Question 1

From an employee's perspective, tax deferral is beneficial because:

Accepted Answer

A)  current taxes are increased in return for reduced taxes later 
B)  money can be invested that would ordinarily be paid in current income taxes 
C)  tax rates in the future are guaranteed to be lower 
D)  since tax policy varies, there may be no tax on retirement income in the future 
A)  current taxes are increased in return for reduced taxes later 
B)  money can be invested that would ordinarily be paid in current income taxes 
C)  tax rates in the future are guaranteed to be lower 
D)  since tax policy varies, there may be no tax on retirement income in the future B

Question 2

A cash balance pension plan guarantees the participating employee:

Accepted Answer

A)  nothing 
B)  a minimum interest rate on the employee's retirement savings 
C)  a minimum monthly pension amount for the first 10 years of retirement 
D)  none of the above 
A)  nothing 
B)  a minimum interest rate on the employee's retirement savings 
C)  a minimum monthly pension amount for the first 10 years of retirement 
D)  none of the above B

Question 3

In the year 2012, what is the maximum amount you can contribute to a 401(k) plan per year?

Accepted Answer

A)  10% of your salary 
B)  $10,000 
C)  12.4% of your salary, or, $11,000 (whichever is greater) 
D)  $17,000 
A)  10% of your salary 
B)  $10,000 
C)  12.4% of your salary, or, $11,000 (whichever is greater) 
D)  $17,000 D

Question 4

Carlos and Mary are married, and covered under Carlos' group health plan provided by his employer. Carlos dies. How long can Mary continue her health coverage, according to COBRA provisions?

Accepted Answer

A)  0 months 
B)  18 months 
C)  24 months 
D)  36 months 
A)  0 months 
B)  18 months 
C)  24 months 
D)  36 months

Question 5

The primary purpose of a 401(k) plan is to:

Accepted Answer

A)  save for retirement on a tax-deferred basis 
B)  save for retirement on a tax-free basis 
C)  save for retirement and have your employer match your contributions, all on a tax-free basis 
D)  have a forced savings plan for emergencies 
A)  save for retirement on a tax-deferred basis 
B)  save for retirement on a tax-free basis 
C)  save for retirement and have your employer match your contributions, all on a tax-free basis 
D)  have a forced savings plan for emergencies

Question 6

Which of the following statements about IRAs is false?

Accepted Answer

A)  Annual contributions made to the account are tax-deductible up to certain amounts. 
B)  They earn tax-deferred investment income. 
C)  Only people in certain income categories can make deductible IRA contributions. 
D)  The maximum annual deductible contribution is $4,000 per person. 
A)  Annual contributions made to the account are tax-deductible up to certain amounts. 
B)  They earn tax-deferred investment income. 
C)  Only people in certain income categories can make deductible IRA contributions. 
D)  The maximum annual deductible contribution is $4,000 per person.

Question 7

The monthly fee that HMOs charge employers is called the:

Accepted Answer

A)  capitation payment 
B)  capitation and insurance premium 
C)  insurance premium 
D)  subscription fee 
A)  capitation payment 
B)  capitation and insurance premium 
C)  insurance premium 
D)  subscription fee

Question 8

The face amount of group term life insurance is typically not selectable by the individual employee and therefore can be based on salary.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a characteristic of group insurance?

Accepted Answer

A)  Benefits are individually selected by the employee. 
B)  One master contract is provided to the employer. 
C)  For larger employer groups, there is no medical exam required for coverage. 
D)  Group insurance premiums are lower than comparable individual coverage. 
A)  Benefits are individually selected by the employee. 
B)  One master contract is provided to the employer. 
C)  For larger employer groups, there is no medical exam required for coverage. 
D)  Group insurance premiums are lower than comparable individual coverage.

Question 10

The Family and Medical Leave Act:

Accepted Answer

A)  applies to employers having 15 or more employees 
B)  gives employees the right to have paid leave for the birth of a child 
C)  gives employees the right to have unpaid leave to care for a foster child 
D)  does not require employees to give employers medical evidence of the illness that requires their leave 
A)  applies to employers having 15 or more employees 
B)  gives employees the right to have paid leave for the birth of a child 
C)  gives employees the right to have unpaid leave to care for a foster child 
D)  does not require employees to give employers medical evidence of the illness that requires their leave

Question 11

Suppose you have a 401(k) plan, and you would like to draw the money out when you are age 45. You want the money to send your child to college. What will happen if you draw all the money out and close the account?

Accepted Answer

A)  You will have to pay income taxes on the withdrawal. 
B)  You will have to pay income taxes, plus a tax penalty, on the withdrawal. 
C)  You will receive the money tax-free, since you paid taxes on it when you deposited it. 
D)  You will only have to pay taxes on the amount of money drawn out that represents interest earned on your deposits. 
A)  You will have to pay income taxes on the withdrawal. 
B)  You will have to pay income taxes, plus a tax penalty, on the withdrawal. 
C)  You will receive the money tax-free, since you paid taxes on it when you deposited it. 
D)  You will only have to pay taxes on the amount of money drawn out that represents interest earned on your deposits.

