Compensation and Benefits Flashcards
Act that determined that older workers may not be discriminated against by performance-based pay systems.
Age Discrimination in Employment Act (ADEA), 1967
Practice where an un-contracted medical provider bills a patient for all charges not paid for by the patient’s insurance plan, even if those charges are above the plan’s usual and customary rate or are considered medically unnecessary.
Balance billing
Basic compensation an employee receives, usually as a wage or salary.
Base pay
Combining several salary grades or job classifications with narrow pay ranges into one band with a wider spread.
Broad-banding
Pay that employees receive when they are called back for an extra shift in the same workday.
Call-back pay
Type of health-care plan in which the physician is paid on a per capita (per head) basis rather than for actual treatment provided.
Capitated health-care plan
Form of defined benefit plan that defines the promised benefit in terms of a hypothetical account balance and features benefit portability.
Cash balance plan
Allows a publicly traded company to take back previous executive incentive-based compensation in specific circumstances.
Clawback provision
Payment made to salespeople, usually calculated as a percentage of sales.
Commission
Concept that states that jobs requiring comparable skills, effort, responsibility, and working conditions filled primarily by women should have the same job classification and salary as similar jobs filled by men.
Comparable worth
Pay rate divided by the midpoint of the pay range.
Compa-ratio
Reflect the dimensions along which a job is perceived to add value to the organization; used to determine which jobs are worth more than others.
Compensable factors
Act that provides individuals and dependents who may lose medical coverage with opportunity to pay to continue coverage.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Instrument that measures change over time for costs of a group of goods and services
Consumer price index (CPI)
Healthcare options intended to help employers better control costs while allowing employees to make more decisions about their health care.
Consumer-directed health care
Eliminates the duplication of payments when an employee, spouse, or dependents have health coverage under two or more plans.
Coordination of benefits
Specified percentage (typically 20% to 30%) of covered medical expenses that employee pays or fixed dollar amount that covered person pays each time he or she visits a physician or purchases prescription drugs.
Copayment
Act that prohibits federal contractors from receiving kickbacks from employees or subcontractors for wages earned on federal projects.
Copeland “Anti-Kickback Act, 1934
Periodic compensation payment given to eligible employees regardless of their performance or organizational profitability; usually linked to inflation.
Cost-of-living adjustment (COLA)
Trust created exclusively for the purpose of paying the qualified education expenses of a designated beneficiary.
Coverdell Education Savings Account (ESA)
Act that established prevailing wage and benefit requirements for contractors on federally funded construction projects in excess of over $2,000.
Davis-Bacon Act, 1931
Initial amount of covered medical expenses an individual must pay before receiving paid benefits under a health-care plan.
Deductible
Plan that provides income to employees at some future time as compensation for work performed now.
Deferred compensation
Plan that promises employee a retirement benefit amount based on a formula.
Defined benefit plan
Plan in which the employer and sometimes the employee make an annual payment to the employee’s retirement plan account.
Defined contribution plan
Pay that is based on when the employee works (e.g., overtime pay, shift-pay differential) or where the employee works.
Differential pay
Pay that is received by an employee, including based pay, differential pay, and incentive pay.
Direct compensation
Law that calls for fundamental changes in executive compensation disclosure, compensation committee independence, shareholder voting rights, and clawback provisions in publicly traded companies.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Amount advanced on future commissions
Draw
Career development programs that identify meaningful career paths for professional and technical people whose preferences may be outside traditional management roles.
Dual career ladders
Act that adjusts minimum vesting schedules, increasing retirement plan compensation and contribution limits, permits, catch-up contributions by participants age 50 or older in certain retirement plans, and modifies distribution and rollover rules.
Economic Growth and Tax Relief Reconciliation Act (EGTRRA)
Extra pay that employees receive when they are called into work during an emergency (e.g, a power outage)
Emergency-shift pay
Amendment to the Portal-to-Portal Act; clarifies that commuting time is not paid working time.
Employee Commuting Flexibility Act
Act that established uniform minimum standards for employer-sponsored retirement and health and welfare benefit programs.
Employee Retirement Income Security Act (ERISA), 1974
Stock plan structured as a form of ERISA-governed qualified retirement plan.
Employee stock-ownership plan (ESOP)
Workers who are covered b Fair Labor Standard Act regulations as determined by the IRS.
Employees
Act that prohibits wage discrimination by requiring equal pay for equal work.
Equal Pay Act (EPA)
Work having equal skills, equal effort, equal responsibility, and similar working conditions, all performed at the same location.
Equal work
Non-qualified deferred compensation plans that provide benefits to selected management or highly compensated employees beyond Section 415 limitations.
Excess deferral plans
Amount of employer-provided group-term life insurance over $50,000.
Excess group-term life insurance
Plan in which participants must use providers in the network of coverage or no payment will be made.
Exclusive provider organization (EPO)
Employees who are excluded from FLSA minimum wage and overtime requirements.
Exempt employees
Traditional term used to describe persons who live in one country and are employed by an organization based in another country.
Expatriates
Rating system that bases insurance rates on claims history.
Experience rating
Written statement provided by an insurance provider indicating what portion of a benefit claim was paid to the health-care provider and what portion of the payment, if any, the individual is responsible for.
Explanation of benefits (EOB)
When and organization’s pay rates are at least equal to market rates.
External equity
Act that provided certain legal protections for spousal beneficiaries of qualified retirement plans.
Retirement Equity Act (REA)
Job comparison method that ranks each job by each selected compensable factor and then identifies dollar values to develop a pay rate.
Factor comparison method
Act that regulates employee status, overtime pay, child labor, minimum wage, record keeping, and other administrative concerns.
Fair Labor Standards Act (FLSA)
Act that provides employees with up to 12 weeks of unpaid leave to care for family members or because of a serious health condition of the employee.
Family and Medical Leave Act (FMLA)
In these type of profit-sharing plans, the employer contributes a percentage of profits to employee accounts in a qualified, tax-deferred retirement plan.
Deferred profit-sharing plans
Private, not-for-profit body that decides how public financial executives should report their firm’s financial information to their shareholders.
Financial Accounting Standard Board (FASB)
Qualified tuition plan that provides families a federal tax-free way to save money for college.
529 plan
Employer-funded plan that reimburses employees only for eligible and substantiated health-care expenses.
Health reimbursement account (HRA)
Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as single-rate pay.
Flat-rate pay
Type of Section 125 plan that allows employee to use pretax dollars to pay for out-of-pocket health and dependent-care expenses.
Flexible spending account (FSA)
Plans that allow employee to make tax-free favored pay deferrals toward retirement savings through a payroll deduction plan.
401 (k) plan
Plans that allow employees of certain tax-exempt organizations to contribute pretax dollars toward retirement savings.
403 (b) plan
Plans that allow employee of states, political subdivisions or agencies of states, and certain tax-exempt organizations to defer receipt of wages.
457 plans
Listing of grouped data, from lowest to highest.
Frequency distribution
Shows the number of people or organizations associated with data organized in a frequency distribution.
Frequency table
Type of 125 plan that allows employees to choose from a menu of benefits and allocate pretax dollars to pay for those benefits.
Full cafeteria plan.
Health-care plan in which the employer pays a third-party insurance carrier premiums that cover medical insurance charges, administrative costs, sales commissions, taxes, and profits.
Fully insured health-care plan.
Group incentives where a portion of the gains an organization realizes from group efforts is shared with the group.
Gainsharing plans.
Individual, usually a primary-care physician, who is given control of patient access to specialists and services in a managed care organization.
Gatekeeper
Pay increase given to all employee (or a class of employees such as office or production workers) based on local competitive market requirements; awarded regardless of employee performance.
General pay increase
Act that prohibits discrimination against individuals on the basis of their genetic information in both employment and health insurance.
Genetic Information Act (GINA)
Pay based on where an employee works
Geographic differential pay
System of overlapping short- and long-term incentives to make it less likely that key employee will leave an organization.
Golden handcuffs
System by which qualified retirement plan participants become incrementally vested over a period of years of service.
Graded vesting
Clauses written into executive contracts that provide special payments to key executives who might lose their position or be otherwise disadvantaged if another organization took control through a merger or acquisition.
Parachutes; also known as golden parachutes
Account providing tax-free income growth; contributions are made with after-tax dollars.
Roth IRA
Total earning before taxes; include regular wages plus additional earning such as tips, bonuses and overtime pay.
Gross earning
Situation where an employee’s pay is below the minimum of the range.
