CEBS GBA Exam 1 (MODULE 1-12)
Questions & Answers 100% Guarantee
Pass
Module 1 – Employee Benefits Fundamentals
Q: Broad view of Employee Benefits (1.1)
A: Considers Employee Benefits to be virtually any form of compensation
other than direct wages paid to Employees (e.g., WC, Unemployment, State
DI, SS, Vacation, Holidays, 401K/Retirement, Employer share of Medical,
Severance Pay, Child Care).
Q: Narrow view of Employee Benefits (1.1)
A: Any type of plan sponsored or initiated by Employees and Employers
providing benefits from the employment relationship that are not underwritten
or paid directly by the government (excludes legally mandated benefits like
WC, SS).
Q: 3 Examples of Tax Advantages of Employee Benefit Plans (1.2)
A: 1) Employer contributions are tax deductible. 2) Employer contributions are
not considered income to employees. 3) Certain retirement benefits
accumulate tax-free until distributed.
Q: Impact of Labor Unions on Employee Benefits (1.2)
A: Through Collective Bargaining, EBPs have been impacted. A 1948 ruling
states the duty to bargain in good faith over wages also included insurance
and fringes (pension). In NLRB v. W.W. Cross & Co., wages were ruled to
include health and accident plans.
Q: What is the Taft-Hartley Act? (1.2)
A: The Labor Management Relations Act of 1947, restricting union power; set
forth good-faith collective bargaining over wages, hours, terms of employment
and benefits.
Q: Examples of Questions to address when creating benefit objectives (1.3)
A: What benefits should be provided? Who should be covered? Should
employees have options? How should the plan be financed? Administered?
Communicated?
Q: Compare Compensation/Service Oriented vs Needs-Oriented Philosophy
(1.4)
A: Compensation/Service: benefits tied to salary or years of service.
Needs-Oriented: focuses on needs of employees and dependents.
Q: Define Needs/Exposures covered under EBP (1.4)
,A: Medical expenses, disability losses, death, retirement needs, capital
accumulation, unemployment/layoff, financial/retirement counseling,
property/liability losses, dependent care, educational assistance, custodial
care (LTC), and other goals (e.g., stock purchase plans).
Q: Identify Steps in Applying the Functional Approach (1.4)
A: 1) Classify needs/objectives. 2) Classify employee categories. 3) Analyze
present benefits. 4) Determine gaps/overlaps. 5) Consider recommendations.
6) Estimate costs/savings. 7) Evaluate financing alternatives. 8) Consider
cost-saving techniques. 9) Decide on benefits/financing. 10) Implement. 11)
Communicate. 12) Periodically re-evaluate.
Q: Identify 3 types of total compensation/benefit policies (1.4)
A: 1) Average compensation policy (follows industry norms). 2)
High-compensation policy (attracts top talent). 3) Low-compensation policy
(modest, small scale).
Q: What is the Functional Approach to Employee Benefit Planning? (1.4)
A: A systematic method of analyzing an employer's total EBP to meet
employee needs and manage loss exposures within overall compensation
goals.
Q: Why is the Functional Approach appropriate? (1.4)
A: 1) Benefits are a significant, tax-effective part of compensation. 2) Benefits
represent large labor costs needing planning/control. 3) Benefits were
historically adopted piecemeal—this fills gaps. 4) Keeps the EBP current and
compliant. 5) Ensures benefits integrate properly.
Q: Define Accumulation-Oriented Benefits (1.5)
A: Pension plans, profit-sharing, savings, 401K—reward long service; have
longer probationary periods since viewed as a reward.
Q: Define Protection-Oriented Benefits (1.5)
A: Medical expense, life/STD/LTD insurance—protect against serious loss
exposures; short probationary period due to need for immediate coverage.
Q: Explain the Replacement Ratio concept (1.5)
A: Gross income after retirement divided by gross income before retirement,
including SS, capital accumulation, and retirement plan benefits.
Q: Impact of a Contributory plan on Employee Participation (1.5)
A: Not everyone will elect due to cost. If mandatory, may create employee
relations issues.
Q: Describe arguments about flexibility in plan design (1.5)
A: Argument 1: More flexibility → more likely EE selects benefits meeting their
needs. Argument 2: Works against functional approach since some EEs may
not recognize their own needs and leave gaps uncovered.
