Topic 11 - Strategic Benefits

Question 1

What is the distinction between performance-based rewards and employment-based rewards?

Answer 1

Performance-based rewards depend on employee or organizational performance, while employment-based rewards (such as benefits) are contingent upon an employee maintaining employment with the organization.

Question 2

Why are employee benefits considered employment-based rewards?

Answer 2

Because they are only contingent on an employee staying with the organization, not on performance.

Question 3

What is the purpose of a Benefit Benchmark Survey?

Answer 3

To understand the types and levels of benefits offered by other companies, helping organizations attract and retain qualified employees.

Question 4

What does the Benefit Mix Strategy refer to?

Answer 4

The combination of different benefit types an organization offers to its employees.

Question 5

What is the Benefit Level Strategy?

Answer 5

It refers to the level of each benefit provided and the overall expenditure for the company on benefits.

Question 6

What is the purpose of offering a benefits package that leads the market in some areas?

Answer 6

To differentiate the organization in the labor market and make it more attractive to potential employees.

Question 7

What is an Employee Benefit Preference Survey?

Answer 7

A survey that asks employees about their preferred benefits to help organizations tailor their benefit offerings.

Question 8

Why is it important to communicate clearly about the purpose of an Employee Benefit Preference Survey?

Answer 8

To avoid creating false expectations among employees regarding the availability of new benefits.

Question 9

How can exit interviews help with benefit decisions?

Answer 9

By gathering feedback on whether benefits influenced an employee’s decision to leave, which helps organizations adjust their benefits to stay competitive.

Question 10

What are utilization rates in the context of employee benefits?

Answer 10

The extent to which employees are using various benefit options offered by the organization.

Question 11

Why should organizations monitor benefits with low utilization rates?

Answer 11

To ensure that these benefits align with organizational goals and are not wasted.

Question 12

What is the role of uncertainty and risk in making employee benefits decisions?

Answer 12

Decisions are made under risk (known probabilities) and uncertainty (unknown outcomes), requiring careful consideration and gathering of market data.

Question 13

How can organizations reduce uncertainty and risk when offering new employee benefits?

Answer 13

By conducting surveys, focus groups, and piloting benefits with a smaller group of employees before full implementation.

Question 14

What is a Psychological Contract in the context of employee benefits?

Answer 14

It refers to the informal expectations between an employee and the organization, where offering certain benefits signals care and strengthens the employee-organization bond.

Question 15

How do employee benefits contribute to the Psychological Contract?

Answer 15

They signal to employees that the organization cares for their personal needs, fostering a sense of safety and loyalty.

Question 16

True or False. While employee benefits are likely to have an impact on the attraction of employees, and inducing them to accept employment, it is less likely that such rewards would have a large effect on day-to-day performance-related behavior.

Answer 16

True

Question 17

The benefits benchmark survey is used to:

Gauge the type and level of benefits that the market expects
Gauge the type and level of benefits offered by other companies
Gauge the type and level of benefits offered recently within the organization
Gauge the type and level of benefits mandated by the government

Answer 17

Gauge the type and level of benefits offered by other companies

Question 18

The benefit mix strategy refers to:

The particular combination of benefit types that an organization offers
The particular combination of benefit types that the government requires
The particular combination of benefit types that competitor organizations offer
The particular combination of benefit types that the market expects

Answer 18

The particular combination of benefit types that an organization offers

For example, by adding on-site child care, orthodontia coverage, and low family deductibles, an organization can create a distinct package that may appeal to particular employees.

Question 19

The benefit level strategy refers to:

Only the overall company expenditure
An overall benefit and compensation strategy
The level of each benefit type provided as well as the overall company expenditure
Only the level of each benefit type

Answer 19

The level of each benefit type provided as well as the overall company expenditure

Question 20

A psychological contract refers to:

The informal expectations and agreements between an employee and an organization
The formal expectations and agreements between an employee and an organization
The positive expectations that a company expects from employees
The negative expectations that a company expects from employees

Answer 20

The informal expectations and agreements between an employee and an organization

Question 21

Are organizations required to offer retirement benefits?

Answer 21

No, organizations are not required to offer retirement benefits, but they must comply with laws that regulate retirement income, like ERISA.

Question 22

What does ERISA stand for and what does it regulate?

Answer 22

ERISA stands for the Employee Retirement Income Security Act, and it regulates retirement plans offered by organizations to ensure they meet specific requirements.

