or is funded in any way—for example, it is provided through insurance—the program will be a welfare benefit plan subject to ERISA. Furthermore, the Department of Labor (DOL) regulations list additional types of payroll practices as not being ERISA plans. These would include plans where compensation is paid to an employee: (a) While absent on a holiday or vacation (b) While absent on active military duty (c) While absent for the purpose of serving as a juror or as a witness in an official proceeding (d) On account of periods of time during which the employee performs little or no productive work while engaged in training, or (e) Who is relieved of duties while on sabbatical leave or while pursuing further education.

Explain how a plan, fund or program for an employee benefit plan is defined. (Text, p. 23)

The phrase plan, fund or program is not defined in ERISA but rather has been laid out in several court cases. The courts have held that a plan, fund or program under ERISA is established if, from the surrounding circumstances, a reasonable person can ascertain the intended benefits, the class of beneficiaries, the source of financing and the procedure to receive benefits.

What are the general requirements for the maintenance of electronic records by plan administrators? (Text, pp. 234-235)

The physical copies of records can be transferred to electronic versions if the transfer results in legible, accurate copies that are reproducible. The electronic record-keeping system must: (a) Be maintained with controls in place to ensure accuracy and authenticity of the records (b) Be able to index, retain, preserve, retrieve and reproduce the records in a safe and accessible place (c) Be able to convert the records to legible paper form (d) Not impose access restrictions (e.g., time or location) that would impair an individual's ability to comply with reporting and disclosure requirements of ERISA (e) Be adequately secured, organized, backed up and maintained by established procedures. Not all records may be electronically stored. While electronic copies may serve as backup records, originals must be maintained if they cannot be converted to legible and accurate electronic form, or if the physical copy has significant value.

Section 502(c)(1) of ERISA can authorize a court to impose civil penalties against plan administrators who fail or refuse to timely produce "certain plan documents" upon request. Which plan documents must a plan administrator furnish? (Text, pp. 352-353)

The plan documents a plan administrator must furnish are: (a) A copy of the latest updated SPD (b) The latest annual report (c) Any terminal report, bargaining agreement, trust agreement or contract; or (d) Other instruments under which the plan was established or operated.

Who is responsible for establishing and maintaining an effective system of internal controls over employee benefit plans? Controls generally fall into which specific areas? (Text, pp. 104-105)

The plan sponsor and plan administrator are responsible for establishing and maintaining an effective system of controls. Controls generally fall into these areas: (a) Plan documentation and any amendments (b) Plan testing and administration as well as contributions, participant data, compensation, distributions, loans and plan expenses (c) Controls at any third-party administrator (d) Controls might also be necessary to address multiple plans, multiple subsidiaries or business units, or merging plans in the event of a business combination. (e) Defined benefit pension plans also have additional controls to address actuarial assumptions and the proper distribution of funds.

While the plan sponsor is ultimately responsible for ensuring that all plan transactions are executed in a timely fashion, identify the entities who typically carry out the responsibilities and functions listed in the previous question. (Text, pp. 230-231)

The plan sponsor, with assistance from a broker/advisor/consultant, is responsible for developing company objectives and making decisions regarding plan provisions. The plan administrator (often the company's senior HR executive) is tasked with the following functions: selecting service providers, filing IRS and DOL forms, and distributing summary annual reports and other required participant notices. The plan administrator is also responsible for all that entails in ensuring operational compliance. The recordkeeper/provider takes on the task of enrolling participants (and perhaps educating them about their options under the plan) and also of compiling information to disseminate required participant disclosures. The TPA has the responsibility to prepare plan documents and also to conduct year-end compliance testing. Finally, the services of a broker/advisor/consultant are sought to assist with soliciting plan proposals, conducting a provider search, assisting with employee enrollment, surveying the investment industry for plan fees and other services, and possibly counseling terminating employees or those retiring about their options with regard to plan accumulations and distributions.

For global companies that sponsor DC retirement plans in different countries, developing and applying a consistent investment philosophy across many markets can be extremely challenging. What are the benefits that might be achieved by such an approach? (Text, pp. 524-525)

The possible benefits of developing and applying a consistent investment philosophy across many markets are: (a) Mobile employees (b) Simplified, streamlined governance (c) Cleaner communication among plan decision makers around the world (d) Application of best practices across borders (e) A logical framework to explain plan decisions (f) A consistent approach to regional diversification.