Green-circle rates
Pay earned by employees who work in an environment that is considered more risky from a safety or health point of view.
Hazard pay
Act that made changes to ERISA, the Internal Revenue Code, the Public Health Service Act, and COBRA to improve health-care coverage portability and accessibility and provide medical record privacy and security.
Health Insurance Portability and Accountability Act (HIPAA), 1996
Purchases health-care plans for large groups of employers to provide small organizations the economic advantages large organizations have.
Health insurance purchasing cooperative (HIPC)
Tax-sheltered savings account similar to an IRA but created primarily to pay for medical expense
Health savings account (HSA)
Determined by an array of issues such as business ownership and/or salary.
Highly compensated employee (HCE)
Form of base pay that is dependent on the number of hours worked.
Hourly wage
Form of direct compensation where employers pay for performance beyond normal expectations to motivate employees to perform at higher levels.
Incentive pay.
Full-choice health plan that allows covered employees to go to any qualified physician or hospital and submit claims to the insurance company; also known as fee-for-service health-care plan.
Indemnity health-care plan
Workers who are not covered by Fair Labor Standard Act regulations as determined by the IRS.
Independent contractors
Jobs used as reference points when setting up a job classification system and when designing or modifying a pay structure.
Benchmark jobs
Compensation commonly referred to as benefits.
Indirect compensation
Tax-deferred accounts to which wage earners can contribute an amount up to a yearly maximum.
Individual retirement accounts (IRAs)
Traditional term used to describe employee brought in from another country to work in the headquarters country for a specific period.
Inpatriates
Requires participants to complete a specific number of years of service with an employer before they get any vested benefits, after which they are 100% vested.
Cliff vesting
Occurs when people feel that performance or job differences result in corresponding differences in pay rates.
Internal equity
Umbrella term used to describe anyone on a global posting.
International assignee (IA)
Bilateral social security agreements that coordinate the U.S. Social Security program with the comparable programs of other countries; also known as totalization agreements.
International social security agreements
Payroll deductions such as tax levies and court-ordered child support that an employee must pay
Involuntary deductions
Evaluation method that groups jobs into a predetermined number of grades or classifications, each having a class description to use for job comparisons.
Job classification
Systematic determination of the relative worth of jobs within an organization.
Job evaluation
Evaluation method that establishes a hierarchy of jobs from lowest to highest based on overall importance to the organization.
Job ranking
Maximum dollar amount of covered medical expenses that a health-care plan will pay on behalf of any covered person during that person’s lifetime.
Lifetime maximum benefit
Act that creates a rolling time frame for filing wage discrimination claims and expands plaintiff field beyond employee who was discriminated against.
Lilly Ledbetter Fair Pay Act
Concept that states that employees must be able to influence the attainment of a goal and see a direct result of their efforts in order for incentive pay plans to be effective.
Line of sight
Insurance coverage that provides a daily monetary benefit to people who are chronically ill and who require living assistance wither at hoe or in residential facility.
Long-term care insurance
Replaces a portion of employee’s lost income after short-term disability coverage ends.
Long-term disability (LTD) coverage
One-time payment made to an employee; also called performance bonus.
Lump-sum increase (LSI)
General term for a medical plan that seeks to ensure that the treatments a person receives are medically necessary and provided in a cost-effective manner.
Managed care
Method similar to job evaluation systems that evaluates jobs based upon their market value.
Market-based evaluation
Correlate pay with time spent in a professional field such as teaching or research.
Maturity curves
Middle point above and below which 50% of scores in a set of data lie.
Median
Involves traveling to hospitals and health-care providers that are outside an employer’s local area of network; also called medical travel.
Medical tourism
Social Security Administration program that provides medical care for people over age 65.
Medicare
Health plan where benefits are reduced for employees eligible for Medicare; Medicare becomes the primary provider.
Medicare carve-out
Health plan that covers specific expenses not covered by Medicare.
Medicare supplement
Act that addresses parity between mental heath benefits and medical benefits.
Mental Health Parity Act (MHPA)
Situation where an individual’s performance is the basis for the amount and timing of pay increases; also called performance-based pay.
Merit pay
Minimum hourly amount, determined by Congress, that nonexempt employees can be paid.
Minimum wage
Value that occurs most frequently in a set data.
Mode
Offered to employees who are on leave for injuries under FMLA; job tasks are modified to meet the employee’s restrictions.
Modified-duty programs
Plans in which employers make mandatory payments (a fixed percentage of an eligible employee’s compensation) to a retirement plan.
Money purchase plans
Organizations with operations in multiple countries.
Multinational enterprises (MNEs)
In health plans, requires a secondary carrier to reimburse only up to the level of reimbursement the primary carrier would have paid.
Non-duplication of benefits
Employees covered under FLSA regulations, including minimum wage and overtime pay requirements.
Nonexempt employees
Income deferral benefit offered to a select group of management or highly compensated employees in the organization.
Non-qualified deferred compensation plan
Act that amended ADEA to include all employee benefits; also provided terminated employees with time to consider group termination or retirement programs and consult an attorney.
Older Worker’s Benefit Protection Act (OWBPA)
Pay that employees receive when they can be called in to work but are not working before receiving the call to return to work.
On-call pay
Stated amount out of pocket the insured can pay for medical costs in a 12-month period before copayments end.
Out-of-pocket maximum
Required for nonexempt workers under FLSA at 1.5 times the regular rate of pay for hours over 40 in a workweek.
Overtime pay
Large bank of time comprising all of an employee’s paid time off (i.e., vacation, sick leave, and holidays) that the employee can use as he or she sees fit.
Paid-time-off (PTO) bank
Occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority; also know as salary compression.
Pay compression
Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as flat-rate pay.
Single-rate pay
Used to group jobs that have approximately the same relative internal or external worth and are paid at the same rate or within the same pay range.
Pay grades
Job ranking method in which evaluator compares each job with every other job being evaluated.
Paired-comparison method
Set the upper and lower bounds of possible compensation for individuals whose jobs fall in a pay grade.
Pay ranges
Collect information on prevailing market rates and include topics such as incentive plans, overtime pay, and base pay.
Pay surveys
Act that changed the laws that affected defined benefit plans, defined contribution plans, individual retirement accounts, and other issues related to retirement planning.
Pension Protection Act (PPA), 2006
One-time payment made to an employee; also called a lump-sum increase.
Performance bonus
Situation where an individual’s performance is the basis for the amount and timing of pay increases; also called merit pay.
Performance-based pay
Situation in which employee pays a portion of the required monthly premium for health-care coverage.
Premium sharing
“In place of parent”; term used in expansion of FMLA coverage to employees who stand in place of a parent with day-to-day responsibilities to care for and financially support a child or who have a day-to-day responsibility to care for or financially support a person who stood in loco parentis for them.
In loco parentis
Special privileges for executive characteristics, rather than the job, determine pay.
Perquisites
Pay system in which employee characteristics (skills, knowledge), rather than the job, determine pay.
Person-based pay
Consists of hospital and physician practices that merge into vertically integrated structures.
Physician hospital organizations (PHOs)
Most commonly used method of job evaluation; involves using specific factors to evaluate job worth.
Point-factor method
Combination of a PPO and an HMO; provide direct access to specialists.
Point-of-service (POS) organizations
Act that defines what is included as hours worked and is therefore compensable and a factor in calculating overtime.
Portal-to-Portal Act, 1947
Set of benefits provided to employees who are terminated for some reason other than cause.
Severance package
Medical conditions that existed before a health-care policy is taken out.
preexisting conditions
Formed by an insurance company, an employer or a group of employers who negotiate discounted fees with networks of health-care providers; in return, the employers guarantee a certain volume of patients.
Preferred provider organizations (PPOs)
Type of Section 125 plan that allows employees to pay for certain qualified benefits with pretax dollars.
Premium-only plan (POP)
Rulings issued by the IRS to specific taxpayers or organizations that request an interpretation of the law.
Private-letter rulings
Pay based on the quantity of work and outputs that can be accurately measured.
Productivity-based pay
Plans that distribute a portion of an organization’s profits to its employees.
Profit sharing plans
Stated that an ERISA plan fiduciary has legal and financial obligations not to take more risks when investing employee benefit program funds than a reasonably knowledgable, prudent investor would under similar circumstances.
Prudent person rule
Retirement benefit offered to all employees in the organization; provides tax advantages and is protected under Employee Retirement Income Security Act.
Qualified deferred compensation plan
Create or recognize the right of an alternative payee to receive all or a portion of the benefits under a retirement plan.
