HR Benefits

Diversification

Diversification reduces risk by allocating investments among various financial categories "Diversification is a critically important element in reaching long-range financial goals while minimizing overall risk

Compounding

It's your "earnings earning earnings" Simply, your money working for you

Where do profit sharing programs prorate their allocation based on?

Base paymotivation, productivity and efficiency for the employee

Bonds

Debt

Stock

Equity

Both Defined Contribution and Defined Benefit plans have funding flexibility?

FALSE

Defined Contribution vesting schedules are generally more restrictive than Defined Benefit schedules?

FALSE

In a Defined Benefit Program, the employee bears the investment risk?

FALSE

In benefits you pretty much do what you want to do when paying for benefits

FALSE

When you self-insure, you off load the risk to a third party

FALSE

Largest country by 2050

India

A Defined Benefit Plans is a future benefit for the employee determined by a specific formula?

TRUE

A Defined Contribution Plans is a current benefit for the employee contributed to an account?

TRUE

Defined Benefit Plans generally favor longer service employees?

TRUE

Defined Benefit payments are generally monthly while Defined Contribution is lump sum?

TRUE

Defined Benefit plans are much more complicated to administer than Defined Contribution plans?

TRUE

Employees tend to value Defined Contribution plans over Defined Benefit plans?

TRUE

Funding means to put money aside to meet future benefit obligations

TRUE

If you are an insurer, you take on the risk from a third party

TRUE

In a Defined Contribution Plan the certainty of cost is favored by employers?

TRUE

Pay as you go means paying currently with no worries about future obligations

TRUE

Besides an understanding of benefits, the goal of this course is • To have you think as a HR professional with specialty in business • To have you think as a business professional with a specialty in HR • To have you think for yourself • To have you just put the time in and get an A

To have you think as a business professional with a specialty in HR

Of the following, one is a critical HR initiative in the minds of senior leaders • Using compensation and benefit plans to stunt employee engagement • Using hearsay evidence to quantify HR impact • Increasing the cost of programs and increasing their value • Tying compensation and benefit rewards to organizational strategy and business success

Tying compensation and benefit rewards to organizational strategy and business success

Employee benefits became very popular because of this event • World War II wage freeze • World War I enlistments • Great Depression migration west • Prohibition was repealed and people could drink again

World War II wage freeze

Profit sharing contributions made are tax __________ for the employer and grow tax ___________ for the employee

deductible; deferred

under CODAs you have the opportunity to

get cash or you can defer that cash,

In what kind of program CAN you reward individual effort?

in compensation program

HIPPA

is all about privacy

Why do employers use profit sharing?

motivation, productivity and efficiency for the employee

COBRA

requires continuation of coverage if you leave your job

Profit sharing program is an employee benefit program that:

requires that the sponsor allow that the employee participate in profit

What can't profit sharing do?

reward individual effort

Cash

safe and liquid

(CODA) if you defer it than its

tax exempt and it grows tax deferred

(CODA) if you select cash

you get taxed,

In 2014, an employee over age 50, can contribute how much to a 401(k)? • $5,500 • $17,500 • $23,000 • $51,000

• $23,000

f you cash out your IRA before age 59 ½, you are subject to ordinary income tax plus an additional excise tax of how much? • 5% • 10% • 15% • 20%

• 10%

Of the total US workforce in 2014, what percentage is represented by a union? • 9.1% • 10.2% • 12.3% • 14.4%

• 12.3%

Immigrants as a percentage of the workforce reached what level in 2010 • 11% • 13% • 15% • 17%

• 13%

An example of an employer non-elective contribution would be? • A $1.00 for $1.00 contribution on employee deferrals • 3% of pay for all employees regardless of their contribution • A maximums set by employer • A prorated contribution made based on service

• 3% of pay for all employees regardless of their contribution

For most employers, benefits represent what percentage of the total compensation dollar • 10% • 20% • 30% • 40%