Question 23

What are the requirements for a retirement plan to be considered qualified under ERISA?

Answer 23

Plans must communicate characteristics, follow fiduciary responsibility rules, meet funding and vesting requirements, and adhere to payout rules.

Question 24

What legislation requires employers to pay and collect taxes for Social Security, Medicare, and Medicaid?

Answer 24

Legislation related to Social Security enacted in 1935 and updated in 1965 requires employers to pay and collect taxes for these programs.

Question 25

What is the purpose of the Social Security, Medicare, and Medicaid programs?

Answer 25

These programs provide a retirement safety net, disability benefits, and a small death benefit, funded by taxes employers collect.

Question 26

How do Workers’ Compensation laws operate?

Answer 26

Workers’ Compensation is administered at the state level and provides compensation for work-related injuries without allowing employees to sue employer

Question 27

What does the no-fault principle in Workers’ Compensation mean?

Answer 27

It means employees injured at work receive compensation without suing employers, and employers pay premiums based on industry and safety history.

Question 28

What is the Unemployment Compensation system?

Answer 28

It provides temporary income to employees who lose their jobs through no fault of their own, funded by taxes paid by employers.

Question 29

How is the Unemployment Compensation tax rate determined?

Answer 29

It is partially determined by the organization’s history of employment practices, such as layoffs, which contribute to unemployment.

Question 30

What is the Family and Medical Leave Act (FMLA)?

Answer 30

The FMLA entitles employees to up to 12 weeks of unpaid time off for medical or family reasons, such as recovery or caregiving.

Question 31

Who is eligible for FMLA leave?

Answer 31

FMLA applies to organizations with 50 or more employees and employees who have worked 1,250 hours in the preceding year.

Question 32

What does COBRA allow employees to do?

Answer 32

COBRA allows employees to continue their employer-sponsored health care plan at their own expense for up to 18 months after leaving the organization.

Question 33

What does HIPAA stand for and what does it regulate?

Answer 33

HIPAA stands for the Health Insurance Portability and Accountability Act, which restricts the use of preexisting condition clauses and protects the privacy of employee health information.

Question 34

What does HIPAA prevent in terms of health care coverage?

Answer 34

It prevents employers from using preexisting condition clauses to deny coverage and protects the confidentiality of employees’ health data.

Question 35

What is the Employer Mandate under the Affordable Care Act (ACA)?

Answer 35

The Employer Mandate requires organizations with 50 or more employees to offer health insurance or pay an additional tax.

Question 36

What key implications does the ACA have for employee benefits?

Answer 36

The ACA affects coverage for dependents, lifetime limits, premium increases, and preexisting condition clauses, and requires monitoring by employers.

Question 37

The Employment Retirement Income Security Act was established to:

Regulate the retirement plans offered by the government
Regulate the retirement plans offered by organizations
Regulate the retirement plans offered through unions
Work as a liaison between organizations and the government

Answer 37

Regulate the retirement plans offered by organizations

Question 38

Social Security requires organizations to:

Both pay and collect taxes from employees to fund the United States Social Security, Medicare, and Medicaid systems
Only pay taxes from employees to fund the United States Social Security, Medicare, and Medicaid systems
Only collect taxes from employees to fund the United States Social Security, Medicare, and Medicaid systems
None of the above

Answer 38

Both pay and collect taxes from employees to fund the United States Social Security, Medicare, and Medicaid systems

Question 39

FMLA allows up to ____________ weeks of time off to recuperate from medical conditions or to handle qualified family needs.

12
15
10
8

Answer 39

12

This time can be taken intermittently, but is not required to be paid time.

Question 40

HIPAA stands for:

Health Insurance Probability and Affordability Act
Health Insurance Portability and Affordability Act
Health Insurance Probability and Accountability Act
Health Insurance Portability and Accountability Act

Answer 40

Health Insurance Portability and Accountability Act

Question 41

Within the ACA, the employer mandate requires that organizations with ___ or more people either offer health insurance to their employees or pay an additional tax for not having done so.

25
50
75
100

Answer 41

50

Question 42

What is the main philosophy behind health-related employee benefits?

Answer 42

Employers take a paternalistic role in meeting employees’ physical needs and ensuring they can continue contributing to the organization through good health.

Question 43

Why do organizations offer health-related benefits to employees?