Qualified domestic relations orders (QDROs)
Under COBRA, an event such as termination for reasons other than gross misconduct, that allows employees to continue their group health-care coverage for a specified period of time.
Qualifying event
Grantor trust designated to segregate non-qualified deferred compensation benefits from an employer’s general accounts.
Rabbi trust
Reimbursement standard used by insurance companies to determine how much providers should be paid for their services.
Reasonable and customary
Describe situations where employees’ pay is above the range maximum.
Red-circle rates
Traditional term referring to employees who have returned home from international assignments.
Repatriates
Pay provided to employees who report for work as scheduled but then find no work is available.
Reporting pay
Act that provided certain legal protections for spousal beneficiaries of qualified retirement plans.
Retirement Equity Act (REA)
Act that added Sections 125 and 401 (k) to the Tax Code.
Revenue Act
Rulings published by the IRS as general guidelines to all taxpayers or organizations.
Revenue rulings
Plans that allow after-tax contributions to existing 401 (k) or 403 (b) plans
Roth 401(k) / 403(b) plans
Account providing tax-free income growth; contributions are made with after-tax dollars.
Roth IRA
Uniform amount of money paid to a worker regardless of how many hours are worked.
Salary
Occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority; also known as pay compression.
Salary compression
Act that requires administrators of defined contribution plans to provide notice of blackout periods; provides whistleblower protection for employees.
Sarbanes-Oxley Act (SOX), 2002
Retirement plan by which employees can contribute each year to a 401(k) plan or IRA.
Savings Incentive Match Plan for Employees (SIMPLE)
Written benefit plans maintained by the employer that allow employees to use pretax dollars to pay for certain benefits.
Section 125 benefit plans
Health-care plans in which the employer takes on the role of the insurance company and assumes some or all the risk.
Self-funded health-care plan
System that allows preference to employees with the longest service.
Seniority
As defined in DOL regulations, a condition that involves employee incapacity for more than three calendar days plus “two visits to a health-care provider.”
Serious health condition
Supplemental pay period to employees who work less-desirable hours, such as as second or third shifts.
Shift pay
Replaces a portion of lost income for a specified period of time for employees who are ill or have non work-related injuries.
Short-term disability (STD) coverage
Extra pay for working holidays or vacation days.
Premium pay.
Form of health care that provides services for a fixed period on a prepaid basis.
Health maintenance organizations (HMOs)
Specified period of time during which employees are ill or have nonwork-related injuries receive their full salary.
Sick leave
Tax-deferred account to which the self-employed and employees of very small businesses can contribute.
Simplified Employee Pension (SEP)
Provides each incumbent of a job with the same rate of pay, regardless of performance or seniority; also known as flat-rate pay.
Single-rate pay
Social Security Administration program that provides retirement, disability, death, and survivor’s benefits.
Social Security
Insurance policy that protects employers with partially self-funded insurance plans by limiting individual and group-wide claims.
Stop-loss coverage
Identified time period and ending point in incentive pay plans.
Sunset clause
Benefits paid to unemployed workers beyond required government unemployment benefits.
Supplemental unemployment benefits (SUB)
Pay beyond base salary or wages such as bonuses and commissions.
Supplemental wages
Set up by ERISA to insure payment of benefits in the event that a private-sector defined benefit pension plan terminates with insufficient funds to pay the benefits.
Pension Benefit Guaranty Corporation (PBGC)
Act that changed the laws that affected defined benefit plans, defined contribution plans, individual retirement accounts, and other issues related to retirement planning.
Pension Protection Act (PPA)
One-time payment made to an employee; also called a lump-sum increase.
Performance bonus
Situation where an individual’s performance is the basis for the amount and timing of pay increases; also called merit pay.
Performance-based pay
Organization-wide incentive plans in which funds are made available for incentive awards based on predetermined criteria and standards.
Performance-sharing plans
Special privileges for executive characteristics, rather than the job, determine pay.
Perquisites
Pay system in which employee characteristics, rather than the job, determine pay.
Person-based pay
Consists of hospital and physician practices that merge into vertically integrated structures.
Physician hospital organizations (PHOs)
Most commonly used method of job evaluation; involves using specific factors to evaluate job worth.
Point-factor method
Situation in which employee pays a portion of the required monthly premium for health-care coverage.
Premium sharing
Type of Section 125 plan that allows employees to pay for certain qualified benefits with pretax dollars.
Premium-only plan (POP)
Medical conditions that existed before a health-care policy is taken out.
preexisting conditions
Formed by an insurance company, an employer or a group of employers who negotiate discounted fees with networks of health-care providers; in return, the employers guarantee a certain volume of patients.
Preferred provider organizations (PPOs)
Rulings issued by the IRS to specific taxpayers or organizations that request an interpretation of the law.
Private-letter rulings
Pay based on the quantity of work and outputs that can be accurately measured.
Productivity-based pay
Plans that distribute a portion of an organization’s profits to its employees.
Profit sharing plans
Stated that an ERISA plan fiduciary has legal and financial obligations not to take more risks when investing employee benefit program funds than a reasonably knowledgable, prudent investor would under similar circumstances.
Prudent person rule
Retirement benefit offered to all employees in the organization; provides tax advantages and is protected under Employee Retirement Income Security Act.
Qualified deferred compensation plan
Create or recognize the right of an alternative payee to receive all or a portion of the benefits under a retirement plan.
Qualified domestic relations orders (QDROs)
Under COBRA, an event such as termination for reasons other than gross misconduct, that allows employees to continue their group health-care coverage for a specified period of time.
Qualifying event
Grantor trust designated to segregate non-qualified deferred compensation benefits from an employer’s general accounts.
Rabbi trust
Reimbursement standard used by insurance companies to determine how much providers should be paid for their services.
Reasonable and customary
Advantages of person-based system pay.
- works best where skill/knowledge levels are well defined
- encourages a flexible and better-trained workforce
- may reduce need for specialists
- allows for the use of work teams that are highly interdependent
Describe situations where employees’ pay is above the range maximum.
Red-circle rates
Traditional term referring to employees who have returned home from international assignments.
Repatriates
Combination of a PPO and an HMO; provide direct access to specialists.
Point-of-service (POS) organizations
Pay provided to employees who report for work as scheduled but then find no work is available.
Reporting pay
Set up by ERISA to insure payment of benefits in the event that a private-sector defined benefit pension plan terminates with insufficient funds to pay the benefits.
Pension Benefit Guaranty Corporation (PBGC)
Act that reduced compensation limits in qualified retirement programs.
Omnibus Budget Reconciliation Act (OBRA), 1993.
Plans that allow after-tax contributions to existing 401 (k) or 403 (b) plans
Roth 401(k) / 403(b) plans
Uniform amount of money paid to a worker regardless of how many hours are worked.
Salary
Retirement plan by which employees can contribute each year to a 401(k) plan or IRA.
Savings Incentive Match Plan for Employees (SIMPLE)
Written benefit plans maintained by the employer that allow employees to use pretax dollars to pay for certain benefits.
Section 125 benefit plans
Act that regulated “insider trading”
Securities and Exchange Act
Health-care plans in which the employer takes on the role of the insurance company and assumes some or all the risk.
Self-funded health-care plan
System that allows preference to employees with the longest service.
Seniority
As defined in DOL regulations, a condition that involves employee incapacity for more than three calendar days plus “two visits to a health-care provider.”
Serious health condition
Act that extended prevailing wage rate and benefit requirements to employers providing services under federal government contracts in excess of $2,500.
Service Contract Act, 1965.
Set of benefits provided to employees who are terminated for some reason other than cause.
Severance package
Supplemental pay period to employees who work less-desirable hours, such as as second or third shifts.
Shift pay
Act that made changes to rules regarding the ability of tax-exempt organizations to institute retirement plans modeled after 401(k) and IRA accounts and simplified the definition of highly compensated employees.
Small Business Job Protection Act (SBJPA)
Social Security Administration program that provides retirement, disability, death, and survivor’s benefits.
Social Security
Which legislation deters discrimination compensation practices in the workplace and ensures that when discrimination does occur wronged employees can receive fair compensation?
a. ) Equal Pay Act
b. ) Lilly Ledbetter Fair Pay Act
c. ) Dodd-Frank Wall Street Reform and Consumer Protection Act
d. ) IRS Intermediate Sanctions
b.) Lilly Ledbetter Fair Pay Act, 2009
Under the Ledbetter Act, the statute of limitations resets (180 days) as the employer issues each allegedly discriminatory paycheck.