• 30%

By 2020, women participation in the workforce will reach what percentage • 46% • 48% • 50% • 52%

• 48%

In 1980, the percentage of workers above age 40 was 38.6%. By 2010, that number had increased to • 44% • 48% • 52% • 56%

• 52%

In 2014, Social Security will tax employees and employers? • 5.5% on the first $150,000 of 2015 earnings • 5% on all earnings in 2015 • 6.2% on the first $113,700 of 2015 earnings • 6.2% on the first $118,500 of 2015 earnings

• 6.2% on the first $118,500 of 2015 earnings

Social Security retirement benefits are available as early as what? • 60 • 62 • 65 • 67

• 62

If you were born after 1960, full Social Security retirement benefits are available at what age? • 65 • 66 • 67 • 68

• 67

If born in 2000, a male could expect to live until and a female until • 65 male and 72 female • 74 male and 80 female • 78 male and 82 female • 85 male and 90 female

• 74 male and 80 female

When thinking of a "replacement ratio" in retirement as compared to an employee's final earnings, what is the agreed upon percentage? • 50% • 60% • 70% • 80%

• 80%

A 401(k) Defined Contribution Plan is considered? • A Cash or Deferred Arrangement (CODA) • A Deferred Compensation Agreement Arrangement (DCAA) • A Cash and Carry Arrangement (ACCA) • A Cash and Tax Arrangement (CATA)

• A Cash or Deferred Arrangement (CODA)

What is a Cash Balance Plan? • A defined contribution plan • A combination of a defined contribution and a defined benefit • A defined benefit plan • A non-qualified plan

• A defined benefit plan

When thinking about older employees, why do older workers stay in the work force • Enjoy the challenge and responsibility • Access to income and health care • Cannot stay at home because of their spouse • Mentor younger employees

• Access to income and health care

From an employer perspective, which of the following is not a good reason to offer benefits to your employees • Attraction and retention • Motivation and morale • Administration and cost • Productivity and accountability

• Administration and cost

An employee contribution to a Thrift Savings Plan is generally? • Before tax with company contributions and/or earnings taxed currently • After tax with company contribution and/or earnings are tax deferred • Before tax with company contributions and/or earnings tax free • After tax with company contribution and/or earnings are taxed currently

• After tax with company contribution and/or earnings are tax deferred

Who must be given the opportunity to diversify in an ESOP? • All employees 45 or over with 10 or more years of service • All employees 50 or over with 10 or more years of service • All employees 55 or over with 10 or more years of service • All employees 60 or over with 10 or more years of service

• All employees 55 or over with 10 or more years of service

And, when you think of demographics and its impact on benefits, what should a business professional with a specialty in employee benefits do • Design products and services that satisfy corporation and employee needs • Ensure programs are flexible enough to react to changing environment • Plan Strategically and then execute flawlessly • All of the above

• All of the above

Labor cost differentials (what different countries pay for labor) has resulted in about 1 million US jobs being offshored. Which job is most likely to be offshored? • Call-center and customer service • Software development, maintenance, testing, R&D • Back-office accounting/mortgage processing/tax form preparation • All of the above

• All of the above

The Labor Force is a product of which trend or attribute • Population Increase or Decrease • Workforce Participation Rates • Immigration Trends • All of the above

• All of the above

The drivers of change in the current business environment include • The restructuring of the economy and global competition • Technology enhancements and changing labor force demographics • Federal and state legislation, regulation and mandates • All of the above

• All of the above

When asked by your CFO, why not just pay salary instead of providing benefits, you would respond • Because of tax treatment and funding advantages • Because of economies of scale purchasing and risk pooling • Because of attraction, retention and competiveness needs • All of the above

• All of the above

When thinking of an ESOP, this plan? • Invests primarily in company stock • Sets up individual employee accounts • Distributes stock to employees based on salary and years of service • All of the above

• All of the above

When thinking of benefits in society, what do they do? • Promote economic security by insuring against uncertain events • Raise living standards by providing targeted services • Add to economic stability by helping to secure the income and welfare of families • All of the above