Does the attorney-client privilege for confidentiality apply to employee benefit plans? Explain. (Text, p. 333)

The privilege applies in the context of employee benefits law just as it does in other areas of the law. It applies when a lawyer and client communicate with a reasonable expectation of confidentiality. In recent years, however, the courts have increasingly recognized that, although the attorney-client privilege applies as a general rule, situations can arise in which an exception applies to communications involving fiduciary activities.

What is the purpose of Section 502(c)(1)? (Text, p. 352)

The purpose of the Section 502(c)(1) civil penalty is not to compensate participants or beneficiaries for injuries but to induce plan administrators to comply with the ERISA statutory disclosure mandate and to punish administrators for noncompliance with that mandate.

A distinguishing feature of top-hat benefit disputes is that fiduciary duties are not at issue and courts take a more contract-oriented approach. One of the most important issues in these cases is the standard of judicial review that will be taken by the court. What are the two opposing standards that might be taken in these cases? (Text, p. 332)

The question concerning the standard of judicial review is this: Will the judge (1) review the dispute with a fresh eye (a de novo standard) or (2) defer to the plan administrator's decision, unless it is shown to be clearly unreasonable (an "abuse of discretion" or "arbitrary and capricious" standard)?

For a voluntary benefit arrangement to be exempt from ERISA based on the DOL safe harbor, it must meet certain requirements. What are these requirements? (Text, p. 27)

The requirements for a voluntary benefit arrangement to be exempt from ERISA are: (a) No employer or employee organization contributions (b) Participation is completely voluntary. (c) No employer consideration except for reasonable compensation and administration (d) No employer endorsement.

What are the tax advantages of a qualified retirement plan prior to retirement? (Text, p. 329)

The savings grow in a qualified retirement plan (1) will avoid all income and payroll taxes at the front end going into the plan, (2) will avoid taxes on investment income while in the plan and (3) will avoid the 3.8% tax on unearned income

List the standard defenses potentially available to the defendant plan administrators in Section 502(c)(1) penalty cases. (Text, pp. 360-363)

The standard defenses potentially available to the defendant plan administrators in Section 502(c)(1) penalty cases are: (a) The claim is barred by the statute of limitations. (b) The plaintiff lacks standing to request the documents. (c) The plaintiff sent the request to the wrong person. (d) The plaintiff requested documents not subject to the Section 502(c)(1) penalty. (e) The plaintiff failed to make a sufficiently specific request (no "clear notice"). (f) The administrator's failure or refusal resulted from matters reasonably beyond the administrator's control.

For claims of fiduciary breach, the Employee Retirement Income Security Act (ERISA) contains a statutory limitations period to cut off the time in which a plaintiff may assert a fiduciary claim. What is this time period? (Text, p. 330)

The statute of limitations for asserting a fiduciary claim is three or six years, depending on the circumstances. (Module 6 discusses the Supreme Court Tibble v. Edison decision that liberalized the six-year statute of limitations under certain circumstances.)

Describe the basic rules for presenting the SBC to entitled parties. (Text, p. 45)

The statute requires that the SBC must be presented in a uniform format, utilize terminology understandable by the average plan participant, not exceed four pages in length and not include print smaller than 12-point font. While the health care reform law called for a four-page summary, the proposed regulations interpret the four-page limitation as four double-sided pages. This will give employers additional flexibility in providing the required information. The SBC must be provided as a standalone document. It must be presented in a culturally and linguistically appropriate manner. In general, the rules provide that, in specified counties of the U.S., plans and insurers must provide interpretive services.

What are the steps a plan fiduciary should take to ensure that their approach to monitoring plan investments meets the Tibble standards of being "systematic" and "regular"? (Text, pp. 217-219)

The steps that plan fiduciaries should take to ensure that their approach to monitoring plan investments is "systematic" and "regular" require adopting procedures for the periodic monitoring of plan investments, closely adhering to those procedures and then documenting the implementation of those procedures. The approach entails the plan sponsor committee retaining both an ERISA counsel and an investment advisor and also establishing systematic monitoring procedures.

