GFOA Compensation and Benefits Practice Test Flashcards
What are compensation structures?
Framework or system to determine the salary/wage that will be paid to an employee
See content outline: Variables Used to Determine Compensation Source: Understanding Government Compensation and Payroll Seminar. Day 1
What is FICA (Federal Insurance Contributions Act)?
A U.S. federal payroll tax that is deducted from each paycheck.
See content outline: Understanding Taxable/ Not Taxable Salary and Benefits Source: https://www.ssa.gov/thirdparty/materials/pdfs/educators/What-is-FICA-Infographic-EN-05-10297.pdf
According to a GFOA Best Practice on “Asset Allocation for Defined Benefit Plans”, which of the following is recommended?
**Work closely with actuaries and other advisors to determine the plans expected rate of return.
**
NOT “Focus on developing a short-term strategic asset allocation policy.”
NOT “Deprioritize developing a legal framework.”
NOT “Review the portfolio performance at most every five years.”
See content outline: Pension Plan > Plan Design Source https://www.gfoa.org/materials/asset-allocation-for-defined-benefit-plans
According to a GFOA Best Practice on “Investment Policies for Tax-Deferred Retirement Saving Plans”, monitoring procedures should include:
**identifying the frequency (no less than annually) and manner in which the entity conducts a thorough assessment of the plan.
**
NOT “identifying the investment options available to plan participants”
NOT “specifying liquidity requirements should the plan sponsor choose to terminate a stable value fund”
NOT “None of the above.”
See content outline: Plan Governance Source: https://www.gfoa.org/materials/investment-policies-for-tax-deferred-retirement-savings
When considering the ACA, employers that are undergoing significant structural changes in plan design and cost sharing might want to forgo grandfathered status so:
A. they can implement strategies that will provide more flexibility in plan design and pricing
AND
B. In other cases, jurisdictions might find it more advantageous to limit future benefit changes in order to retain grandfathered status.
See content outline: Heatlhcare > Plan Design Source: https://www.gfoa.org/materials/complying-with-the-affordable-care-act
To ensure compliance with the ACA, how often should a finance officer review federal regulations specific to healthcare benefits?
Quarterly
See content outline: Heatlhcare > Plan Design Source: https://www.gfoa.org/materials/complying-with-the-affordable-care-act
What is OPEB (Other Postemployment Benefits)?
Health-care and other similar benefits for employees who have completed their active service.
See content outline: Prefunding, Funding, and Trusts Source: Understanding Government Compensation and Payroll Seminar and https://www.gfoa.org/materials/establishing-and-administering-an-opeb-trust
In the Strategic Healthcare Plan Design best practice, 3-5 years is recommended for:
measuring annual trends in costs of services provided and used by participants
See content outline: Healthcare Source: https://www.gfoa.org/materials/strategic-health-care-plan-design
A voluntary yet irrevocable agreement between a state and the Social Security Administration and/or Medicare Hospital Insurance that the state will provide these benefits (not the federal government) to certain state and local government employment is called:
Section 218 (in the Social Security Act) agreement.
See content outline: Developing and Understanding Employee compensation and benefits policies Source: https://www.ssa.gov/slge/sect_218_agree.htm?tl=0%2C1%2C2%2C3
GFOA recommends in the “Governance of Public Employee Postretirement Benefits Systems” Best Practice, that trustees and their agents are obligated to act in accordance with certain fiduciary standards, including:
A. Duty of Loyalty
and
B. Duty of Prudence/ Duty of Care
See content outline: Pension Plan > Plan Design Source: https://www.gfoa.org/materials/governance-of-public-employee-postretirement-benefits
What is the fundamental goal of retirement plan design?
To adequately meet the needs of employees, consistent with the plan sponsor’s available resource
See content outline: Plan Governance Source: https://www.gfoa.org/materials/defined-contribution-retirement-plan-design
A defined contribution plan:
**presents the greatest investment risk as it relates to the employee.
**
NOT “survivor and disability coverage generally provided.”
NOT “presents the least investment risk as it relates to the employee.”
NOT “guaranteed or ad-hoc cost-of-living adjustments provided to annuitants.”
See content outline: Pension Investment Source: https://www.gfoa.org/materials/developing-a-policy-for-retirement-plan-design-options
Which law allows employee to have up to 12 weeks of time off under certain conditions annually?
FMLA
See content outline: Developing and Understanding Employee compensation and benefits policies Source: https://www.dol.gov/agencies/whd/fmla/faq
Pay based on performance is considered:
**a major element of a merit pay model of compensation.
**
NOT “a major element of civil service model of compensation.”
