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Employee Benefits & Social Insurance > Final Exam > Flashcards

Final Exam Flashcards

1
Q

When does a benefit plan year start?

A

Either at the beginning of the calendar year or the company’s benefit plan year (Google)

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2
Q

What are ways to control benefit costs?

A

Employee contributions, waiting periods, high-deductible plans, employee education, utilization reviews, case management, provider payment systems, and lifestyle interventions (279)

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3
Q

Who pays for benefits? Is it pre-tax, after-tax, or both?

A

Both

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4
Q

Fee-for-service plans

A

provide protection against health care expenses in the form of a cash benefit paid to the employee or directly to the health care provider after receiving health-care services. These plans pay benefits on a reimbursement basis. Three types of eligible health expenses are hospital expenses, surgical expenses,
and physician charges. Under fee-for-service plans, participants may generally select any licensed physician, surgeon, or medical facility for treatment, and the insurer reimburses the participants after medical services are rendered. These plans generally do not rely on networks of health-care providers.

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5
Q

IRC Section 125 and nondiscrimination rules

A

IRC Section 125 pertains to cafeteria plans and offers certain benefits on a pre-tax basis. Participants must be given the choice between at least one taxable benefit (such as cash) and one qualified benefit.

Nondiscrimination rules prohibit employers from giving preferential treatment to highly compensated participants and key employees. Failure to meet these rules eliminates tax benefits for the highly compensated/key employees AND/OR the other employees, depending on the violation.
- Companies are required to have at least some nonkey employees in the plan
- Employees should receive the same amount of employer contributions, the same eligibility rules, and the same benefits must be provided
- The value of nontaxable benefits provided to key employees cannot exceed 25% of the total nontaxable benefits provided under the plan

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6
Q

What is a cafeteria plan?

A

Employees choose from a set of designated benefits and different levels of these benefits. Employees can pass on one benefit to accept another. Companies implement cafeteria plans to meet the challenges of diversity.

ex) Employee passes on day care benefits for a company-provided life insurance policy equivalent to their annual salary, and then purchases additional life insurance equivalent to three times their salary.

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7
Q

Any minimum or maximum age to participate in pension plan?

A

Employees must be allowed to participate in pension plans after they have turned 21 and have completed one year of service (1,000 work hours).

Companies may not exclude employees from participating in a pension plan because they are too old.

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8
Q

Qualified plans and impact on taxes for employees and employers

A

Qualified retirement plans must meet the requirements of the IRC and ERISA to provide tax benefits (deferral of investment gains for employees and tax deductions for employers)

Two main types: Defined benefit (pension) and defined contribution (401(k))

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9
Q

Defined contribution plans

A

Retirement plan that is typically tax-deferred (403(b) or 401(k)) in which employees contribute a fixed amount or a percentage of their paychecks to an investment account to fund their retirement. Employers can match a portion of the employee’s contributions as an added benefit.

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10
Q

Non-qualified plans (who participates?)

A

A type of tax-deferred, employer-sponsored retirement plan that fall outside of the ERISA guidelines. Designed to meet specialized retirement needs for key executives or other select employees and can act as recruitment or employee retention tools.

Differ from qualified plans in three ways:
- ERISA qualification criteria
- Funding status
- Mandatory retirement age

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11
Q

Cliff vesting

A

Employee becomes fully vested in retirement benefits after no more than 3 years from beginning participation in the retirement plan.

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12
Q

Vesting

A

Refers to an employee’s nonforfeitable rights to retirement benefits. Title I of the ERISA requires that companies follow one of two schedules: cliff vesting or six-year graduated vesting.

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13
Q

Defined benefit plans, employer contributions vs. employee contributions

A

Defined benefit plans award a monthly sum equal to a percentage of preretirement pay multiplied by the number of years worked for the employer. The level of contributions made by the employer fluctuates from year to year depending on investment returns to ensure the promised benefits are honored.

Employer generally makes the contributions, but sometimes employees can make voluntary contributions or might be required to contribute.