Upon what factors does the tax treatment of qualified pension and profit-sharing plans depend? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 49)

The tax treatment of contributions to qualified pension and profit sharing plans depends on who makes the contributions. Employee after-tax contributions are included in employee income and are FIT, FICA and FUTA taxable. This applies even if the employees are required to participate in the plan and get a refund of contributions if they leave employment before retirement or death. Voluntary employee contributions are always taxable income. Employee elective deferrals (e.g., contributions made on a pretax basis) are FICA and FUTA taxable. Employer contributions to qualified plans are not included in employees' taxable wages and are not FIT, FICA or FUTA taxable. Employees are taxed on pension plan payments when they are received to the extent that they are based on employer contributions, pretax deferrals or investment gains. They are only subject to FIT, however, and not to FICA or FUTA taxes. Payment amounts based on employee after-tax contributions are not taxable. If the plan is a qualified annuity plan, employer contributions are not considered wages and not subject to FIT, FICA taxes or FUTA taxes.

A recent study presented ten best practices for global plan sponsors that companies can use to further both their own business objectives and the retirement readiness of their participants around the world. List these ten best practices. (Text, pp. 518-530)

The ten best practices presented are: (1) Articulate objectives of total rewards globally. (2) Assess your company's existing reward structures around the world. (3) Seek ever-closer interaction between benefit functions globally. (4) Establish a clear, flexible governance structure. (5) Thoroughly understand and adhere to regulation, compliance and legislation. (6) Decide on the degree to which the company employs a global investment philosophy. (7) Seek efficiencies. (8) Promote higher savings rates globally. (9) Establish a specific plan for the transition from accumulation to decumulation. (10) Create a strong employee communications program.

What are Medigap policies? Explain. (Text, p. 443)

The term Medigap is used to mean private health insurance that pays, within limits, most of the health care service charges not covered by Parts A or B of Medicare. These policies, which must meet federally imposed standards, are offered by Blue Cross and Blue Shield and various commercial health insurance companies.

Describe briefly the three categories of unemployment insurance benefits. (Text, pp. 410-411)

The three categories of unemployment insurance benefits are regular state benefits, extended benefits and temporary emergency unemployment benefits. (1) Regular state benefits. Each state has its own program. A weekly cash benefit is paid for each week of total unemployment. The benefit paid varies with the worker's past wages, within certain minimum and maximum dollar amounts. The majority of states use a formula that pays weekly benefits based on a fraction of the worker's high-quarter wages. Several states also pay a dependent's allowance for certain dependents. In most states, the maximum duration of regular benefits is 26 weeks. (2) Extended benefits (EB). EB are also available to workers who exhaust their regular benefits in states with high unemployment. The basic EB program provides up to 13 additional weeks of benefits in states with high unemployment. Some states have also enacted voluntary programs by which seven additional weeks of EB can be paid during periods of extremely high unemployment. The weekly benefit amount of EB is the same as the regular unemployment compensation benefit. (3) Emergency unemployment compensation. During recessions, millions of unemployed workers exhaust their regular state benefits. In addition, many unemployed workers who exhausted their regular benefits live in states where the unemployment rate is not high enough to trigger additional weeks of benefits under the permanent EB program. To deal with the exhaustion of benefits, Congress on numerous occasions has enacted temporary emergency programs that provided additional weeks of benefits to unemployed workers.

Identify three key areas of concern regarding the collection of health data in wellness programs. (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, p. 31)

The three key areas of concern when it comes to health data collection from employees in wellness programs are: (1) Informed consent to collect the data (2) Data handling (3) Employment discrimination

What are the three requirements to pursue the civil penalty under Section 502(c)(1)? (Text, pp. 355-356)

The three requirements to pursue the civil penalty are: (1) The plaintiff must make a written request. Oral requests are not a proper basis for such claims. (2) The request must be made to the plan administrator, not to the plan fiduciaries or parties in interest. (3) The request must give clear notice of the documents sought. The courts do not require a plaintiff to request by name the specific documents being sought.