NOT “Both A and B.”
See content outline: Variables Used to Determine Compensation Source: Understanding Government Compensation and Payroll Seminar. Day 1
Which of the following is NOT considered a de minimis fringe benefit?
**Tuition Reimbursement
**
NOT “Group meals”
NOT “Sporting event tickets”
NOT “Occasional coffee or soft drinks”
See content outline: Developing and Understanding Employee compensation and benefits policies Source: Understanding Government Compensation and Payroll Seminar or https://www.irs.gov/pub/irs-pdf/p5137.pdf
Which of the following is NOT a time entry option?
**USPS mail-based time entry.
**
NOT “ Electronic timecard”
NOT “Paper-based timecard”
NOT “Electronic time entry”
See content outline: Developing and Understanding Employee compensation and benefits policies Source: Understanding Government Compensation and Payroll Seminar. Day 2
GFOA’s Best Practice on participant education related to defined contribution plans states that plan sponsors should:
make sure high-quality investment education is provided to defined contribution plan participants who are allowed to direct their investments.
NOT “mitigate potential liability, by recommending specific investments to participants.”
NOT “outsource ALL investment activities.”
NOT “provide account statements only when requested by participants.”
See content outline: Communicating Benefits to Employees Source: https://www.gfoa.org/materials/participant-education-guidance-for-defined-contribution
Determining the recommended contributions to be made in a given year or years, is the purpose of a(n):
Actuarial valuation
See content outline: Actuarial Reporting Source: https://www.gfoa.org/materials/enhancing-reliability-of-actuarial-valuations-for-pension
Actuarial cost method, asset smoothing method, and amortization policy are core elements of a(n):
pension funding policy.
See content outline: Pension Plan > Plan Design Source: https://www.gfoa.org/materials/core-elements-of-a-funding-policy
Why are defined benefit plans the best plan design for governments?
They are not, entities should determine a suitable plan after reviewing various options.
See content outline: Pension Plan > Plan Design Source: https://www.gfoa.org/materials/developing-a-policy-for-retirement-plan-design-options
According to the GFOA Best Practice on asset allocation for defined contribution plans, communication to participants should occur:
Quarterly and as age milestones are met.
See content outline: Plan Governance Source: https://www.gfoa.org/materials/asset-allocation-for-defined-contribution-plans
According to GFOA’s Best Practice on “Ensuring Other Postemployment Benefits (OPEB) Sustainability”, communication with stakeholders should be a priority for which reason?
Always consider OPEB as an integral part of an employee’s total compensation package.
See content outline: OPEB Source: https://www.gfoa.org/materials/ensuring-other-postemployment-benefits-opeb-sustainability
Under FSLA, “hours worked” is defined as:
It ordinarily includes all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.
See content outline: Personnel Procedures and Payroll Source: https://www.dol.gov/agencies/whd/flsa
Vacancy adjustments, inflation impacts, and compensation approaches are all key components of:
effective budgeting of salary and wages.
See content outline: Budget Implications and Payroll Source: Understanding Government Compensation and Payroll Seminar
Which of the following is a risk of “Early Retirement Incentives”?
Governments can underestimate the full costs of ERIs.
See content outline: Governance / Fiduciary Responsibilities Source: https://www.gfoa.org/materials/the-use-of-early-retirement-incentives
For an employer/ entity to qualify for a 457(b) deferred compensation plan, it must be tax exempt under IRC:
Section 501
See content outline: Deferred Compensation > Plan Design Source: https://www.irs.gov/retirement-plans/irc-457b-deferred-compensation-plans?
Which of the following is NOT a risk of a DROP (deferred retirement option plans) plan?
**The costs are easily determined and able to contain.
**
NOT “DROPs may conflict with goals of pension design.”
NOT “The cost impact of a DROP is difficult to assess.”
NOT “Employee choice frequently increases employer cost.”
See content outline: Deferred Compensation > Plan Design Source: https://www.gfoa.org/materials/deferred-retirement-option-plans?
Who pays for CORBA benefits after an employee leaves an employer?
The former employee
Content outline: COBRA 101 Source: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra
A single employer trust is also known as a:
section 115 trust.
Content outline: OPEB Source: https://www.gfoa.org/materials/establishing-and-administering-an-opeb-trust
Which is true regarding the GASB standard on other post-employment benefits (OPEB)?
An OPEB liability/asset will be reported in government-wide statements.
Content Outline 5.1 Actuarial Reporting: https://gasb.org/page/PageContent?pageId=/standards-guidance/pronouncements/summary–statement-no-75.html&isStaticPage=true