Answer 43

To help retain employees’ health, contribute to their well-being, and negotiate lower costs by pooling a large number of policyholders.

Question 44

What is the most common form of employee benefits?

Answer 44

Health-related benefits, including medical, dental, and vision insurance.

Question 45

How do organizations negotiate better terms for medical insurance?

Answer 45

Organizations can negotiate more favorable terms due to their size and by offering coverage to a large number of employees.

Question 46

What is an Indemnity Plan (fee-for-service)?

Answer 46

A health insurance plan that allows employees to visit any physician, creating costs only when health services are utilized. It offers maximum flexibility but doesn’t help control costs.

Question 47

What is a Managed Care Plan?

Answer 47

A plan that places limitations on employees’ healthcare choices to help control rising healthcare costs by negotiating better service terms.

Question 48

What is a PPO (Preferred Provider Organization) plan?

Answer 48

A managed care plan where employees receive lower copays and deductibles when using in-network providers, but can go outside the network with higher costs.

Question 49

What is an EPO (Exclusive Provider Organization) plan?

Answer 49

A managed care plan where expenses outside the network are not reimbursed, offering less flexibility than a PPO.

Question 50

What is a POS (Point-of-Service) plan?

Answer 50

A managed care plan where a medical services contact (gatekeeper) is assigned to ensure the most efficient healthcare choices, such as seeing a general practitioner before a specialist.

Question 51

What is an HMO (Health Maintenance Organization)?

Answer 51

A health plan with a more restricted network of healthcare providers, offering prepaid services and a set per-employee fee regardless of service utilization.

Question 52

What is Premium Sharing in medical insurance?

Answer 52

A policy where the employer and employee share the cost of the health insurance premium, reducing the employer’s costs and encouraging employees to value the benefits.

Question 53

What is a Co-pay Policy?

Answer 53

A cost-sharing policy where employees pay a set amount each time they use a service, intended to reduce over-utilization of healthcare benefits.

Question 54

What is a Deductible in health insurance?

Answer 54

The amount employees must pay out-of-pocket before insurance begins to cover medical expenses, encouraging cost-sensitivity.

Question 55

What is a Cost-sharing approach in health insurance?

Answer 55

After the deductible is met, employees typically pay a portion of medical expenses, usually around 20%, with insurance covering the remaining 80%.

Question 56

What is the purpose of Dental Insurance for employees?

Answer 56

It covers preventative and routine dental expenses, often with similar cost-control measures to medical insurance.

Question 57

Why do organizations offer Vision Insurance?

Answer 57

Because routine vision-related expenses aren’t typically covered by medical insurance, and many companies provide it as an additional benefit to employees.

Question 58

What is the coverage for laser-based vision correction in vision insurance plans?

Answer 58

About one-quarter of vision insurance plans cover laser-based vision correction procedures.

Question 59

What is a Flexible Spending Account (FSA)?

Answer 59

An account where employees set aside pre-tax funds to cover health-related expenses, saving on taxes, but the funds do not roll over from year to year.

Question 60

How do Health Savings Accounts (HSAs) differ from FSAs?

Answer 60

HSAs allow funds to roll over from year to year and are paired with high-deductible health plans, helping employees manage their healthcare costs more effectively.

Question 61

What is the benefit of Health Savings Accounts over Flexible Spending Accounts?

Answer 61

HSAs allow the funds to roll over from year to year, giving employees more flexibility, whereas FSAs are “use-it-or-lose-it” accounts.

Question 62

Indemnity plans:

Allow employers to go to any physician and create costs for the organization only when health services are utilized
Prevent employers from going to any physician and create costs for the organization only when health services are utilized
Allow employees to go to any physician and create costs for the organization only when health services are utilized
Prevent employees from going to any physician and create costs for the organization only when health services are utilized

Answer 62

Allow employees to go to any physician and create costs for the organization only when health services are utilized

Question 63

Managed Care Plans are adopted by organizations trying to _____ the increasing cost of healthcare.

Slow
Interfere
Speed
Deter

Answer 63

Slow

Question 64

The most common form of managed care plan is the:

Preferred Portability Organization
Preferred Provider Organization
Provided Portability Organization
Portable Provider Organization

Answer 64

Preferred Provider Organization

Question 65

Cost-sharing is when:

The insurance pays for all medical expenses
The insurance only pays for a portion of medical expenses
The insurance pays for a mandated 25% of medical expenses
The insurance pays for a mandated 10% of medical expenses

Answer 65

The insurance only pays for a portion of medical expenses

Question 66

With insurance, ______________ require employees to pay a set amount for each time any service is used.