Educating committee members is critical to the long-term success of the committee as a governing body. Committee education can be broken down into three important segments. What are these segments? (Text, pp. 92-93)

The three segments of investment committee education are: (1) Understanding fiduciary responsibility. Committee members should be aware of what their fiduciary responsibilities are and what liability they have. (2) Education about functioning as a committee. Knowledge of techniques for inviting participation and encouraging different points of view, as well as avoiding common group pitfalls, can help a committee make better decisions as a group. (3) Investment education. Committee members are likely to have varying degrees of investment knowledge and sophistication. Because they will be ultimately responsible for making investment decisions on the plan's behalf, committee members should have a fundamental understanding of investment concepts.

List the types of employee welfare benefit plans not covered under ERISA and specifically excluded under the statute. (Text, pp. 24-25)

The types of benefit plans that are not subject to ERISA requirements are: (a) Governmental plans. These include plans that are established by the U.S. government, the government of any state or political subdivision and any agency of any of the foregoing or a plan to which the Railroad Retirement Act applies, as well as certain plans associated with Native American tribal governments. (b) Church plans. A plan established and maintained for its employees by a church or by a convention or association of churches is exempt from tax under Internal Revenue Code Section 501. (c) A plan maintained to comply with state laws on workers' compensation, unemployment or mandated disability insurance. (d) A plan maintained outside the United States primarily for nonresident aliens. (e) Plans that cover only self-employed individuals and that cover no "common-law employees" generally are not subject to ERISA. (f) Plans that cover only married shareholders of a corporation are not treated as ERISA plans. These are statutory exemptions specific to ERISA. An employer should be aware that it may be required to comply with other federal laws that affect employee benefit plans.

Explain the tax treatment of health benefits offered by employers to employees' same-sex spouses and their eligible dependents. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 30)

The value of health insurance benefits offered by employers to employees' same-sex spouses and their eligible dependents is not subject to federal income or FICA tax withholding and, in addition, employers are permitted to offer this benefit on a pretax basis. Legally married same-sex couples must be treated as spouses, regardless of their state of residence or state of celebration (the state where the marriage was performed).

Explain the differences between a market-driven approach to employee benefit plan communications and the traditional approach to such communications. (Text, p. 100)

There are five significant differences between a market-driven approach to employee benefit plan communications and the traditional approach to such communications. These are: (1) In the market-driven approach, objectives are specific, not general as they are in the traditional approach. (2) In the traditional approach, the focus is on informing or explaining the benefits; in the market-driven approach, the focus is on affecting or changing attitudes or behaviors. (3) Success is often hard to measure in the traditional approach, while it is directly measurable in the market-driven approach. (4) In the traditional approach, messages are sent to a single mass audience, but messages are targeted to specific audiences in the market-driven approach. (5) The communication tone is neutral in the traditional approach; in the marketdriven approach, it is direct.

Are premiums required for Part A? Explain. (Text, p. 444)

There are no premiums for most people covered by Part A. Eligibility is generally earned through the work experience of the beneficiary or of the beneficiary's spouse. However, most aged people who are otherwise ineligible for premium-free Part A coverage can enroll voluntarily by paying a monthly premium, if they also enroll in Part B.

What reasons make it unnecessary that a Social Security program be fully funded? (Text, p. 382)

There are several reasons that make it unnecessary to fully fund the Social Security program. (a) Because the program will operate indefinitely and not terminate in the predictable future, full funding is unnecessary. (b) Because the Social Security program is compulsory, new workers will always enter the program and pay taxes to support it. (c) The federal government can use its taxing and borrowing powers to raise additional revenues if the program has financial problems. (d) From an economic viewpoint, full funding would require substantially higher Social Security taxes, which would be deflationary and cause substantial unemployment. In contrast, private pension plans must emphasize full funding because private pension plans can and do terminate.