, Module 2 – Risk & Insurance Concepts
Q: Define concept of risk (2.1)
A: Uncertainty regarding possible losses; inability to determine with certainty
the number/value of claims.
Q: Define physical, moral, and morale hazard (2.1)
A: Physical: physical conditions increasing loss chance (defective wiring).
Moral: dishonesty increasing loss chance (arson). Morale:
carelessness/indifference because one is insured.
Q: Relationship between peril and hazard (2.1)
A: Peril = cause of loss (fire, flood, death). Hazard = condition increasing the
probability or severity of a peril.
Q: Most Important Type of Pure Risk (2.2)
A: Personal risk (death, illness, disability, unemployment).
Q: How does pure risk differ from speculative risk? (2.2)
A: Pure risk: only loss or no loss possible (insurable). Speculative risk:
includes possibility of gain (e.g., gambling, stocks).
Q: Summarize Methods for Handling Risk (2.2)
A: 1) Avoidance. 2) Control. 3) Retention. 4) Transfer. 5) Insurance (a form of
transfer).
Q: Compare insurance to gambling (2.3)
A: Insurance handles existing pure risk; gambling creates speculative risk.
Insurance shares losses mutually; gambling produces a winner and a loser
who stays worse off.
Q: Characteristics of ideal insurable risk (2.3)
A: 1) Large number of similar risks. 2) Verifiable/measurable loss. 3)
Non-catastrophic loss. 4) Calculable chance of loss. 5) Economically feasible
premium. 6) Accidental/unintentional loss.
Q: Define Indemnification (2.3)
A: Making the insured whole again after a covered loss—restoring to a similar
financial position as before the claim.
Q: How is insurance a mechanism for EBPs? (2.3)
A: Insured pays premiums into a fund; upon loss, reimbursement is provided,
spreading/reducing risk among all contributors.
Q: Advantages/disadvantages of using insurance to fund an EBP (2.3)
A: Advantages: known premiums, outside administration, financial backing,
cost management, economy. Disadvantages: possible added costs (admin,
commissions, taxes), potential employee dissatisfaction (slow claims, denials).
Q: Which risk handling technique is mutually exclusive? (2.3)
A: Avoidance—if you avoid the risk entirely, there's no loss and no need for
other techniques.
Questions & Answers 100% Guarantee
Pass
Module 1 – Employee Benefits Fundamentals
Q: Broad view of Employee Benefits (1.1)
A: Considers Employee Benefits to be virtually any form of compensation
other than direct wages paid to Employees (e.g., WC, Unemployment, State
DI, SS, Vacation, Holidays, 401K/Retirement, Employer share of Medical,
Severance Pay, Child Care).
Q: Narrow view of Employee Benefits (1.1)
A: Any type of plan sponsored or initiated by Employees and Employers
providing benefits from the employment relationship that are not underwritten
or paid directly by the government (excludes legally mandated benefits like
WC, SS).
Q: 3 Examples of Tax Advantages of Employee Benefit Plans (1.2)
A: 1) Employer contributions are tax deductible. 2) Employer contributions are
not considered income to employees. 3) Certain retirement benefits
accumulate tax-free until distributed.
Q: Impact of Labor Unions on Employee Benefits (1.2)
A: Through Collective Bargaining, EBPs have been impacted. A 1948 ruling
states the duty to bargain in good faith over wages also included insurance
and fringes (pension). In NLRB v. W.W. Cross & Co., wages were ruled to
include health and accident plans.
Q: What is the Taft-Hartley Act? (1.2)
A: The Labor Management Relations Act of 1947, restricting union power; set
forth good-faith collective bargaining over wages, hours, terms of employment
and benefits.
Q: Examples of Questions to address when creating benefit objectives (1.3)
A: What benefits should be provided? Who should be covered? Should
employees have options? How should the plan be financed? Administered?
Communicated?
Q: Compare Compensation/Service Oriented vs Needs-Oriented Philosophy
(1.4)
A: Compensation/Service: benefits tied to salary or years of service.
Needs-Oriented: focuses on needs of employees and dependents.
Q: Define Needs/Exposures covered under EBP (1.4)
,A: Medical expenses, disability losses, death, retirement needs, capital
accumulation, unemployment/layoff, financial/retirement counseling,
property/liability losses, dependent care, educational assistance, custodial
care (LTC), and other goals (e.g., stock purchase plans).