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14
Q

457, 403(b), and 401(k)

A

Section 457 plans are nonqualified retirement plans that are typically used for employees in state or local government positions. ONLY EMPLOYEES CAN CONTRIBUTE.

403(b) plans are tax-deferred annuity plans. These are available to nonprofit organizations such as churches, private/public schools and colleges, hospitals, and charitable organizations. Contributions come from employees and employers, with employee contributions coming from salary reduction agreements. 403(b) plans may supplement other employer-sponsored retirement programs, usually defined benefit plans. Not every 403(b) plan is subject to ERISA minimum standards as ERISA only applies to private-sector organizations. Some are governmental plans (churches, schools, etc.)

401(k) plans allow employees to defer part of their compensation to an individual account set up in the qualified defined contribution plan. Only private-sector or tax-exempt employers can sponsor 401(k) plans. Three noteworthy benefits 401(k) plans provide are: deferred income taxes until withdrawal, employer contribution tax deductions, and deferred investment gain taxes until withdrawal.

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15
Q

SIMPLE plans

A

Stands for Savings Incentive March Plans for Employees. Only available for small companies that meet the following requirements:
- The company employs 100 or fewer people.
- Each employee’s previous year earnings was at least $5,000.
- The company does not maintain another retirement plan.

Can be established as an IRA or a 401(k).

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16
Q

Hybrid plans

A

Combine features of both defined benefit plans and defined contribution plans. 4 common types are:
- Cash balance plans and pension equity plans
- Target benefit plans
- Money purchase plans
- Age-weighted profit sharing plans

Used to avoid the “golden handcuffs” associated with defined benefit plans

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17
Q

Identify defined benefit vs. defined contribution plans

A

Pensions and cash balance plans are defined benefit plans
Everything else is defined contribution plan

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18
Q

401(k) vs. Roth 401(k)

A

Roth 401(k)s differ in two ways:
1. An employee pays income tax on their contributions
2. Upon retirement, withdrawals are not taxed

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19
Q

What is PIA and OASDI

A

Primary Insurance Amount (PIA) is the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age.

Old-Age, Survivor, and Disability Insurance (OASDI) refers to the programs that provide retirement income, income to the survivors of deceased workers, and income to disabled workers and their family members.

20
Q

Earliest age to draw social security retirement benefits

A

62

21
Q

Funding for OASDI and Medicare

A

Under FICA: employer payroll tax and employee withholdings (7.65%)
Under SECA: self-employed individuals are taxed at a higher rate (15.3%)

22
Q

When was Social Security created?

A

1935

23
Q

Unemployment

A

Federal-state unemployment insurance programs provide weekly income to individuals who became unemployed through no fault of their own. Each state administers its own program and develops guidelines within the parameters set by the federal government. States pay into a unemployment tax fund administered by the government, who invests the payments and disburses funds to the states as needed.

General criteria for eligibility:
- Limited voluntary employment, and involuntary unemployment except for disqualifying causes.
- Minimum earnings and employment requirements.
- A waiting period in most states.
- A capacity to work and an availability for work.
- An active seeking of suitable work.

24
Q

Social Security disability

A

SSA only pays for total disability. Inability to work must because the medically determinable physical or mental impairment is expected to result in death or the impairment has lasted/is expected to last for a continuous period of at least 12 months

25
Q

COLA

A

Cost-of-living adjustments represent periodic base-pay increases often set to periodic changes in the U.S. Bureau of Labor Statistics’ CPI. Enables workers to maintain purchasing power by having their base pay adjusted for inflation.

26
Q

On-call

A

Employers must compensate nonexempt employees for spending time on or close to the employer’s premises so that employees cannot use the time effectively for their own purposes.

26
Q

Jury duty

A

Most employers choose to compensate nonexempt employees while they are serving on a jury or as a witness. The Jury Systems Improvement Act of 1978 recognizes that serving on a jury is a protected individual right and employers can not prohibit employees from participation or treat them unfairly for doing so.

26
Q

Paternity leave

A

Covered under the FMLA of 1993 - unpaid leave for 12 weeks

26
Q

FMLA - what is it and how does one qualify?