Insurance policy that protects employers with partially self-funded insurance plans by limiting individual and group-wide claims.
Stop-loss coverage
Identified time period and ending point in incentive pay plans.
Sunset clause
Benefits paid to unemployed workers beyond required government unemployment benefits.
Supplemental unemployment benefits (SUB)
Pay beyond base salary or wages such as bonuses and commissions.
Supplemental wages
Tax-deferred account to which the self-employed and employees of very small businesses can contribute.
Simplified Employee Pension (ESP)
Specified period of time during which employees are ill or have nonwork-related injuries receive their full salary.
Sick leave
All remuneration for services (including noncash benefits) that is taxable when paid.
Taxable wages
Act that created tax-advantaged savings mechanisms.
Taxpayers Relief Act (TRA), 1997
Pay rates that are affected by when an employee works.
Time-based differential pay
System in which pay is based on longevity in the job and pay increases occur on a predetermined schedule.
Time-based step-rate pay
Non-qualified deferred compensation plan that provides retirement benefits to select group of management or highly compensated employees.
Top hat plan
It provides retirement, disability, death, and survivor’s benefits. It is a work-related program, not public assistance, and covers most U.S. employees with the exception of the clergy and some workers in the public sector.
Social Security
Bilateral social security agreements that coordinate the U.S. Social Security program with the comparable programs of other countries; also known as international social security agreements.
Totalization agreements
Typically paid to nonexempt workers for the time they spend traveling to or between work assignments.
Travel pay
Describes a stock option when the stock’s current market value is less than the option’s exercise price.
Underwater
Mandatory benefit program set up as part of the Social Security Act designed to provide employees with some income when they lose their jobs through no fault of their own.
Unemployment insurance
Act that protects employment, reemployment, and retention rights for persons who voluntarily or involuntarily serve or have served in the uniformed services.
Uniformed Services Employment and Reemployment Rights Act (USERRA)
Raw average of data that gives equal weight to all factors, with no regard to individual factors such as the number of incumbents or organizations.
unweighted average
Audit of health-care use and charges to identify which benefits are used and to make certain that care is necessary and costs are in line.
Utilization review
Process by which a retirement benefit becomes non-forfeitable.
Vesting
Payroll deductions selected by the employees such as charitable contributions.
Voluntary deductions
Act that extended concept of prevailing wage to employers who manufacture or supply goods under government on projects exceeding $10,000 each, and required time and a half be paid for workers working over 40 hours in a workweek.
Walsh-Healey Act, 1936.
How long is COBRA continues after the employee’s termination of employment for gross misconduct?
0
Average of data that takes other factors such as the number of incumbents into account.
Weighted average
Tax credit to encourage employers to hire people from targeted groups.
Work Opportunity Tax Credit (WOTC)
Full-choice health-care plan that allows covered employees to go to any qualified physician or hospital and submit claims to the insurance company; also know as indemnity health-care plan.
Free-for-service-care plan
Physical condition (accident or illness) that is caused, aggravated, precipitated, or accelerated by work activity or the work environment.
Work-related disability
Any fixed, recurring period of 168 consecutive hours (7 days times 24 hours = 168 hours)
Workweek
Which of the following statements is true under the provisions of the Fair Labor Standard Act?
a. ) Public employee may elect to accumulate comp time rather than be paid in cash for overtime.
b. ) Private employers cannot limit the number of hours an employee works based on age.
c. ) Severance and vacation pay are regulated by the FLSA.
d. ) FLSA regulations take precedence over state regulations with regard to minimum wage when state wages are higher.
a.) Public employee may elect to accumulate comp time rather than be paid in cash for overtime.
When calculating overtime, the employer must include the time for an employee who:
a. ) spends two hours at home, waiting for a call to report to work
b. ) arrives one hour early for the shift and waits in the break-room
c. ) arrives at 08:00 as scheduled but cannot begin work because the needed delivery doesn’t arrive until 10:00
d. ) must commute one hour each way from home to the plant
c.) arrives at 08:00 as scheduled but cannot begin work because the needed delivery doesn’t arrive until 10:00
A system used to identify compensable factors, uses a standardized set of compensable factors such as know-how, problem solving, and accountability.
The Hay Plan, or Guide Chart-Profile method.
Under FLSA, which of the following employees must be paid overtime?
a. ) A janitor who worked 30 hours during the workweek and was paid for 12 hours of vacation time.
b. ) A vice president in charge of operations who worked 50 hours in a week
c. ) A nonexempt employee who worked 45 hours in a week
d. ) A security guard who worked 40 hours, including 10 hours on a holiday.
c.) A nonexempt employee who worked 45 hours in a week
Under FLSA, all nonexempt workers must be paid overtime pay - 1.5 times their regular rate of pay for hours worked in excess of 40 in any workweek.
Which of the following acts requires organizations holding federal construction contracts to pay laborers and mechanics the prevailing wage of the employees in the locality where the work is performed:
a. ) Davis-Bacon Act
b. ) Walsh-Healey Act
c. ) Copeland Act
d. ) Fair Labor Standard Act
a.) Davis-Bacon Act
The Davis-Bacon Act requires contractors and subcontractors on certain federally funded or assisted construction projects in excess of $2,000 each in the U.S. to pay wages and fringe benefits at least equal to those prevailing in the geographic area where the work is performed.
The law applies to laborers and mechanics; trainees and apprentices may be paid less.
Which of the follwoing issues is NOT a consideration when determining equal work under the Equal Pay Act?
a. ) Skills
b. ) Gender
c. ) Effort
d. ) Responsibility
b.) gender
Equal work is defined by equal skills, equal effort, equal responsibility, and similar working conditions in the same establishment.
This type of managed health-care plan contracts with individual practices associations (IPAs) - groups of physicians in private practice who provide some services.
Group model HMOs.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, publicly traded companies are required to
a. ) disclose the compensation of certain executives to shareholders
b. ) provide shareholders with a copy of the organization’s compensation philosophy
c. ) demonstrate that pay discrepancies between executives and rank–and-file employees are grounded in statistical analysis.
d. ) pay an excise tax on erroneously awarded incentives-based compensation paid to executives.
a.) As a result of Dodd-Frank, the SEC will set forth rules under which a publicly traded company must disclose executive packages, the company’s financial performance, and the total compensation for the CEO as compared to the median of all the company’s compensation packages when excluding the CEO’s (the “rank-and-file” median)
How long is COBRA continues after the employee’s termination of employment due to reduction in hours?
18 months
Which legislation deters discrimination compensation practices in the workplace and ensures that when discrimination does occur wronged employees can receive fair compensation?
a. ) Equal Pay Act
b. ) Lilly Ledbetter Fair Pay Act
c. ) Dodd-Frank Wall Street Reform and Consumer Protection Act
d. ) IRS Intermediate Sanctions
b.) Lilly Ledbetter Fair Pay Act, 2009
Under the Ledbetter Act, the statute of limitations resets (180 days) as the employer issues each allegedly discriminatory paycheck.
Which of the following acts sets minimum wages, child labor standards, and overtime provisions for workers?
a. ) Davis-Bacon Act
b. ) Walsh-Healey Act
c. ) Copeland Act
d. ) Fair Labor Standard Act
d.) Fair Labor Standard Act, 1938 is commonly referred to as the Wage and Hour Law.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, publicly traded companies are required to
a. ) disclose the compensation of certain executives to shareholders
b. ) provide shareholders with a copy of the organization’s compensation philosophy
c. ) demonstrate that pay discrepancies between executives and rank–and-file employees are grounded in statistical analysis.
d. ) pay an excise tax on erroneously awarded incentives-based compensation paid to executives.
a.) As a result of Dodd-Frank, the SEC will set forth rules under which a publicly traded company must disclose executive packages, the company’s financial performance, and the total compensation for the CEO as compared to the median of all the company’s compensation packages when excluding the CEO’s (the “rank-and-file” median)
FLSA compliance requirements
The FALSA applies to organizations with employees who:
- Engage in interstate commerce
- Produce goods for interstate commerce
- Handle, sell, or work on goods or materials that have been moved in or produced for interstate commerce.
Employers who are in violation of a child labor law could be subject to a civil money penalty of:
a. ) $11,000
b. ) $25,000
c. ) Up to $10,000
d. ) $1,100 for each employee
a.) $11,000
Employers may be subject to a civil money penalty (CMP) of up to $11,000 for each employee who is the subject to child labor violation.