Question 12

Explain the advantages to an employer of a defined benefit pension plan versus a defined contribution pension plan.

Accepted Answer

There are two advantages. 1) The defined

Question 13

The traditional American method of providing retirement and health benefits is best described as a democratic socialist approach.

Accepted Answer

A) True 
 B)False

Question 14

HIPPA applies to group health plans that cover ________ or more employees.

Accepted Answer

A)  2 
B)  15 
C)  20 
D)  50 
A)  2 
B)  15 
C)  20 
D)  50

Question 15

Explain the difference between a PPO and an HMO.

Accepted Answer

HMOs provide health care servi

Question 16

When you are "100% vested" in a pension plan, what does that mean?

Accepted Answer

A)  You own 100% of your contributions, but you do not own the employer's contributions to the plan. 
B)  You own 100% of the employer's contributions, but you do not own your contributions to the plan. 
C)  You own 100% of your contributions to the plan. 
D)  You own 100% of the employer's contributions to the plan. 
A)  You own 100% of your contributions, but you do not own the employer's contributions to the plan. 
B)  You own 100% of the employer's contributions, but you do not own your contributions to the plan. 
C)  You own 100% of your contributions to the plan. 
D)  You own 100% of the employer's contributions to the plan.

Question 17

An integrated disability income plan is one that:

Accepted Answer

A)  limits the amount of coverage to 50 percent of pre-disability take home wage 
B)  coordinates the waiting period with other sick leave and personal leave plans 
C)  requires a participation provision such as 20/80 when paying for eligible expenses 
D)  coordinates the benefits under Social Security and the disability income plan 
A)  limits the amount of coverage to 50 percent of pre-disability take home wage 
B)  coordinates the waiting period with other sick leave and personal leave plans 
C)  requires a participation provision such as 20/80 when paying for eligible expenses 
D)  coordinates the benefits under Social Security and the disability income plan

Question 18

Which of the following is not a characteristic of group insurance provided by an employer?

Accepted Answer

A)  Many persons are covered under one contract. 
B)  Volume discount results in a lower cost for the coverage. 
C)  Evidence of insurability usually is not required. 
D)  Employers cannot require employees to share in the cost. 
A)  Many persons are covered under one contract. 
B)  Volume discount results in a lower cost for the coverage. 
C)  Evidence of insurability usually is not required. 
D)  Employers cannot require employees to share in the cost.

Question 19

Instead of purchasing group health insurance, many employers now self-fund health benefits for their employees. Who normally administers such a self-funded health program?

Accepted Answer

A)  The risk management department 
B)  The human resources department 
C)  State health insurance pools 
D)  A third-party administrator 
A)  The risk management department 
B)  The human resources department 
C)  State health insurance pools 
D)  A third-party administrator

Question 20

Which of the following statements about IRAs is false?

Accepted Answer

A)  Withdrawals made after age 59-1/2 are taxed as ordinary income in the year they are received. 
B)  Only deductible contributions and tax deferred interest paid out during retirement are taxed as income. 
C)  Early withdrawal from an IRA causes a 20% tax penalty to be incurred. 
D)  Withdrawal of IRA funds must begin by age 70-1/2. 
A)  Withdrawals made after age 59-1/2 are taxed as ordinary income in the year they are received. 
B)  Only deductible contributions and tax deferred interest paid out during retirement are taxed as income. 
C)  Early withdrawal from an IRA causes a 20% tax penalty to be incurred. 
D)  Withdrawal of IRA funds must begin by age 70-1/2.

Exam 19: Employee Benefits

From an employee's perspective, tax deferral is beneficial because:

A cash balance pension plan guarantees the participating employee:

In the year 2012, what is the maximum amount you can contribute to a 401(k) plan per year?

Carlos and Mary are married, and covered under Carlos' group health plan provided by his employer. Carlos dies. How long can Mary continue her health coverage, according to COBRA provisions?

The primary purpose of a 401(k) plan is to:

Which of the following statements about IRAs is false?

The monthly fee that HMOs charge employers is called the:

The face amount of group term life insurance is typically not selectable by the individual employee and therefore can be based on salary.

Which of the following is not a characteristic of group insurance?

The Family and Medical Leave Act:

Suppose you have a 401(k) plan, and you would like to draw the money out when you are age 45. You want the money to send your child to college. What will happen if you draw all the money out and close the account?

Explain the advantages to an employer of a defined benefit pension plan versus a defined contribution pension plan.

The traditional American method of providing retirement and health benefits is best described as a democratic socialist approach.

HIPPA applies to group health plans that cover ________ or more employees.

Explain the difference between a PPO and an HMO.

When you are "100% vested" in a pension plan, what does that mean?

An integrated disability income plan is one that:

Which of the following is not a characteristic of group insurance provided by an employer?

Instead of purchasing group health insurance, many employers now self-fund health benefits for their employees. Who normally administers such a self-funded health program?

Which of the following statements about IRAs is false?

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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