An ERISA plan document may contain a venue selection clause that specifies where cases may be brought and a clause that provides that a plaintiff may sue the plan only in the district where the plan is administered. Such clauses have several advantages from the plan administration perspective. What are these advantages? (Text, p. 331)

There is administrative convenience to plan managers in dealing with lawsuits "at home" rather than where a retiree resides. On a substantive level, however, there are other advantages. For example, a consistent set of rulings from a single body of circuit case law affords greater predictability on issues when there is a clear circuit split or even just a subtle nuance in local case law, local judges, etc. In addition, a consistent legal environment enables the plan that covers participants in more than one district to operate in a more consistent manner. Along the same lines, the plan's informational materials, such as the summary plan description (SPD), might be well served by a consistent body of case law. The same can be said of ancillary documents that can trigger lawsuits.

Comment on the rate of inflation that should be used for retiree medical care costs. (Text, p. 458)

There is no consensus for the rate of inflation that should be used for retiree medical care costs. The Medicare trustees project that per person costs will increase at a 4.3% average annual rate. Other organizations use different rates of inflation. Planners might want to choose two or three rates in order to project different scenarios.

Several factors have come together recently that focus on the need to help older workers convert their DC retirement plan balances to periodic income. What are some of these factors? (Text, p. 276)

These factors are: (a) A recent study by the Government Accounting Office (GAO) highlighted the fact that the majority of older workers do not have access to retirement income solutions in their 401(k) plans. In this study, about two-thirds of the plans did not offer payout options that are intended to last a lifetime, and about threefourths did not offer annuities where an insurance company guarantees a lifetime payout. (b) A bipartisan policy report by a nonprofit group recommended that lifetime income options be added to DC plans (c) Regulatory developments are enabling the use of retirement income solutions in tax-qualified DC plans. (d) Surveys indicate that older workers need and want help with developing retirement income. (e) New regulations require financial advisors and institutions that provide advice regarding tax-qualified retirement accounts to act as fiduciaries. (As of this writing, the regulations are being reviewed, and it is possible that they may ultimately be rescinded.) (f) Reports show how employers and financial institutions can construct retirement income programs in DC retirement plans and demonstrate analytical techniques they can use to help them design these programs.

Fee-for-service beneficiaries are responsible for charges that are not covered by the Medicare program and for various cost-sharing aspects of Parts A and B. How are these liabilities paid? (Text, p. 443)

These liabilities may be paid: (a) By the Medicare beneficiary (b) By a third party, such as an employer-sponsored retiree health plan or private Medigap insurance, or (c) By Medicaid, if the person is eligible.

What are the major conclusions from the analysis to rank the drivers for retirement outcomes using three factors: saving, investing and fees? (Text, p. 246)

This analysis revealed that such security hinges on savings levels and investment outcomes, plus a containment of the effect of management fees. Fees nonetheless have received what may be outsized fiduciary focus these days. Recent regulations have fixated much of plan sponsors' attention to fees, and media frenzy has fueled fear of litigation. Fee negotiations sometimes de facto serve to filibuster a holistic view of success factors for a retirement plan. Lower fees are beneficial to plan participants, all other things being equal. Fiduciaries are obligated to assess and negotiate fees. Yet racing to the bottom of fees may detract fiduciary oversight of investment selections. A lower cost mandate tends to entail easier-to-implement asset classes with less professional expertise and services necessary and thus may forgo return opportunities if such route has insufficient exposures and diversifications among key areas and markets.

What is the purpose of ERISA Section 502(c)(1)(B)? (Text, p. 349)

This section of ERISA authorizes a court's ability to impose stiff civil penalties against plan administrators who fail or refuse to timely produce certain plan documents upon request. This statutory power has been invoked often.

A recent study identified three factors that will have a major impact on the medical care cost structure of multinational companies. What are these three factors? (Text, p. 511)

Three factors that will have a major impact on the medical care cost structure of multinational companies are: (1) The transformation of the world economy with a power shift to emerging markets (2) Aging of the world population (3) Growth of lifestyle risk factors around the world.

List three significant problems in state unemployment insurance programs. (Text, pp. 412-413)

Three significant problems in state unemployment insurance programs are: (1) Only a small proportion of workers receive benefits. (2) Inadequate financing. Many states have relatively low trust fund balances, which has forced them to borrow from their federal unemployment accounts during business recessions. (3) A relatively high percentage of claimants exhaust their regular state unemployment benefits during business recessions.