All-pays
Co-pays
Insurance Premiums
None of the Above

Answer 66

Co-pays

Question 67

What is the purpose of income replacement employee benefits?

Answer 67

To help employees manage risks that may affect their earnings, such as accidents or retirement.

Question 68

How have retirement benefits changed in recent years?

Answer 68

Retirement plans have become more portable, with employees bearing more of the financial risk due to lower job security and changing career paths.

Question 69

What is a Defined Benefit Plan?

Answer 69

A traditional pension plan where an organization calculates a guaranteed pension amount based on factors like the employee’s years of service and average salary, and pays the employee annually throughout retirement.

Question 70

Why have Defined Benefit Plans decreased in popularity?

Answer 70

Because the organization bears the financial risk, including market fluctuations and longer life expectancies, leading to fewer than 20% of retirement benefits being Defined Benefit Plans in 2013.

Question 71

What is a Defined Contribution Plan?

Answer 71

A retirement plan where employers contribute to an employee’s portable retirement account, with funds invested by the employee and growing tax-free until retirement.

Question 72

What are common examples of Defined Contribution Plans?

Answer 72

401(k) and 403(b) plans, which are tax-protected retirement accounts under specific sections of the tax code.

Question 73

What is Employer Matching in Defined Contribution Plans?

Answer 73

When employers contribute to an employee’s retirement account based on the employee’s own contribution, typically matching up to 3-5% of their salary.

Question 74

What is the purpose of Disability Coverage?

Answer 74

To replace a portion of an employee’s salary if they are unable to work due to injury or illness.

Question 75

What is Short-term Disability Coverage?

Answer 75

A benefit that replaces a portion of an employee’s salary if they are unable to work for a short period (typically up to 3 weeks) due to injury or illness.

Question 76

What is Long-term Disability Coverage?

Answer 76

A benefit that replaces a portion of an employee’s salary if they are unable to work for an extended period (typically up to 3 months or more) due to injury or illness.

Question 77

How common is disability coverage in the U.S.?

Answer 77

About three-quarters of U.S. firms offer some form of disability coverage.

Question 78

What is Paid Leave?

Answer 78

A benefit that allows employees to receive pay for time not worked, including vacation, holidays, sick days, and personal days.

Question 79

What are the types of Paid Leave offered by organizations?

Answer 79

Vacation time, Holiday Pay, Sick Days, and Personal Days.

Question 80

What is a Paid Time Off Bank?

Answer 80

A system where employees have a bank of time off to be used for any purpose, removing the need for HR to monitor the reasons for absences.

Question 81

Which of the following is not used for defined benefits?

Any appropriate medium that employees can use to convince management
An organization uses a time-based formula to calculate how much pension an employee has earned
Upon retirement the organization pays the employee a guaranteed amount per year throughout retirement
None of the above

Answer 81

Any appropriate medium that employees can use to convince management

Question 82

Employer matching is where:

Employees make contributions to the retirement account contingent on the organization also electing to contribute to it
Organizations make contributions to the retirement account even if the employee chooses not to contribute
Organizations make contributions to the retirement account contingent on the employee also electing to contribute to it
Employees make contributions to the retirement account even if the organization chooses not to contribute

Answer 82

Organizations make contributions to the retirement account contingent on the employee also electing to contribute to it

Question 83

Short-term disability policy usually lasts ________ weeks.

1
2
3
4

Answer 83

3

Question 84

Paid leave refers to:

Various forms of pay for time not worked
Future pay for time not worked
Back pay for time not worked
None of the above

Answer 84

Various forms of pay for time not worked

Question 85

What is the purpose of life insurance provided by most organizations?

Answer 85

Life insurance provides a payout to the survivors of an employee upon their death.

Question 86

How do organizations typically structure life insurance coverage for employees?

Answer 86

Coverage is often limited to a percentage of the employee’s salary, with the option for employees to purchase additional coverage.

Question 87

What are “Perks” or “Perquisites” in the context of employee benefits?

Answer 87

Perks, or Perquisites, are unique benefits offered by employers that are not standard and help differentiate the organization in the labor market.

Question 88

How do fringe benefits like free meals, company cars, or on-site massages impact an organization?