• All of the above

When you think of Global Retirement Issues, which of these is a true statement? • Many employees will be forced to work beyond age 65 • Living standards in developed countries will fall and poverty rates will rise • Developing countries will not be able to afford retirement systems for its seniors • All of the above

• All of the above

Tax deferred means • Amounts contributed by an employee or an employer are not currently taxed until distributed • Amounts contributed by an employee or an employer are currently taxed when provided • Amounts contributed by an employee or an employer are tax free when distributed • Amounts contributed by an employee or an employer are not currently taxed but tax deductible when distributed

• Amounts contributed by an employee or an employer are not currently taxed until distributed

It is estimated that by 2050, the fastest growing group will be • Asians • Hispanics • Afro Americans • White Americans

• Asians

Tax exempt means • At the time the benefit is provided by the employer, there is no current taxation to the employee • At the time the benefit is provided to the employee, the employee gets a tax deduction • At the time the benefit is used, the benefit is taxed • At the time the benefit is provided it is taxed as salary

• At the time the benefit is provided by the employer, there is no current taxation to the employee

Tax free means • Benefit when actually received by the employee is taxable immediately • Benefit when actually received is deductible from the employee's taxes • Benefit when actually received by the employee is free from taxation • Benefit when actually received is subject to state taxes

• Benefit when actually received by the employee is free from taxation

Certain forms of compensation are exempt from constructive receipt, such as • Salary provided by a non-profit employer • Benefits choices that provide cash to the employee • Benefits that are within a qualified plan • Salary that is deferred until a later date

• Benefits that are within a qualified plan

In a 401(k), the employee is given the choice of? • Taking cash and being taxed • Deferring salary into an account for tax deferred treatment • Both of the above • None of the above

• Both of the above

Why do employers integrate with Social Security benefits in a Defined Benefit Pension Plan? • To maintain equal levels of income replacement to both lower paid and higher paid • To take credit for employer's contribution on behalf of employee • Both of the above • Neither of the above

• Both of the above

Similar to a Defined Benefit Plan, Defined Contribution participants find? • Only their contributions go into a trust, the company maintains theirs in the company • Only the employer contributions go into a trust, the employees are held at the company • Both the employee and employer contributions go to a trust • Both the employee and employer contributions are held at the company

• Both the employee and employer contributions go to a trust

A typical Cash Balance Plan would provide an employee with a percentage (e.g., 5%) of pay every year worked. What type of defined benefit plan is that? • Final Pay plan • Flat dollar amount plan • Money Purchase plan • Career Average plan

• Career Average plan

What is constructive receipt? • Cash or property received for a service is immediately taxable • Cash or property received for a service can be deferred until later • Cash is immediately taxable, while property is non-taxable • Cash and or benefits received are always taxable

• Cash or property received for a service is immediately taxable

What will be the result of governments and companies providing pension promises made based on faulty life expectancy assumptions? • Increased tax revenues • Debt • Early retirements will increase • Life expectancy will decrease

• Debt

A defined benefit Cash Balance Plan? • Defines the promised benefit in terms of an account balance • Defines the promised benefit in terms of a retirement annuity • Defines the promised benefit in terms of an life insurance benefit • Defines the promised benefit in terms of a Social Security amount

• Defines the promised benefit in terms of an account balance

It is estimated that by 2050, Hispanics will • Stay stable at 11% • Double from 11% to 24% • Triple from 11% to 33% • Quadruple from 11% to 44%

• Double from 11% to 24%

Under the IRS Code, an employee's contribution to a 401(k) plan is called? • Cash Election • Elective Deferral • Affirmative Deferral • Deferred Election

• Elective Deferral

Social Security is a government social system supported by? • Government revenues as provided by Congress • Employer and employee taxes paid • Employee contributions deducted from payroll • Employer generosity