Explain what a person must do to achieve disability insured status. (Text, pp. 384-385)

To be disability insured, a person must meet two work tests: (1) a recent work test and (2) a duration of work test. The latter test does not require work within a certain period of time. More liberal rules apply to the blind.

Describe the eligibility requirements a disabled worker must meet to receive Social Security disability benefits. (Text, p. 394)

To be eligible for benefits, a disabled worker must meet the following eligibility requirements: (a) Be disability insured (b) Meet a five-month waiting period (c) Satisfy the definition of disability.

Describe the critique of research conducted by leading experts on the significance of fees in reducing retirement account balances of DC plan participants. (Text, pp. 238-239)

To demonstrate a payoff from a lower fee, many illustrations assumed a fee cut of 100 basis points or more (one basis point is equal to 1/100th of 1%, or 0.01% (0.0001)) and correspondingly assumed a sure boost of annual investment return by the equivalent size, without sacrifice in investment depth or services. A cut of 100 basis points or more, however, may be dramatic in institutional fee negotiations. Many analyses would nonetheless extrapolate this as a common size to expect. Much of the research fails to consider where the fee level should settle as reasonable and how the fee effect evolves when fees are reduced. In addition, most studies looked at the fee effect by assuming a one-time savings (e.g., $10,000) and a constant investment return over a long horizon (e.g., 7% per annum), which is not a close approximation of typical savings and investment patterns over the life cycle. Retirement savings are often deposited into the plan regularly, dollar amounts differ, and their contributions to the final balance vary with the time duration and investment outcomes. Factoring periodic savings into the fee assessments makes a difference. A 1% fee, for instance, reduces the account balance by nearly 45% if only a one-time savings is assumed over 40 years—a stark overestimate of fee erosion—in comparison with about 23% when periodic savings are considered in the calculations. The discrepancy varies with fee levels.

Explain Social Security quarters of coverage and how they are earned. (Text, p. 383)

To receive Social Security quarters of coverage (also called credits), a person must have a certain amount of work in covered employment. Credits can be earned any time during the year, and a maximum of four credits can be earned each year. A person receives one credit for each $X of covered earnings. (In 2017, the amount needed for a credit was $1,300.) The amount required to earn one credit automatically increases each year as average wages in the economy rise.

Identify two areas of legal conflict regarding the jurisdiction of ERISA that could prove to be particularly challenging for multijurisdictional employers. (Text, pp. 344-345)

Two areas of legal conflict regarding ERISA that could prove to be particularly challenging for multijurisdictional employers are: (1) The interplay with ERISA and state-imposed all-payer claim data laws. In 2016 the U.S. Supreme Court, in Gobeille v. Liberty Mutual Insurance Co., upheld the ERISA preemption over state law, but other cases are forthcoming. (2) The interplay with ERISA and leave laws. In some cases a state family leave law is more generous to individuals than the federal law and is allowed to prevail over the federal standard. This jurisdictional issue continues to be questioned.

What are some typical retirement income goals? (Text, p. 279)

Typical retirement income goals can include: (a) A desire for liquidity to meet emergencies (b) Maximizing expected retirement income (c) Income that does not decrease due to capital market volatility (d) Income that keeps up with inflation (e) Income that retirees cannot outlive.

Provide examples of financial reports that a plan filing Form 5500 is required to keep for a minimum of six years after the filing date. (Text, pp. 232-233)

Under ERISA Section 107, plans required to file the Form 5500 and related schedules must maintain a copy of all the information used to arrive at these figures, such as financial reports including: (a) Statements from the trust, custodian, brokerage accounts and/or bank accounts that reflect deposits, withdrawals, income, fees and other transactional activity (b) Documentation that such accounts are properly maintained as plan (not company or personal) accounts (c) Certified audits and/or appraisals, depending on plan size and type of assets held (d) Distribution records including withholding and Forms 1099-R (e) Reconciliation of deposits to deductions taken on corporate income tax returns.