Examples of Direct Compensation.
- Base pay/wages
- Differential pay
- short-term and long-term incentive pay
- Commissions and bonuses
- Pay programs for selected employees, such as sales and professors
- Recognition and achievement awards (Cash)
It is concerned with the value of a job to the organization.
Job Evaluation.
Job Evaluation Methods
- non-quantitative
- quantitative
What is the intent of profit-sharing plans?
to allow employees to “partner” with management and reap the direct benefits of profitability.
Penalties for violating Copeland’s Anti-Kick Back Act.
The criminal and civil penalties include a maximum five-year prison term, a $5,000 fine, or both.
Name two examples of systems used to identify compensable factors.
- The Hay Plan or Guide Chart-Profile method
- The Factor Evaluation System (FES)
What can an HR benefit managers do to keep health-care costs down.
- Change the delivery system
- Let employees choose
- Redesign the policies
- Promote prevention and wellness
- Conduct careful reviews
- Undertake a utilization review
- Consider medical tourism
As part of conducting a benefit plan needs assessment, the HR professional has looked at the organization’s business strategy and compensation philosophy. What is the NEXT step that should be taken?
a. ) Look at market conditions to see what benefits competitors offer
b. ) Determine which benefits should be included in the plan
c. ) Conduct a utilization review to determine how benefits are used
d. ) Determine employees needs with regard to benefits.
d.) The end result of the needs assessment should be that the benefits provided match the overall organizational strategies, support the organization’s mission and vision, and meet employee needs.
How is the Unemployment Insurance financed?
Employers pay a federal tax of 6.2% o the first $7,000 earned by each worker. The money is held in a federal trust, with each state having its own account. If all state unemployment insurance is current, employers usually receive a 5.4% credit and the remaining .8% go to the federal government.
In addition, most states have state unemployment taxes. All states allow for an experience rating. As a result, tax rates may vary from as low as 1% to as high as 10%.
Overtime exceptions in the Walsh-Healey Act.
The Defense Authorization Bill of 1986, excluded federal contractors from overtime pay requirements after eight hours of work in a day. In this case, time and a half must be paid only for hours in excess of 40 per week.
If an employer determines that the FMLA medical certification is incomplete or insufficient, how many days does the employee have to “cure” the deficiency.
If the FMLA medical certification is incomplete or insufficient, the employer is required to designate, in writing, what information is missing. The employee has seven (7) days to cure the deficiency.
Which of the following employer-paid benefits would an employee receive tax-free?
a. ) Ten days of sick leave at 100% of original salary
b. ) $1,500 for taking a computer class at the community college
c. ) $500 award for a labor-saving suggestion
d. ) two weeks of paid vacation
b.) Educational expense reimbursements (up to annual statutory limits) are considered a nontaxable indirect compensation.
How long is COBRA continues after the employee’s termination of employment for any reason other than gross misconduct?
18 months
How long does COBRA need to continue after in the event of a divorce or death of the employed spouse?
36 months
Why ESOPs may not necessarily be a good means of incentive pay?
Because they do not meet the line-of-sight criterion.
That is employees may not see a link between their actions (working hard, etc.) and stock prices. The factors, may be too long-term, complex, and out employees’ control to be good motivators.
Find median salary? $55,000 $65,000 $70,000 $55,000 $70,000 $70,000 $60,000 $70,000 $70,000 $65,000 $70,000
$70,000 is the median salary; There is an odd number of salaries (11); five salaries are less than that point and five are greater.
What are the three primary factors when determining external equity?
- Industry
- Occupation
- Location
A situation when the employer intentionally establishes pay rates or benefits below those offered by other employers in similar industry, occupation and location.
Lagging the market
Main purposes of totalization agreements.
- They eliminate dual social security taxation
- They help fill gaps in benefit protection for workers who have divided their careers between the US and another country
For the purposes of 403(b) plan, what are the qualified employers?
A qualified employer is an organization that is “organized and operated exclusively for religious, charitable, scientific, public-safety testing, literary, or educational purposes”. ex. K-12 public schools, colleges, universities, hospitals, philanthropic and community-based organizations, and churches.
All forms of financial and non-financial returns that employees receive from their employers.
Total rewards
A pay-type system where two employees may perform similar tasks, but the person with superior knowledge or skill mastery receives more pay.
Person-based pay.
Which of the following statements about flat-rate systems is true?
a. ) They are used most often for bargaining unit jobs
b. ) They are used most often for professional jobs
c. ) They are used most often in privately held organizations
d. ) They are the most cost-effective approach
Flat-Rate pay or single-rate pay is typically used for elected jobs in the public sector or union hourly workers.
These always have the same rate of pay, regardless of performance or seniority.
Disadvantages of in-house server payroll system.
- May need climate controlled room for the computer
- High fixed costs
- Expansion may be difficult
- Requires additional staff to maintain equipment
- System can become obsolete
- Risk of choosing equipment that does not meet the needs
General rules for the Coverdell ESAs
Coverdell Education Savings Accounts (ESAs) are trusts set up solely for the purpose of paying qualified education expenses for the designated beneficiary of the account.
- Federal Tax exempt
- Max yearly contribution is $2,000
- Contributions are not tax-deductible
- For qualified higher education expenses
- Multiple accounts can be established for one beneficiary
What are most frequent claims for overtime pay?
- disputes over periods before and after the scheduled shift worked
- work taken home by nonexempt personnel
In this Supreme Court case, the court ruled that all time spent donning or doffing unique safety gear is compensable and that the FLSA requires payment to affected employees for all time spent walking between changing and production areas.
IBP, Inc. v. Alvarez, 2005.
Disadvantages of job ranking method.
- it may not be clear why one job is valued over another
- not much of a differential between jobs
- not feasible when evaluating a large number of positions
Examples of discretionary benefits.
Discretionary benefits, are benefits voluntarily provided by the employer that may not be totally discretionary, because competitive practice or employee relations may exert pressure on the employer.
example: an organization may augment health-care benefits where government-supplied health care is not satisfactory.
What is the rationale behind the PTO bank.
The rationale is to treat employees as adults and no longer require an accounting of the reason for various absences with pay from the workplace.
What is an alternative to providing an actual car to an employee (usually an executive)
To provide a car allowance instead.
Supreme Court ruling that awarded retirement benefits to an ex-spouse even though she had agreed to disclaim such benefits, because retiree had never changed beneficiary designation on retirement plan; points out the need for retirement plan administrators to pay attention to divorcees and qualified domestic relations orders.
Kennedy v. Plan Administrators for Dupont Savings, 2009.
Two types of 529 plans
- College savings plans
- Prepaid tuition plans
How long does COBRA need to continue when a dependent child loses eligibility status?
36 months
In accordance to SOX, a plan administrator who fails to provide a required blackout notice may be fined up to _____ per ____ affect participant or beneficiary who did not receive the notice.
$100 per day
This act establishes the same standard for hostile work environment claims on account of military status as that governing Title VII and other employment discrimination laws.
Veterans Opportunity to Work (VOW) to Hire Heroes Act amended USERRA.
2011
This gainsharing-type plan is based on the premise that shared rewards come from the difference between labor costs and the sales value of production. A ratio is calculated that expresses the value of production required for each dollar of the total wage bill.
The Rucker gainsharing Plan, popular in the 1940s.
A situation where an organization chooses to pay their employees approximately the same wages and offer a benefit package similar to that of the competition.
matching the market
This type of organizational culture sees employees as contributors. Their compensation programs are more performance driven, stressing and recognizing the contributions that individual employees make to organization.
Contribution-oriented organizational culture.
What is the statue of limitations under the FLSA?
Generally - two years, but the time period can be extended to three years, if there has been a willful violation by the employer.
What are escheat laws?
unclaimed wages
Type of workers, as defined by DOL, who perform work involving repetitive operations with their hands, physical skill, and energy.
Blue-collar workers.
Two varieties of qualified retirement plan.
- defined benefit
- defined contribution
Supreme Court case, that decided that if an employer provides retiree health benefits, the health insurance benefits received by Medicare-eligible be the same - or cost the same - as the health insurance benefits received by younger retirees.
Erie County Retirees Association v. County of Erie, 2008
What are some most important issues with Social Security program.
