Question 1

Riley works at Kupton Co., which provides her with a health care plan that contracts with health care professionals to provide services at a reduced fee. Which type of health care plan is Kupton Co. providing to its employees?

Accepted Answer

Kupton Co. is providing its employees with a preferred provider organization (PPO) plan, which contracts with health care professionals to provide services at a reduced fee. This is different from a health maintenance organization (HMO), which typically requires employees to seek care only from providers within a specific network, and a consumer-driven health plan (CDHP), which involves high-deductible insurance paired with a tax-advantaged account for health care expenses. A flexible spending account (FSA) is a type of tax-advantaged account that allows employees to set aside pre-tax dollars for qualified health care expenses, and a managed care plan is a broad term that can refer to any type of health insurance that coordinates and manages healthcare services.

Question 2

Evan is the human resource manager of a one-year-old technology company. The founder wants him to set up a retirement plan. Evan thinks the best approach during the company's early years would be a defined-contribution plan funded with profit-sharing dollars. Which statement best supports Evan's idea?

Accepted Answer

A defined-contribution plan funded with profit-sharing dollars gives the company more flexibility during the early years as it establishes itself. This is because the contribution amount can be adjusted based on the company's profitability, and there are no set obligations to make contributions in years where profits are low. This allows the company to conserve cash in leaner years while still offering a retirement benefit to employees.

Question 3

Park Production offered employees a defined-benefit retirement plan, in which retirees received benefits calculated on the basis of their age, earnings, and years of service. But the company didn't keep up with technology, and its earnings fell. When the stock market dipped, the company could no longer afford to keep paying for its retirement benefits. What protection will the retirees have in this situation?

Accepted Answer

The Pension Benefit Guarantee Corporation (PBGC) is a government agency that insures defined-benefit pension plans in case of employer bankruptcy or failure to meet benefit obligations. Even if a company cannot afford to pay for its retirement benefits, the PBGC will step in to provide retirees with a basic benefit. However, the amount of the benefit may not be as much as the original plan promised, and certain restrictions may apply.

Question 4

Tiffany, the engineering manager at Cardinal Tech, takes an eight-week unpaid leave to go on a tour to promote a book she wrote. She does so in accordance with Cardinal Tech's policy for leaves without pay. In what sense could this unpaid leave be an employee benefit for Tiffany?

Accepted Answer

Tiffany benefits from retaining her seniority and benefits during her unpaid leave. This means that when she returns from her leave, she will still have the same amount of seniority and benefits she had before she left. This can be advantageous for her in terms of job security and long-term benefits such as retirement savings. None of the other options listed apply in this scenario.

Question 5

Connor, the manager of a shipping company, introduces a set of communications, activities, and facilities designed to change health-related behaviors in ways that reduce health risks and subsequent medical costs. The program aims at specific health risks, such as high blood pressure, high cholesterol levels, smoking, and obesity. Based on these offerings, Connor has introduced a(n)

Accepted Answer

An employee wellness program is a set of activities, facilities, and communications designed to change health-related behaviors in ways that reduce health risks and medical costs. These programs often aim to address specific health risks, such as those mentioned in the scenario (high blood pressure, high cholesterol, smoking, and obesity). Therefore, Connor has introduced an employee wellness program. The other options (B, C, D, and E) are not appropriate because they refer to different types of healthcare plans, rather than a wellness program.

Question 6

Phono Inc. has a benefits package that includes paid vacations and sick leave. The human resource manager proposes shifting this time into a bank of paid time off. What would be an advantage of this change?

Accepted Answer

Shifting to a bank of paid time off would give employees more flexibility to use their time off for personal reasons, rather than being constrained by categories of vacation and sick leave. This could also provide more privacy for employees who don't want to disclose the reason for their absence.

Question 7

Meghan, who recently moved to a new city, evaluates several insurance options from her new employer. Owing to her recent medical issues, she wants to choose her health care providers, even if seeing them costs more than seeing the providers in a specific insurance network. Which health care plan is Meghan most likely to find suitable for her needs?

Accepted Answer

Meghan would be most likely to find a preferred provider organization (PPO) suitable for her needs because it allows her to choose her health care providers, even if they are out of network, although it may cost her more. PPOs have a network of preferred providers, but also allow members to seek care outside of the network at a higher cost. Managed care plans, health maintenance organizations (HMOs), employee wellness programs, and flexible spending accounts do not necessarily offer the flexibility to choose providers out of network.

Question 8

What is true about disability insurance?

Accepted Answer

Disability insurance typically pays around 50 to 70 percent of the employee's salary in case of disability.

Answer: D 
 Most employers offer long-term disability plans, in addition to short-term disability plans.

Options A and E are incorrect as disability insurance can cover the employee for long periods of time and does not cover the employee's dependents. Option B is incorrect as payments under long-term plans are typically higher than short-term plans due to the extended period of coverage.