• Employer and employee taxes paid

ERISA requires Defined Benefit Pension Plans to do all of the following except one, which is it? • Adhere to certain rules for Participation and Vesting • Ensure the plan does not discriminate in favor of lower paid • Follow Fiduciary Standards and participate in the Pension Benefit Guarantee Corporation • Requirements for Reporting and Disclosing plan information and Minimum Funding

• Ensure the plan does not discriminate in favor of lower paid

Of the following, one is not a critical skill for HR professionals in the minds of senior leaders • Strategic HR and Business Thinking • Influence, Persuasion and Leadership skills • Excellent transaction and administrative capabilities • Understanding Company, Financials and Operations

• Excellent transaction and administrative capabilities

Which of the following is not a true statement regarding Defined Benefit Pension Plans? • Benefit is defined • Cost is uncertain and company must pay whatever it takes to provide promised benefit • Requires service of enrolled actuary and investment professionals • Financial risk is on the employee

• Financial risk is on the employee

There are really only two types of Defined Benefit Pensions Plans, what are they? • Career Average and Final Pay • Flat benefit and Percent of Pay • Service and Job Performance • All of the above

• Flat benefit and Percent of Pay

Tax deductible means • For a company, the expense of providing a benefit is not deductible from their income • For a company, the expense for providing a benefit is considered additive to their income • For a company, the expense of providing a benefit receives no special advantage • For a company, the expense for providing a benefit is treated as a deduction to their income

• For a company, the expense for providing a benefit is treated as a deduction to their income

A Career Average Plan averages the employees earning over their career, whereas a Final Average Pay Plan averages the earnings? • Over the career of the employee with all the employers the employee has worked for • Uses the same method used by Social Security • Generally uses the earnings earned in the last 3 to 5 years of work • Never uses earnings, uses job performance criteria instead

• Generally uses the earnings earned in the last 3 to 5 years of work

What is the rationale behind the U.S. benefit system? • Get government more involved in social care so there are more benefits for all • Get government less involved in social care so there are less benefits for all • Get government out of social care by incenting employers to provide coverage • Get government out of social care by raising taxes but adding more coverage

• Get government out of social care by incenting employers to provide coverage

Which benefit category generally cost the employer the most • Legally Required • Health care and insurance • Paid Time Off • Retirement

• Health care and insurance

Under the US tax code, what are the two biggest exclusions • Health insurance and Medicare payments • Retirement plans and Mortgage interest • Health insurance and Retirement plans • Child Care credit and Charity donations

• Health insurance and Retirement plans

The primary goal of an ESOP is to? • Increase employee motivation and productivity through ownership • Create a new class of preferred shareholders • Decrease company value by issuing employer stock • Increase the amount of employer stock in the market

• Increase employee motivation and productivity through ownership

By 2050, African Americans will • Increase from 12% to 14% • Increase from 15% to 25% • Decrease from 14% to 12% • Decrease from 25% to 15%

• Increase from 12% to 14%

Which of these is not an element of the "three-legged stool" retirement concept? • Personal savings • Social Security • Company pension • Inheritance

• Inheritance

Which of the following is not a recent development in 401(k)'s? • Introducing Roth 401(k)'s • Setting up Automatic Enrollment and Step-Up Contributions • Offering Lifestyle, Target Retirement and Self- Directed investment options • Installing restrictive vesting provisions

• Installing restrictive vesting provisions

When you think of Global Retirement Issues, which of these is a false statement regarding populations? • Global population of those 65 and older will triple to 1.5 billion by 2050 • Countries will have more citizens 65 and older than children under age 15 • U.S. is set to increase almost 400 million people by 2050 • Japan and Russia will grow while China and India will decline

• Japan and Russia will grow while China and India will decline

One of the biggest employer issues with ESOPs is its? • Lack of diversification • Lack of stock growth • Lack of employee interest • Lack of the capital to issue stock