- Income redistribution (paying more into the system than will later be received from the system)
- Longevity (more people are living longer)
- Ratio Of workers to retirees (as a senior population grows, fewer younger workers will be available to pay for each retiree)
Types of deferred compensation plans
- Qualified Deferred Compensation Plans (provide tax benefits, offered to all employees in the organization)
- Non-qualified Deferred Compensation Plans (MAY provide tax benefits, offered to only select employees)
What is the goal of the HIPCs
The goal of the Health Insurance Purchasing Cooperatives (HIPCs) is to provide small organizations with the needed economic clout to negotiate more advantageous rates than they can get acting independently.
Difference between a specific stop-loss coverage and an aggregate stop-loss coverage.
Specific stop-loss coverage protects the employer’s self-funded health-care plan from risk of a major illness for one participant (or one family unit).
Aggregate stop-loss coverage protects the plan fro the risk of large group total claims from all participants during the plan year.
What are the two plans of Medicare.
Medicare Part A (covers hospital insurance)
Medicare Part B (optional supplemental medical insurance)
What are the Social Security death benefits of a surviving spouse of a deceased worker.
A lump-sum death payment of $255,
Who qualifies for Social Security survivor’s benefits.
- Surviving spouse at age 60 or older (50 if disabled)
- Surviving souse at any age if caring for a child under the age 16 or a disabled child
- Unmarried children under age 18
- Disabled children at any age if they became disabled before age 22 and remain so
- Dependent parents, age 62 or older
What type of criminal penalties are provided by SOX for individuals who retaliate against whistleblowers.
Any individual who violates SOX’s whistleblowers provision may be subject to fines and imprisonment of up to 20 years.
What are the expansions of the National Defense Authorization Act for Fiscal Year 2008.
additional FMLA leave for
- employees with family members who are covered members of the military (up to 12 weeks)
- military caregiver leave (up to 26 weeks)
Situation where the employer borrows money from a financial institution to finance the organization’s stock.
leveraged ESOPs (Employee Stock-Ownership Plan)
How long is COBRA continues after the employee’s termination of employment when employee is disabled at the time of reduction in hours or termination?
29 months
This type of defined benefit plans may consist of participants earn a percentage of the pay for each year they are plan participants.
Career-average formula.
This plan has another variety, where the participant’s yearly earnings are totaled and then averaged over the years in the plan.
Tying budgets or pay to the CPI.
Indexing
Calculate the range spread
Minimum annual salary: $45,000
Maximum annual salary: $65,000
(Maximum - Minimum) / Minimum
(65,000 - 45,000) / 45,000 = .444 or 44 %
List examples of SUB.
SUB (Supplemental Unemployment Benefits)
- Paid leave
- Holiday pay
- Vacation pay
- Pay for legally protected activities
- Leave of absence
- Bereavement Leave
- Personal days
A viable option to 401(k) and 403(b) for self-employed and small organizations
Simplified Employee Pensions (ESPs)
What PBGC does not insure?
PBGC (Pension Benefit Guaranty Corporation) is an ERISA pension-protection plan for qualified pension plans.
It does not cover or insure retirement plans that do not promise specific benefit amounts-defined contribution plans such as profit-sharing or 401(k).
State insurance program designed to protect workers in cases of work-related injures or diseases.
Workers’ compensation
Best way to recognize a red-circled employee’s contribution to the organization without increasing that employee’s base pay rate.
LSI (lump-sum increase) or a performance bonus
Guidelines for effective use of merit pay/performance-based pay.
- Develop accurate performance appraisal systems
- Train supervisors in the mechanics of the performance appraisal system and in the art of giving feedback
- Tie meaningful rewards closely to performance
- Use a wide range of increases to differentiate between performance levels
Guidelines for effective use of merit pay/performance-based pay.
- Develop accurate performance appraisal systems
- Train supervisors in the mechanics of the performance appraisal system and in the art of giving feedback
- Tie meaningful rewards closely to performance
- Use a wide range of increases to differentiate between performance levels
What greatly diminished the tax advantages of perquisites.
The 1993 Tax Act.
The simplest, easiest to maintain Section 125 plans. They create no new benefits.
Premiums-Only Plans (POPs)
Benefits of using POPs
POPs (Premium Only Plans)
- easiest to maintain
- premium automatically deducted from employees’ salaries before taxes are taken out.
- the above decreases employee’s taxable income by the amount contributed
- employee pay less in taxes and have more take-home money pay
- with employee pretax income lowered, employers and employees also pay less Social Security (FICA) payroll taxes
This type of 529 plan allows savers (account holders) to lock in future tuition at participating in-state public colleges and universities at current prices.
Prepaid tuition plan
Extra pay for working holidays or vacation days.
Premium pay.
Two types of IRS responses to taxpayers’ questions on an interpretation of the law in light of the taxpayer’s particular situation.
- Revenue rulings ( general guidelines to all taxpayers)
- Private-letter rulings (to specific taxpayers or organizations)
Which of the following coverage situations exemplifies a HIPPA change to COBRA?
a. ) Reduction in tax penalties against employers who fail to provide the certificates of coverage when an employee leaves the organization
b. ) COBRA’s 11-month disability coverage continuation extension
c. ) Exclusion of a newborn of a covered employee
d. ) Extension of the allowable gap in coverage from 60 days to 90 days to waive preexisting condition exclusions
b.) HIPAA clarifies that all qualified beneficiaries are entitled to purchase the additional 11 months of continuation coverage - for a total of 29 months - if they are disabled at any time during the first 60 days of COBRA coverage.
Form of insurance carried by employers for their employees that provides a lump-sum payment to the employees’ beneficiaries.
Group-term insurance
FLSA’s white-collar exemption categories.
- executive
- administrative
- professional
- computer
- outside sales
This type of defined benefit plan bases benefits on the average earning during a specified number of years immediately prior to retirement.
Final-pay formula.
This plan provides the greatest inflation protection and the greatest cost to the employer.
Which of the following job evaluation methods would provide a small organizations with quick and inexpensive way to compare one job to another?
a. ) Ranking
b. ) Paired comparison
c. ) Point-factor
d. ) Factor comparison
a.) Job ranking is a fairly quick, inexpensive method of job evaluation and is easily explained to managers and employees.
Advantages of paired-comparison job evaluation method.
used when there are many jobs to evaluate.
How long must the payroll records be kept.
Under the Fair Labor Standard Act and the Age Discrimination in Employment Act, employer must retain payroll records for three years.
Some cash awards are paid as a lump sum. These awards may be:
- Discretionary bonuses (based on evaluator’s assessment)
- Performance-based incentives (measured against predetermined objective)
- Formula-based incentives - typically based on a percentage of profits
Gifts, awards, trips, prizes, and other forms of merit awards used to recognize individuals for their performance, special contributions, or length of service.
non-cash reward programs
What should be the compensation basis for a sales representative whose time is spent acquainting potential customers with the organization’s product line and providing technical assistance?
Base salary that represents a large percentage of compensation.
Situation where employer contributes stock or cash or provides employee discounts to buy stock.
Non-leveraged ESOPs (Employee stock-ownership plans)
What is the retirement age where one will receive Social Security benefits?
Workers and their spouses can begin receiving benefits at age 62 at a reduced rate. The full retirement age is 67 for persons born in 1960 or later. (65 for those born in 1937, and 66 for 1943-1954)
Examples of Indirect Compensation (benefits)
- Legally required benefits
- Retirement income replacement programs
- Disability insurance and income protection
- Hospital and medical benefits
- Deferred pay
- Pay for time not worked
- Unpaid leave
- Flexible benefit plans
- Non-cash recognition and achievement awards
- Perquisites
What type of determinations can Wage and Hour Division f DOL issue in regards to Davis-Bacon Act.
- A general determination - for a geographic areas
- A specific determination - for a specific contract
Organizations excluded from FLSA
- The military
- Very small family owned and operated businesses
- Family farms
Main groups of the IRS 11-Factor Test
- Behavior control
- Financial control
- Relationship of the parties
Behavioral control factors in the IRS 11-Factor Test
- Instructions the organization gives the worker (when, where and how)
- Training the organization gives the worker
Financial control factors in the IRS 11-Factor Test
- The extent which the worker has unreimbursed business expenses
- The extent of the worker’s investment
- The extent to which the worker makes services available to the relevant market
- How the organization pays the worker
- The extent to which the worker can realize a profit or loss
What is the minimum weekly pay for an exempt worker?
$455 weekly or $23,660 annually
Act that made significant changes in employee benefit programs, especially retirement plans.
Tax Reform Act 1986
Three exemption criteria an exempt employee must meet.