Answer 88

These perks send a strong signal to employees, help shape organizational culture, and can contribute to recognition as a “Best Company to Work For.”

Question 89

What are some examples of additional strategic benefits that organizations may offer?

Answer 89

Examples include onsite childcare, personal tax services, elder care assistance, credit union use, infertility coverage, and onsite exercise facilities.

Question 90

How should organizations determine which perks or fringe benefits to offer?

Answer 90

Benefits should be based on a sound Total Rewards Strategy and monitored to ensure they are delivering the expected results for both the organization and its employees.

Question 91

What is the main advantage of a cash-based compensation system?

Answer 91

It allows employees to exchange cash for products and services they value, without requiring the organization to predict those preferences.

Question 92

Why do many employers offer Flexible Benefit Plans?

Answer 92

Flexible Benefit Plans allow employees to choose benefits that align with their personal needs and preferences, given the diversity of the workforce.

Question 93

How do Flexible Benefit Plans work?

Answer 93

Employees are given a dollar amount of benefit units to allocate toward various programs, allowing them to design a benefit package that suits their specific needs, such as life insurance or health insurance.

Question 94

True or False. Utilization rates refer to the extent to which employees are using the different benefit options.

Answer 94

True

Question 95

Another name for flexible benefits plans could be:

Cafeteria-style plan
Dinner plan
Lunchtime plan
Breakfast plan

Answer 95

Cafeteria-style plan

Question 96

True or False. Flexible benefit plans allow employees to allocate a defined number of benefit units to various programs to design a package that more closely matches their definition of value.

Answer 96

True

Question 97

Which of the following would not be considered a strategic benefit?

Overtime pay
Onsite childcare
Credit union
Onsite exercise

Answer 97

Overtime pay

Question 98

____________________ provide(s) a payout to survivors of the employee upon his or her death.

Premiums
HSA
Health insurance
Life insurance

Answer 98

Life insurance

The amount of coverage paid for by the organization is often limited to a percentage of the employee’s salary, but many organizations provide employees the option of purchasing higher amounts of coverage.

Question 99

_____________________ would be made available as a break from work, with no constraints on why the employee wants to use the time.

PPO
Paid time off
Vacation time
Sick days

Answer 99

Vacation time

Question 100

True or False. The ACA has implications for continued coverage of dependents, lifetime limits on coverage, premium increases, and preexisting conditions clauses in insurance plans.

Answer 100

True

Question 101

____________________ is provided for many federally recognized holidays.

Sick pay
Paid time off
Holiday pay
All of the above

Answer 101

Holiday pay

Question 102

______________________are used for employees and paid even though they do not attend work but the expectation is that an employee is actually unwell when the days are used.

Paid time off
Holiday pay
Personal pay
Sick days

Answer 102

Sick days

Question 103

______________________ are used when the employee is free to not come into work, even if they are not sick.

Sick days
Paid time off days
Holiday pay days
Personal days

Answer 103

Personal days

Question 104

True or False. The selection of benefits should focus on those benefits in the best position to influence choices to join and remain with the organization.

Answer 104

True

Question 105

A _______________________ takes HR out of the role of policing excuses for absences and places responsibility for managing the days off on the employee.

Personal pay bank
Paid time off bank
Health savings account
Holiday pay bank

Answer 105

Paid time off bank

Question 106

Organizations can establish _____________, wherein organizations or employees put pretax funds into an account upon which employees can draw for medical expense reimbursement.

Paid off accounts
Flexible spending accounts
Holiday accounts
Health savings accounts

Answer 106

Health savings accounts

These accounts are paired with more traditional health plans with very high deductibles and are a mechanism for encouraging employees to manage their health care expenses in the same cost-conscious way they manage their funds in general.

Question 107

With the increased use of laser-based vision correction, about ________ of plans also cover that procedure.

One-third
One-half
One-quarter
One-fifth

Answer 107

One-quarter

Question 108

True or False. Dental insurance supports employees in preventative and routine dental expenses.

Answer 108

True

Question 109

A _______________ is where employers require the employee to pay up to a certain amount in medical expenses before the insurance begins.

Deductible
Cost provider
Cost plus
Cost-sharing

Answer 109

Deductible

Question 110

After the deductible has been reached, organizations often have a ___________approach in which the insurance only pays for a portion of medical expenses.

Cost plus
Cost-sharing
Cost provider
Flexible spending account

Answer 110

Cost-sharing