Question 9

Frankie is deciding between two jobs that provide equal pay. He compares the health care benefits provided by both jobs to help him make a decision. One job offers a flexible spending account, while the other job offers him managed care. Which statement will help Frankie make a decision?

Accepted Answer

Money in flexible spending accounts is not taxed, so employees get more take-home pay. This is a clear advantage over managed care which does not offer this benefit.

Question 10

Which organizations benefit when switching from a defined-benefit plan to cash balance plans?

Accepted Answer

Organizations with many experienced employees benefit when switching from a defined-benefit plan to cash balance plans because cash balance plans are designed to provide more benefits to employees who are closer to retirement age and have a longer period of service with the organization. Therefore, organizations with many experienced employees can save on the cost of funding the benefits of younger employees and reduce the cost of funding retired employees' benefits by switching to cash balance plans.

Question 11

What is true of short-term disability insurance?

Accepted Answer

Short-term disability insurance pays a portion of a disabled employee's salary as benefits for up to six months. This allows employees to have at least some income while they recover from an illness or injury that prevents them from working temporarily.

Question 12

Jerry loses his job during a layoff at his company. He's worried about not having access to his health insurance benefits anymore. However, his company is required to offer him the same health insurance coverage for up to 36 months following the layoff. Which federal law applies in this scenario?

Accepted Answer

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that employers with 20 or more employees offer continued health insurance coverage to employees who experience a qualifying event, such as a layoff, for up to 36 months. This allows individuals like Jerry to maintain their health insurance coverage even after losing their job.

Question 13

Courtney's employer provides her with an insurance plan that requires her to obtain approval before being admitted to the hospital for surgical procedures. Which variation of health coverage does this illustrate?

Accepted Answer

Managed care plans often require policyholders to obtain pre-approval or referrals before accessing certain medical services, such as hospital admission for surgery. This is done to control costs and ensure that care is provided in a cost-effective manner. Health maintenance organizations (B) are a specific type of managed care plan. Employee wellness (C), flexible spending accounts (D), and consumer-driven health plans (E) do not typically require pre-approval for hospital admissions.

Question 14

Under a 401(k) plan, the ________ is responsible for choosing specific investments.

Accepted Answer

Under a 401(k) plan, the employee is responsible for choosing specific investments. They are usually provided with a range of investment options to choose from, including mutual funds, stocks, bonds, and target-date funds. The employer may also hire a financial institution or ERISA fiduciary advisor to provide investment advice to employees, but ultimately it is the employee's decision on how to allocate their contributions within the plan.

Question 15

During a meeting to discuss ways to cut costs on benefits packages, the vice president of the company, Ian, suggests getting long-term disability insurance for all employees. Patty, the HR manager, disagrees with him, stating that short-term disability coverage is more advantageous for the company. Which of the following supports Patty's statement?

Accepted Answer

Short-term disability plans limit the maximum coverage in a month, which means that they are more affordable for the company. This aligns with Patty's statement that short-term disability coverage is more advantageous for the company to cut costs on benefits packages.

Question 16

Jesse has a health care plan that provides him with coverage that allows him to be involved in making decisions to help lower costs. This plan typically includes insurance with a high deductible, a medical savings account, and ongoing health education. Which type of health care plan is Jesse using?

Accepted Answer

Jesse is using a consumer-driven health plan, which typically includes a high deductible insurance plan, a medical savings account, and ongoing health education. This type of plan allows consumers to be more involved in making decisions about their healthcare and to take a more active role in managing their health and healthcare costs.

Question 17

Rose, a new employee, learns her company provides a group insurance plan that she can enroll in. Her friend, Gary, suggests that Rose would save money if she chooses to purchase an individual insurance plan over the company's group insurance plan. Which statement weakens Gary's argument?

Accepted Answer

This statement directly contradicts Gary's argument that Rose would save money by choosing an individual insurance plan. It highlights the fact that group insurance plans are typically less expensive than individual policies, making them an attractive option for many employees.

Question 18

What is true of a cash balance plan?

Accepted Answer

In a cash balance plan, the money earns interest at a predetermined rate, often linked to rates like those on U.S. Treasury bills.

Question 19

What is an example of a defined-contribution pension plan?

Accepted Answer

A money purchase plan is an example of a defined-contribution pension plan, where employers contribute a fixed percentage of the employee’s salary each year. The amount that accumulates in the employee’s account depends on the performance of the investment choices that the employee made.

Question 20

Which federal law increased the responsibility of pension plan trustees to protect retirees?

Accepted Answer

The Employee Retirement Income Security Act (ERISA) increased the responsibility of pension plan trustees to protect retirees by establishing standards for private sector pension plans and ensuring that they are managed in the best interest of plan participants and beneficiaries. The law requires plan trustees to act prudently and responsibly, diversify plan investments, disclose plan information to participants, and take steps to ensure that plan fiduciaries are not engaging in self-dealing or other prohibited activities.

Quiz 14: Providing Employee Benefits