• Lack of diversification

When you think of Global Retirement Issues, which of these is a false statement? • Financial crisis caused government budgets to spend to rescue financial systems and to provide unemployment benefits • Tax revenues from individuals and corporations declined • Millions lost jobs or saw their pay stagnate • Lifetime earnings have increased as a result of social benefit programs resulting in higher pensions

• Lifetime earnings have increased as a result of social benefit programs resulting in higher pensions

Of the four generation groups, this is the largest • Silent Generation • Baby Boomers • Generation X • Millennials

• Millennials

People retiring today from Social Security will pay? • More in SS taxes than they will receive in benefits • Less in SS taxes then they will receive in benefits • Just about the same amount • None of the above

• More in SS taxes than they will receive in benefits

A major difference of a 403(b) vs. a 401(k) is? • Elective deferrals, non-elective deferrals and employer matching contributions • Investments are generally limited • Most use custodial annuity accounts through an insurance provider • Most use the government for investments and administration

• Most use custodial annuity accounts through an insurance provider

A trust, once qualified and established for participants can? • Never be used by the company to help pay business expense s • Can only be used by the company in the case of business emergency • Protect the participant's rights but not those of the beneficiaries • Allows the IRS to withdraw funds for taxes when due

• Never be used by the company to help pay business expense s

ESOPs can be? • Non leveraged and partially leveraged • Non leveraged and leveraged • Partially leveraged and leveraged • Partially non leveraged and partially leveraged

• Non leveraged and leveraged

Employer contributions to a 401(k) can be either "matching contributions" to employee deferrals or? • Partial matching contributions • Fully matching contributions • Elective contributions • Non-elective contributions

• Non-elective contributions

In response to the increasing costs of a guaranteed retirement benefit, companies have eliminated defined benefit pension plans and began? • Offering defined contribution plans that shifts savings and investment responsibility to employees • Offering defined benefit plans that shifts savings and investment responsibility to employees • Offering retiree medical coverage to offset the loss of pension benefits • Employers have not made changes

• Offering defined contribution plans that shifts savings and investment responsibility to employees

What was one of the solutions the Deficit Reduction Commission put forward to "right" Social Security? • Reduce the retirement age • Increase benefits for high income workers • Raise the cap on pay subject to tax • Establish a national sales tax

• Raise the cap on pay subject to tax

A lifetime annuity from a Defined Benefit Pension Plan, means the recipient? • Receives a fixed monthly payment for life plus benefits for a beneficiary • Receives a fixed monthly payment for lifetime • Receives a lump sum payment • None of the above

• Receives a fixed monthly payment for lifetime

A joint and survivor annuity from a Defined Benefit Pension Plan, means the recipient? • Receives a lump sum death benefit payment • Receives lower fixed monthly payments until both the retiree and the survivor die • Receives a lower fixed monthly payments and a higher monthly payments for the survivor • Receives a higher fixed monthly payment and a lower monthly payment for the survivor

• Receives lower fixed monthly payments until both the retiree and the survivor die

What did ERISA, the granddaddy of all benefit legislation, not do • Established qualified benefit plans and allowed pre-emption of state insurance laws • Required employers to establish and administer plans fairly for all employees • Set up reporting to federal government, participants and implemented fiduciary responsibility and protection for participants • Ensured non- discrimination, minimum funding and created the PBGC

• Required employers to establish and administer plans fairly for all employees

An IRA is a personal savings vehicle that is? • Tax Deductible and Tax Deferred • Taxable Income and Tax Free • Tax Deferred and Tax Exempt • Tax Exempt and Tax free

• Tax Deductible and Tax Deferred

To get government out of social care, the government has traded • Tax and funding advantages for voluntary employment based programs • Tax and funding advantages for involuntary employment based programs • Dollar for dollar government rebates for voluntary employment based programs • There really are no advantages for voluntary employment based programs

• Tax and funding advantages for voluntary employment based programs

A 403(b) is a 401(k) for? • Tax-exempt employers and educational organizations • Tax paying employers and educational organizations • Tax-exempt employers and tax paying employers • Educational organizations and anyone else who wants to have one