Q: Identify Steps in Applying the Functional Approach (1.4)
A: 1) Classify needs/objectives. 2) Classify employee categories. 3) Analyze
present benefits. 4) Determine gaps/overlaps. 5) Consider recommendations.
6) Estimate costs/savings. 7) Evaluate financing alternatives. 8) Consider
cost-saving techniques. 9) Decide on benefits/financing. 10) Implement. 11)
Communicate. 12) Periodically re-evaluate.
Q: Identify 3 types of total compensation/benefit policies (1.4)
A: 1) Average compensation policy (follows industry norms). 2)
High-compensation policy (attracts top talent). 3) Low-compensation policy
(modest, small scale).
Q: What is the Functional Approach to Employee Benefit Planning? (1.4)
A: A systematic method of analyzing an employer's total EBP to meet
employee needs and manage loss exposures within overall compensation
goals.
Q: Why is the Functional Approach appropriate? (1.4)
A: 1) Benefits are a significant, tax-effective part of compensation. 2) Benefits
represent large labor costs needing planning/control. 3) Benefits were
historically adopted piecemeal—this fills gaps. 4) Keeps the EBP current and
compliant. 5) Ensures benefits integrate properly.
Q: Define Accumulation-Oriented Benefits (1.5)
A: Pension plans, profit-sharing, savings, 401K—reward long service; have
longer probationary periods since viewed as a reward.
Q: Define Protection-Oriented Benefits (1.5)
A: Medical expense, life/STD/LTD insurance—protect against serious loss
exposures; short probationary period due to need for immediate coverage.
Q: Explain the Replacement Ratio concept (1.5)
A: Gross income after retirement divided by gross income before retirement,
including SS, capital accumulation, and retirement plan benefits.
Q: Impact of a Contributory plan on Employee Participation (1.5)
A: Not everyone will elect due to cost. If mandatory, may create employee
relations issues.
Q: Describe arguments about flexibility in plan design (1.5)
A: Argument 1: More flexibility → more likely EE selects benefits meeting their
needs. Argument 2: Works against functional approach since some EEs may
not recognize their own needs and leave gaps uncovered.
, Module 2 – Risk & Insurance Concepts
Q: Define concept of risk (2.1)
A: Uncertainty regarding possible losses; inability to determine with certainty
the number/value of claims.
Q: Define physical, moral, and morale hazard (2.1)
A: Physical: physical conditions increasing loss chance (defective wiring).
Moral: dishonesty increasing loss chance (arson). Morale:
carelessness/indifference because one is insured.
Q: Relationship between peril and hazard (2.1)
A: Peril = cause of loss (fire, flood, death). Hazard = condition increasing the
probability or severity of a peril.
Q: Most Important Type of Pure Risk (2.2)
A: Personal risk (death, illness, disability, unemployment).
Q: How does pure risk differ from speculative risk? (2.2)
A: Pure risk: only loss or no loss possible (insurable). Speculative risk:
includes possibility of gain (e.g., gambling, stocks).
Q: Summarize Methods for Handling Risk (2.2)
A: 1) Avoidance. 2) Control. 3) Retention. 4) Transfer. 5) Insurance (a form of
transfer).
Q: Compare insurance to gambling (2.3)
A: Insurance handles existing pure risk; gambling creates speculative risk.
Insurance shares losses mutually; gambling produces a winner and a loser
who stays worse off.
Q: Characteristics of ideal insurable risk (2.3)
A: 1) Large number of similar risks. 2) Verifiable/measurable loss. 3)
Non-catastrophic loss. 4) Calculable chance of loss. 5) Economically feasible
premium. 6) Accidental/unintentional loss.
Q: Define Indemnification (2.3)
A: Making the insured whole again after a covered loss—restoring to a similar
financial position as before the claim.
Q: How is insurance a mechanism for EBPs? (2.3)
A: Insured pays premiums into a fund; upon loss, reimbursement is provided,
spreading/reducing risk among all contributors.
Q: Advantages/disadvantages of using insurance to fund an EBP (2.3)
A: Advantages: known premiums, outside administration, financial backing,
cost management, economy. Disadvantages: possible added costs (admin,
commissions, taxes), potential employee dissatisfaction (slow claims, denials).
Q: Which risk handling technique is mutually exclusive? (2.3)
A: Avoidance—if you avoid the risk entirely, there's no loss and no need for
other techniques.