- Minimum salary ($455 weekly)
- Paid on a salary basis without improper deductions
- Exempt duties
Which of the following is not considered a statutory deduction?
a. ) Medicare
b. ) Federal income tax
c. ) 401(k) contributions
d. ) Disability insurance
c.) 401(k) contributions
There are three main categories of payroll deductions: Voluntary, Involuntary, and Statutory. 401(k) contributions is the correct answer to this question because although it is a deduction, it is considered a voluntary deduction rather than a statutory one.
Examples of the three types of deductions include:
Voluntary: health benefit contributions 401(k) contributions union dues contributions to charities designated by employees Involuntary: Debt garnishment Child support garnishment Statutory: Social Security Medicare Federal income tax State income tax Unemployment insurance (in some states) Disability insurance (in some states) Other state and local taxes
Name compensable factors included in the Equal Pay Act and Title VII of the Civil Rights Act used fr point-factor job evaluation.
- Skill
- Responsibility
- Effort
- Working conditions
- Supervision of others
Which of the following non-quantitive job evaluation methods is most complex, and therefore rarely used.
Factor comparison method.
It is best used in the limited instances when wages are steady over time and the organization uses a flat rate for each job.
A system used to identify compensable factors, developed in the 1970s by the U.S. government.
The Factor Evaluation System (FES); includes factors such as knowledge required, supervisory controls, guidelines, complexity, scope and effect, personal contacts, purpose of contacts, physical demands, and the work environment.
Examples of defined benefit plans.
- Flat-dollar formula
- Career-average formula
- Final-pay formula
- Cash balance plan
Replaces a portion of lost income for a specified period of time for employees who are ill or have non work-related injuries.
Short-term disability (STD) coverage
Act that added Sections 125 and 401 (k) to the Tax Code.
Revenue Act
Two examples of consumer-directed health-care programs.
- health reimbursement accounts (HRA)
- health savings accounts (HSA)
Imposed a mandatory 20% federal income tax withholding requirement on most qualified retirement plan proceeds that a recipient does not roll over into another qualified retirement plan or individual account.
Unemployment Compensation Amendments (UCA)
What are COLAs often based on.
Consumer Price Index (CPI)
Which act established Coverdell ESAs
Coverdell Education Savings Accounts (ESAs), previously known as Education IRSa, were originally established by the Taxpayer Relief Act and then subsequently expended by the Economic Growth and Tax Relief Reconciliation Act.
This type of 529 plan allows the saver (account holder) to establish an account for a future student (beneficiary). Plans typically offer a variety of investment options (e.g., stock mutual funds, bond mutual funds)
College savings plans.
The deferred savings may be used for expense at any college.
Name a non-taxable direct compensation.
- wages paid after death in a new calendar year.
Examples of non-taxable indirect compensations.
- business expenses (if accounted for in timely manner)
- Child care (up to $5,000) under Section 129 plan
- Company vehicle (business use only)
- De minimis fringes ($25 or less)
- Life insurance (if employee pays premium with after-tax dollars)
- Group life insurance plans providing $50,000 or less coverage
- Educational expenses reimbursements up to annual stat. limits
- Employee discounts on employer goods/services
- Medical/dental/health plans (employer contributions)
- Direct moving expenses (up to deductible amount)
- No-additional-cost services
- Employee-paid disability benefits (if purchased in after-tax dollars)
Examples of taxable indirect compensations.
- Employee paid disability benefits (if purchased in pretax $$)
- Disability benefits (if employer pays the premiums)
- Life insurance (if employee pays premium with pretax $$)
- Educational expenses in excess of statutory limits
- Gifts, prizes, and awards over certain dollar amounts
- Unsubstantiated employee business expenses
- Commuter expenses in excess of $245/month
- Parking expenses in excess of $245/month
- Personal use of company vehicle
- Sick pay
IRS’s general rules on golden parachute.
To the extent that the severance payments equal or exceed three times the executive total compensation, they:
- Will subject the executive to an excise tax in addition to the income tax
- May not be deductible by the employer
Under an organization’s health plan. employees are not required to submit claims if they go to participating doctors and hospitals since these providers are direct employees of the health-care provider. This type of health-care plan is most likely a(n):
a. ) PPO
b. ) commercial insurance plan
c. ) IPA model HMO
d. ) staff model HMO
d.) staff model HMO
Staff model HMOs directly employ staff physicians and other health-care professionals.
Provide examples of managed care plans.
- Group model HMO
- Staff model HMO
- Preferred provider organizations (PPOs)
- Point-of-service (POS) organizations
- Exclusive provider organizations (EPOs)
- Physician hospital organizations (PHOs)
Which of the following defined benefit plans is portable for the employee?
a. ) Flat-dollar formula
b. ) Cash balance plan
c. ) Final-pay formula
d. ) Career-average formula
b.) Cash balance plan is a type of defined benefit plan; it expresses the promised benefit in terms of hypothetical account balance. Cash balance plans have become popular because the benefit can more easily be communicated to participants and the accrued benefit is portable.
Type of relationship aspects in the IRS 11-Factor Test
- Written contract describing the relationship the parties intended to create
- Whether the organization provides the worker with employee-type benefits, such as insurance, a pension plan, vacation, or sick pay
- The permanency of the relationship
- The extent to which services performed by the worker are a key aspect of the regular business of the organization.
Does the Davis-Bacon Act protect all workers?
The law applies to laborers and mechanics who are employed on a particular project. Trainees and apprentices may be paid less than the predetermined rates under certain circumstances.
Under this type of defined benefit plan, the plan pays a set dollar amount for each year of service under the plan.
Flat-dollar formula.
This type of formula is usually seen in plans covering hourly-paid employees under a collective bargaining agreement.
Under ERISA, when is the annual report (form 5500) on a qualified benefit plan due to be filed with the DOL?
a) Two months after eligibility of the plan
b. ) Three months after establishment of the plan
c. ) Seven months after the end of the plan year
d. ) One year after plan features have changed
c.) Generally, once a plan has 100 or more participants as of the beginning of the plan year, there is a Form 5500 filing requirement.
Form 5500 is the annual report filed with the DOL seven month after the end of the plan year.
Used for CEOs who take a position with an organization wit the advance knowledge that the position could be terminated due to restructuring or direction change.
“Golden Handshake”
Sometimes offered to executives of a company being acquired, to ensure that they remain with the reorganized company.
“Golden Lifejacket”
Under ERISA, each employee is entitled to receive the following communication automatically.
- Summary plan description (SPD)
- Summary annual report (SAR)
- Summary of material modifications (SMM)
Due within 210 days after the end of the ERISA plan year whenever any of the plan’s features have been significantly changed.
Summary of material modifications (SMM).
Contains ERISA’s financial information about the plan (due seven months after end of the plan year).
Summary annual report (SAR)
Contains information on what the ERISA plan provides and how it operates. It is due within 120 days after the establishment of the plan or 90 days after eligibility and must be updated no less frequently than once every five years.
Summary plan description (SPD)
Which of the following benefits would typically pay the salary of an employee who is out of work for 225 days while recovering from an illness?
a. ) Employer-provided sick leave
b. ) Short-term disability coverage
c. ) Long-term disability insurance
d. ) Paid leave of absance
c.) Long-term disability insurance usually begins after the short-term coverage expires, which typically lasts up to six months.
225 days is longer than 6 months.
Which of the following reports must be sent to employees automatically?
a. ) Summary plan description (SPD)
b. ) Annual report (Form 5500)
c. ) Compa-ratios
d. ) Workers’ compensation notice
a.) Summary plan description is one of three required communication notices to employees according to ERISA and it is due within 120 days after the establishment of the plan or 90 days after the eligibility.
the other two are:
- Summary annual report (SAR), and
- Summary of material modifications (SMM)
In which of the following does the employer take on the role of the insurance company and assume some or all of the risk?
a. ) self-funded plan
b. ) HMO
c. ) PPO
d. ) Indemnity plan
a.) If an organization has a self-funded health-care plan, the employer takes on the role of the insurance company and assumes some or all of the risk.
Options employer have for administering a self-funded plan include the following.
- administrative-service-only (ASO)
- Third-party administrator (TPS) plan
In this type of health-care plan, the risk is assumed by the employer; the employer hires only the claims department of the insurance company.
Administrative-services-only (ASO) plan
In this type of health-care plan, the employer assumes the risk; the employer utilizes an independent (not-insurer-related) claims department.
Third-party administrator (TPA) plan
ERISA’s eligibility requirements for retirement plan.
- attainment of age 21
- completion of 12 months of service
An organization can lower the thresholds.