• Tax-exempt employers and educational organizations

A Roth IRA is a personal savings vehicle that is? • Non Taxable but Tax Deferred and Tax Free • Taxable but Tax Deferred and Tax Free • Taxable but Non Taxable and Tax Deferred • Tax Free but not Tax Deferred and not Tax Deductible

• Taxable but Tax Deferred and Tax Free

What is not a primary demographic of the labor market • Population, • Labor Force • Technology • Occupational Skills

• Technology

The two non-discrimination tests employers must pass under a 401(k) are? • The HCE and the NHCE • The ADEA and the ADA • The ADP and the ACP • The ACA and the AFAR

• The ADP and the ACP

Very common, when converting a current plan to a Cash Balance Plan, an older employee may experience "wear away". This means? • The converted amount is allowed to grow more rapidly than other participants • The converted amount exceeds the earned benefit but continues to grow • The converted amount exceeds the earned benefit and no additional benefits are earned until parity reached. • The converted amount is ignored and the employee continues to participate as before earning at their current level

• The converted amount exceeds the earned benefit and no additional benefits are earned until parity reached.

What happens if the ADP and the ACP 401(k) tests are not satisfied? • The employer must modify and refund some HCE contributions • Nothing happens; you get a pass for trying • The employer must refund all the HCE contributions • The employer is required to shut down the 401(k) plan

• The employer must modify and refund some HCE contributions

The fastest growing segment of the population is what age category? • Those under age 16 • Those between 18-34 • Those between 51-69 • Those over age 85

• Those over age 85

Benefits are reduced for early commencement for what primary reason? • To recognize that people do not want to retire early • To recognize that the government does not care when a person retires • To recognize that benefits will be paid out over a longer period of time • To recognize that people want to stop working

• To recognize that benefits will be paid out over a longer period of time

Tax deductible means • To the individual, certain benefits are only deductible from their income • To the individual, certain benefits are deducted from their income or their taxes • To the individual, certain benefits are only deductible from their taxes • To the individual, benefits are never deductible from their income or taxes

• To the individual, certain benefits are deducted from their income or their taxes

When you think of demographics and its impact on companies, what are these demographic factors are not causing an impact? • Older workforce, diversity and war for talent • Unlimited supply of workers with right skills and experiences • Global competition and growth constraints • Multiple sources of workers and investment in Human Capital

• Unlimited supply of workers with right skills and experiences

In a Defined Benefit Plan sponsors can only have 10% of employer securities (company stock) in the plan. A Defined Contribution Plan can have? • Up to 10% • Up to 33% • Up to 50% • Up to 100%

• Up to 100%

In order to be deemed to have passed the tests, employers can use a "safe harbor" approach? • Which means the employer makes a non-elective contribution of 1% for each plan participant • Which means the employer makes a non-elective contribution of 2% for each plan participant • Which means the employer makes a non-elective contribution of 3% for each plan participant • Which means the employer makes a non-elective contribution of 4% for each plan participant

• Which means the employer makes a non-elective contribution of 3% for each plan participant

In an After Tax savings program, if money is withdrawn from the account before age 59 ½? • No withdrawal penalties apply • Withdrawal penalties apply to the employee contribution, the company contribution and any earnings • Withdrawal penalties apply to the company contribution and any earnings • Withdrawal penalties apply to the employee contribution

• Withdrawal penalties apply to the company contribution and any earnings

Some plans allow for employee loans from a 401(k) but it has a risk? • You are using your own money, paying yourself interest and have no worries • Your loan amount taken is out of the market for the duration of the loan • Your loan is taxed when you take it • You are so convinced loans are smart, so you start taking out more loans

• Your loan amount taken is out of the market for the duration of the loan

By 2050, it is estimated that non-Hispanic whites will: • decrease from 73% to 53% • decrease from 53% to 33% • increase from 53% to 73% • increase from 33% to 53%

• decrease from 73% to 53%