A

Provides employees with job protection in the cases of family or medical emergencies. Employees may take up to 12 weeks of unpaid time off for personal illness that extends beyond three work days. Ensures that upon their return, the employee’s job is restored in either the same position or a new position with the same pay, benefits, and other terms and conditions.

27
Q

Telecommuting

A
28
Q

Bereavement leave

A

Paid time off for employees, usually after the death of a relative. Policies specify the maximum amount of days of based on the employee’s relationship with the deceased (anywhere from 1 to 5 days)

29
Q

Military leave

A

Employers have an obligation to reemploy previously employed individuals following the completion of military service. USERRA of 1994 provides protection at the federal level. 5 year threshold.

30
Q

Sabbatical leave

A

Usually paid time off to undertake professional development activities including the completion of research projects and curriculum development. Universities grant sabbatical leaves to faculty members who meet service requirements (usually 3 years of employment) and this resets each time a sabbatical is taken. Can be partial of full pay up to an entire year.

31
Q

Holiday time-off practices

A

Private-sector employers usually follow the holiday time-off practices for federal
government employees. Federal law established 12 paid holidays for federal government employees. Most federal government employees work five days a week—Monday through Friday. When holidays fall on a weekend day, employees receive a day off during the workweek to observe the holiday. Most state workers observe holidays based on state laws. Some companies add one or two days off with pay to the list of regularly scheduled holidays. Floating holidays allow employees to take paid time off to observe holidays not included in the employer’s list of recognized holidays.

32
Q

Volunteerism

A

More companies are starting to include paid time off as an employee benefit.

33
Q

Adoption assistance

A

Placed into three categories: information resources, financial assistance, and parental leave that extends mandatory leave under the FMLA. Employers can receive tax benefits under IRC Section 23(a) for reasonable and necessary assistance with adoption fees, court costs, and other expenses.

34
Q

Educational assistance (tax benefits?)

A

Employers treat scholarship programs as a normal expense and employees may be able to reduce the tax on the qualified tuition amount plus other related expenses.

35
Q

EAP’s confidential?

A

Usually must have signed consent of employee to release information unless its a safety concern or against the law.

36
Q

Dollar amount employees can exclude from income for educational assistance

A

$5,250

37
Q

Remote work - effect on employees and employers - remote and work comp?

A

Work comp includes remote employees

38
Q

Independent contractor

A
39
Q

Medigap

A

Supplements Parts A and B of Medicare. Available in most states from private insurance companies for an extra fee. Most plans help cover the costs of coinsurance, copayments, and deductibles. Sale of these plans is limited to 10 standardized choices by federal and state governments. Medicare Select plans lower premiums in exchange for a limited choice of healthcare providers.

40
Q

FICA rate for employees

A

7.65%

41
Q

Three ways distribution of retirement benefits are generally made

A

Lump sums, annuities, and trust payments

42
Q

SECURE Act

A

Enacted in 2019, encourages individuals to save for retirement and to make it easier for employers to offer retirement savings plans to their employees. The act includes various provisions that affect retirement planning, savings, and distributions.

RMDs at 72
No limit for IRA contributions as long as participant has earned income
Easier for smaller employers to provide retirement savings options to their employees by allowing them to join multiple employer plans (MEPs), which can reduce administrative burdens and costs.

43
Q

What are qualified benefits?

A

Employer sponsored benefits for which an employee may exclude the cost from federal income tax calculation.

401(k) Plans
403(b) Plans
IRA (Individual Retirement Account)
Health Savings Accounts (HSAs)
Flexible Spending Accounts (FSAs)
Dependent Care Assistance Programs (DCAPs)
Employer-Sponsored Health Insurance
Adoption Assistance Programs
Educational Assistance Programs
Employee Stock Ownership Plans (ESOPs)

44
Q

What is Juneteeth?

A

an annual observance in the United States that commemorates the emancipation of enslaved African Americans.

Employee Benefits & Social Insurance (1 decks)

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