Tools used during a benefit needs assessment.
- questionnaires and surveys
- benchmarking
- trend analysis
Employee completes ___ and receives ____; Independent contract completes ___ and receives ____ .
a. ) W-4, W-2, W-9, 1099
b. ) W-2, W-4, W-9, 1099
c. ) 1099, W-2, W-9, W-4
d. ) W-4, W-9, 1099, W-2
a.) Employee completes a W-4, and receives a W-2
Independent contractor completes a W-9, and receives a 1099
The main or most important duty of the position as an important part of FLSA status exemption.
Primary duty.
Although no particular percentage of exempt duties is required under FMLS, the lower the total percentage of exempt duties, the greater the legal risk to the employer if challenged by the Department of Labor.
FLSA Overtime Executive exemptions.
An employee must have a primary duty to
- manage an enterprise, department or subdivision
- direct the work of at least two full-time employees or equivalent
- hire, discipline, promote, or fire employees
- give “employment recommendations”
FLSA overtime Administrative exemptions
- performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customer
- exercise of discretion
- independent judgment related to “matters of significance”
FLSA overtime Learned Professional exemptions.
- Requires advanced knowledge in a field of science or learning that is required by prolonged instruction.
- Work requires exercise of discretion and judgment
- Work in a field of science or learning
FLSA overtime Creative Professionals exemptions.
- must meet minimum salary requirements.
- perform work that requires invention, imagination, originality, or talent in a recognized field of creative or artistic development. (music, writing, acting, graphic arts, journalists)
FLSA’s requirement exemption of a Highly Compensated Employee (HCE)
- perform office or non-manual work
- make an annual salary of $100,000 or more that includes at least $455 per week paid on a salary or fee basis
- perform one of the duties of an exempt (executive, administrative, professional employee)
FLSA exemptions requirements for outside sales workers
- must have a primary duty involving making sales or obtaining orders and contracts
- be customarily and regularly engaged away form the employer’s place of business
Outside sales employees are not subject to the minimum salary requirements or other exemptions.
FLSA’s safe-harbor provisions for improper deductions
- employer has a “clearly communicated policy” that prohibits improper pay deductions and includes a complaint mechanism
- Reimburses employees for any improper deductions
- makes a good-faith effort to comply in the future
an exempt employee is normally not subject to deductions for illness in less than full-day increments (an FMLA exception may occur)
Specific non-exempt jobs
- First responders (Fire, police, paramedics, correctional officers, park rangers)
- Insurance adjusters (likely administrative exempt)
- Financial service industry workers (likely administrative exempt)
- Human Resources Managers (who do not exercise discretion and independent judgment)
- nurses (registered nurses, licensed by a state board - exempt)
- Technologists and technicians
Compensatroy Time as it applies to overtime - main provisions.
- in general, overtime must be paid cash at a rate of 1.5 times
- public-sector employers (federal, state, and local government) may grant compensatory time off at a rate of no less than one and on-half hours for each hour of OT
- public safety employees (police, fire fighters, etc) can accumulate up to 480 hours of compensatory time
- other public-sector employees - up to 240 hours
FLSA Child Labor Provisions
- under age 14
- prohibited from most non-farm work
- may be employed by parents, except in hazardous industries, manufacturing, or mining
- certain jobs permitted (actors, newspaper carriers)
FLSA Chile Labor Provisions
- ages 14-15
- during school hours, work no more than 3 hrs/day, 18/week
- school vacations, work no more than 8 hrs/day, 40/week
- work hours restricted to 7:00 am - 7:00 pm (to 9:00 pm from June 1 to Labor Day)
FLSA Child Labor Provisions
- ages 16-17
- prohibited from working on hazardous jobs such as operating trash binders, shredders, or material-handing equipment
- on other hourly restrictions
FLSA minimum wage provisions exceptions
- $2.13 cash wage if earned tips
- Employee younger than 20 in first 90 days of employment
- Full-time students in retail/service
- Students learned at an accredited college, school, etc.
- Mentally or physically impaired with DOL certificate
Which act addressed OT questions of:
- before and after work
- on-call/standby time
- preparatory/concluding activities
- waiting times
- meals and breaks
- travel time
- training time
Portal-to-Portal Act intended to address OT questions and provided guidelines on above issues
WOTC main provisions
- Federal income tax credit that encouraged employers to hire people for 9 targeted job seekers
- can reduce federal tax liability
- paid during the first 12 months of work for qualified employees who have completed a set number of hours or days of work
- some provisions extended by America Taxpayer Relief Act of 2012
- administrated by DOL’s Employment and Training Administration (ETA) and IRS
As a result of Dodd-Frank Act, the Securities and Exchange Commission (SEC) set forth the following rules for publicly traded companies.
- in proxy or other shareholder consent materials
- executive compensation packages
- company financial performance
- total compensation for the CEO as compared to the median of all the companies employee compensation package
- compensation committee to be truly “independent”
Which of the following philosophies would en entitlement-oriented organization embrace?
a. ) Lifelong employment
b. ) Individual rewards
c. ) Bringing in new talent
d. ) Performance-driven pay
a.) lifelong employment
In a entitlement-oriented organizational culture, less emphasis is put on individual employee contributions, initiative, and responsibility.
Which of the following strategies will NOT reduce employer heath-care costs?
a. ) Promoting a wellness program
b. ) Eliminating time lapses on preexisting conditions
c. ) Establishing a gatekeeper system
d. ) Conducting utilization reviews
b.) Eliminating time lapses on preexisting conditions.
Instrument often used to determine COLAs.
COLAs (cost-of-living-adjustments) are often based upon the consumer price index (CPI).
Advantages of properly applied internal equity.
- Meets employees’ needs for a fair wage and adequate benefits
- Recognizes employees’ contributions to the organization
- Rewards equal work with equal pay
- Does not discriminate against protected classes
A salary offered based on widely published salary survey data for a less-skilled position in a locale with an abundant labor pool would most likely equate to which of the following market percentiles?
a. ) 25th percentile
b. ) 50th percentile
c. ) 60th percentile
d. ) 75th percentile
a.) The situation is called lagging of the market.
Organizations may be able to lag the market (deliberately establish their pay rates levels below those offered by other employers) when the supply of talent is greater than demand.
When using survey data, lagging the market typically equates to the 25th percentile of the market.
Job-to-job comparison job evaluation methods.
- Job ranking (non-quantitative)
- Factor comparison (quantitative)
Job-to-predetermined standard comparison job evaluation methods.
- Job classification (non-quantitative)
- point-factor method (quantitative)
Which of the following health plans allows an employee to roll over unused account balances form year-to year?
a. ) Premium-only plans
b. ) Flexible spending accounts
c. ) Full cafeteria plans
d. ) health reimbursement plan
d.) “Rolling over” the remaining unpaid funds into the next year is one of the advantages of Health Reimbursement Accounts plan.
If a Professional in Human Resources wanted to perform a review using a system that combined performance ratings the employee’s position and salary range to recommend an amount of increase, which of the following would they be usning?
a. ) Job pricing
b. ) A merit matrix
c. ) A salary survey
d. ) Broadbanding
A merit matrix is commonly developed by HR as a tool for managers to use in planning increases for their work units. A merit matrix combines a performance rating with the employee’s position in the salary range to recommend the amount of increase.
Broadbanding is a salary structure that splits positions in the company into just a few specific pay ranges.
Salary surveys allow organizations to gather compensation and benefits data that reflects current trends in the labor market. Surveys are often provided by professional services vendors or compensation consulting firms.
Job pricing is used to determine the appropriate pay level for a position and occurs when a new job is created or an existing job has undergone changes.
The Financial Accunting Standards Board (FASB) was established as a
… private body to determine how financial executives should report their firms’ financial information to their shareholders.
Based on focus group data collected from health plan participants and beneficiaries, employee insurance disclosure documents are revised to improve their visual appeal and utility. These actions relate to which PPACA provision?
a. ) Preventive care
b. ) Dependent coverage
c. ) State health marketplaces
d. ) Uniform explanation of coverage
d.)
Patient Protection and Affordable Care Ac’s (PPACA) of 2010 Uniform explanation of coverage provision requires employers to provide participants and plan beneficiaries a summary of benefits and coverage (not to exceed 4 pages) prior to enrollment, re-enrollment, or prior to delivery of the certificate of coverage.
List components of a total rewards system.
- direct compensation (pay systems)
- indirect compensation (benefit and recognition programs)