Under federal law, how is the value of all benefits provided to an employee's same sex civil union partner or domestic partner treated? (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 31)

Under federal law, the value of all benefits provided to an employee's same-sex domestic partner or a same-sex civil union partner under applicable state law (or provided to the partner's children) is not exempt from FIT unless the person is a "dependent" as defined in the IRC. (That is, if benefits are provided to a nondependent partner in a same-sex civil union or domestic partnership, FIT are withheld, and they are based on the fair market value (FMV) of the benefits. In taxation terms FMV is referred to as imputed income.)

What were the terms of the GMR settlement with FTC? (Text, p. 132)

Under the terms of the GMR settlement with the FTC, GMR and its owners are prohibited from misrepresenting the extent to which they maintain the privacy and security of consumers' personal information. Further, they must establish a comprehensive information security program that will protect consumers' sensitive personal information, including information the company provided to independent service providers. In addition, the company must have the program evaluated both initially and every two years by a certified third party. As is typical of FTC enforcement actions, the settlement will remain in force for the next 20 years. The GMR settlement demonstrates that according to FTC, companies must be held to high standards with regard to third-party vendor management and oversight when it involves personal information.

What are the objectives of unemployment insurance programs? (Text, p. 408)

Unemployment insurance programs are federal-state programs that pay weekly cash benefits to workers who are involuntarily unemployed. Each state has its own unemployment insurance program. The objectives of these programs are: (a) Provide cash income during involuntary unemployment (b) Help unemployed workers find jobs (c) Encourage employers to stabilize employment (d) Help stabilize the economy.

In what areas of plan management are plan advisors likely to possess a different kind, not just degree, of information from TPAs? (Text, p. 228)

Unlike TPAs, plan advisors are particularly knowledgeable about mutual funds, collective investment trusts (CITs), different share classes, active versus passive investments, "to" versus "through" TDF glide paths, and net asset value (NAV) versus accumulation unit value (AUV). The latter terms refer to measurements of value of mutual funds that are held directly or indirectly through accounts owned by insurance companies. Other matters with which investment advisors are also likely be more familiar than TPAs are Social Security optimization, non-qualified deferred compensation arrangements, distribution planning, and estate and trust issues.

Which occupations are covered by Social Security? Explain. (Text, p. 383)

Virtually all private sector employees are covered under Social Security at the present time. Federal civilian employees hired after 1983 are also covered on a compulsory basis. In addition, state and local government employees can be covered by a voluntary agreement between the state and federal government. The majority of state and local government employees are covered. More than nine out of ten workers are working in occupations covered by Social Security.

Explain the extent to which employees are currently informed as to the scientific evidence underpinning the health imperatives suggested by a wellness program. (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, p. 32)

Wellness programs are not subject to regulation by any government or licensing body such as the Department of Health or the American Medical Association (AMA), and there is no requirement that board-certified doctors who are wellversed in scientific research on weight loss, nutrition or smoking cessation oversee these programs. Yet many wellness programs provide directives to enrollees as to nutrition, weight-loss techniques and smoking cessation, etc. It is important to convey to the participant employee that the information being provided by the wellness program is not medical information and should not be treated as such.

What limits exist on the amount of health information that can be collected by a wellness program? (Reading B, Health and Big Data: An Ethical Framework for Health Information Collection by Corporate Wellness Programs, Study Guide Module 7, pp. 32-33)

Wellness programs collect significant amounts of PHI from the employees; in fact, because wellness programs enjoy the support of the government, the programs are enabled to collect such information as family medical histories and even to conduct genetic testing information without running afoul of federal laws such as the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). Recent cases have indicated that the type of data a wellness program is enabled to collect can seem boundless; the current state of the law is such that there is no check against wellness programs trawling for health information that the employee has not volunteered.

Outline the general rules to which workers' compensation benefits are subject. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, p. 44)

When employees suffer a work-related injury or illness, they may receive workers' compensation benefits. As a general rule, workers' compensation benefits are not subject to FIT or FICA taxes on amounts that do not exceed the amount of benefits provided under federal, state or local law. However, under an arrangement where the employer pays part or all of an employee's salary while receiving benefits in return for all of the benefit payments received by the employee, FIT, FICA taxes and FUTA taxes must be withheld on any amounts the employer pays to the employee that exceed the amount of benefits received by the employee. The excess amounts are considered taxable wages.

What can make a plan sponsor suspect the auditor has not conducted adequate planning for the audit? (Text, p. 189)

When the auditor arrives on the first day of fieldwork with little previous communication and immediately starts performing audit testing, this may be an indicator of inadequate planning, supervision and internal controls work on the part of the auditor.

What penalties against CPA firms that perform deficient plan audits are available through ERISA? Explain. (Text, p. 187)

While EBSA can reject a plan's annual Form 5500 filing and assess civil penalties against the plan sponsor until plan audit deficiencies are remediated, ERISA currently provides EBSA no enforcement power to assess civil penalties against CPA firms performing deficient audits.

Discuss the key factors that guide the courts' discretion in imposing a penalty under Section 502(c)(1). (Text, p. 357)

While not binding, the two most important factors guiding the courts' exercise of its discretion to impose Section 502(c)(1) penalties are: (1) The nature of the administrator's conduct in responding to the plaintiff 's request, e.g., whether the administrator is guilty of bad faith (2) Whether the plaintiff suffered prejudice from the administrator's failure or refusal to provide the requested documents. One court has summarized the factors by saying that, in exercising its discretion under Section 5 02(c)(1), the court is to consider any bad faith or intentional misconduct by the administrator, the length of the delay, the number of requests made and the extent and importance of the documents withheld, and any prejudice to the participant.

How often should a recordkeeper request for proposal (RFP) be issued? (Text, p. 94)

While not mandated according to any regulations, we generally recommend that plan sponsors consider issuing recordkeeper RFPs at least every three to five years.

What are white label funds, and what are some of the concerns plan fiduciaries should have about these funds? (Textbook, pp. 313-314)

White label funds are separate accounts that invest directly in stocks, bonds or other types of individual securities, in lieu of a pooled fund. The account, consisting of plan assets managed by a professional investment manager in accordance with plan guidelines, may be offered on its own or as part of an investment option combining the account with other managers' accounts or a pooled vehicle. The plan fiduciary selects the managers and sets the investment guidelines for each account. The participants in the plan can then choose which of the white label funds in the account they wish to use. Possible areas of concern for plan fiduciaries are: (a) White label funds may involve significant costs and burdens because of costs such as higher recordkeeping fees, higher audit fees, legal fees for manager contracts, and legal and vendor fees for preparation of customized fund disclosures. (b) These funds require a considerable investment of time by plan fiduciaries and staff. (c) Special regulatory issues may be associated with white label funds. Some types of investment activity might trigger additional obligations. (d) Fiduciaries need to be sure that disclosure materials adequately meet ERISA standards and sufficiently give participants the necessary information to make investment decisions.

What is the early retirement age for Social Security benefits? Explain. (Text, pp. 385-386)

Workers and their spouses can retire as early as the age of 62 with actuarial reduced benefits. A person may start receiving benefits as early as the age of 62 irrespective of his or her full retirement age.

Describe the characteristics of an HRA. (Reading A, Taxation of Employee Benefits: Federal, Study Guide Module 2, pp. 37-38)

employees for medical expenses of the employees and their spouses, dependents and eligible adult children (e.g., through the age of 26). HRAs are fully funded by the employer and cannot be offered to employees through a cafeteria plan or salary reduction. Employees are reimbursed on a pretax basis up to a set maximum amount for each period of coverage. Any amount not used by an employee by the end of the period is not lost and can be carried over to the next period at the employer's discretion. All of the following three conditions must be met for HRA coverage and reimbursements not to be included in an employee's gross income: a) the HRA only reimburses medical care expenses, as defined by IRC; b) every request for reimbursement is substantiated; c) the HRA does not reimburse medical expenses for a prior tax year, expenses incurred before the HRA plan became effective or expenses incurred before the employee enrolled in the plan. GBA/RPA 3 | Strategic Benefits Management Benefits Industry | Module 2 Module 2 | 15 In addition, while employer contributions to an employee's HRA are tax-free to the employee, ACA requires that HRAs be integrated into a primary group's major medical plan and that the employee actually enroll in that primary group plan. (There are exceptions for retiree-only and one-person stand-alone HRAs.)