CEBS GBA Exam 3 with correct answers
Anemployeewelfarebenefitplanhasfourbasiselements.Whataretheseelements?(Mod1.1)-
VERIFIEDANSWER✔✔-1)Theremustbeaplan,fundorprogram.
2)Theplan,fundorprogramisestablishedormaintainedbyanemployer.
3)Theplan,fundorprogramisforthepurposeofprovidingspecificallylistedbenefits,throughthepurchaseofins
uranceorotherwise.
4)Benefitsareprovidedtoparticipantsandbeneficiaries.
Explainhowa"plan,fundorprogram"foranemployeebenefitplanisdefined(Mod1.1)-VERIFIEDANSWER✔✔-
Thephrase"plan,fundorprogram"isnotdefinedinERISAbutratherhasbeenlaidoutinseveralcourtcases.Court
shavehelda"plan,fundorprogram"underERISAisestablishedif,fromthesurroundingcircumstances,areasona
blepersoncanascertaintheintendedbenefits,theclassofbeneficiaries,thesourceoffinancingandtheprocedur
etoreceivebenefits.
DescribetheproceduresrequiredtoestablishanERISAemployeewelfarebenefitplan(Mod1.1)-
VERIFIEDANSWER✔✔-
NoparticularformalitiesarerequiredtocreateanERISAplanandnosingleactioninandofitselfnecessarilyconsti
tutesestablishmentofERISAemployeewelfarebenefitplan.Thus,ERISAplanshavebeendeemedtobe"establis
hedormaintained"byapracticethatwouldcauseareasonableEEtoperceiveanongoingcommitmentbytheERt
oprovideEEbenefits.ThiswouldincludeanycontributionsbyanERtowardpaymentofbenefitsorbytheERsimpl
yadministeringthebenefit.
Itiseasytohaveaplan,fundorprogram-
generallyanyongoingadministrativeschemewillsatisfythiscondition.ShowingthatanERmaintainsaplanisals
oeasy-
anycontributionbytheERtowardspaymentofbenefitsoradministrationoftheplanisenough(includingacontri
butiontowardinsurancecoverage).
ListthetypesofemployeewelfarebenefitplansnotcoveredunderERISAandspecificallyexcludedunderthestat
ute(Mod1.1)-VERIFIEDANSWER✔✔-
1)GovernmentalPlans:includesplansestablishedbytheUSGov't,thegov'tofanystateorpoliticalsubdivisionan
danyagencyofanyoftheforegoingoraplantowhichtheRailroadRetirementActapplies,aswellascertainplansa
ssociatedwithNativeAmericanTribalgov'ts.
2)Churchplans:aplanestablishedandmaintainedforitsEE'sbyachurchorbyaconventionorassociationofchurc
hesisexemptfromtaxunderIRCSec501.
3)AplanmaintainedtocomplywithstatelawsonWorker'sComp,UnemploymentorMandatedDisabilityInsura
nce.
,4)AplanmaintainedoutsidetheUSprimarilyfornonresidentaliens.
5)Plansthatcoveronlyself-employedindividualsandthatcoverno"common-
lawemployees"generallynotsubjecttoERISA.
6)PlansthatcoveronlymarriedshareholdersofacorporationarenottreatedasERISAplans.
ERshouldbeawarethatismayberequiredtocomplywithotherfederallawsthataffectEEbenefitplans.
ListthetypesofbenefitsprovidedbyERISAhealthandwelfare,andprovideexamplesofsuchplans(Mod1.1)-
VERIFIEDANSWER✔✔-a)Medical,SurgicalorHospitalCareorBenefits
b)Benefitsintheeventofsickness,accident,disability,deathorunemployment
c)VacationBenefits
d)Apprenticeshiporothertrainingbenefits
e)Day-carecenters
f)Scholarshipfunds
g)Prepaidlegalservices
Ex:MedicalInsurance,Dental,Vision,PrescriptionDrugPlans,DrugorAlcoholTreatmentprograms,FSAs,EAPs,
WellnessPrograms,AD&DandSTD/LTDPlans.
DiscusswhetherplansthatinvolvepayrollpracticesaretreatedasERISAhealthandwelfareplans(Mod1.1)-
VERIFIEDANSWER✔✔-Thepaymentofanemployee'snormalcompensationinfullorinpartoutofthe
employer'sgeneralassetsforperiodswhentheemployeeisphysicallyormentally
unabletowork—thatis,anunfundedshort-termdisabilityplan—isgenerallynota
welfarebenefitplansubjecttoERISA.However,ifadisabilityprogramprovides
morethananemployee'snormalcompensationorisfundedinanyway—for
example,itisprovidedthroughinsurance-theprogramwillbeawelfarebenefitplansubjecttoERISA.
TheDeptofLabor(DOL)regulationslistadditionaltypesofpayrollpracticesasnotbeingERISAplans.Theseinclud
eplanswherecompensationispaidtoanEE:
a)Whileabsentonholiday/vacation
b)Whileabsentonactivemilitaryduty
c)Whileabsentforjuryduty/witness
,d)OnaccountofperiodsoftimeduringwhichtheEEperformslittleornoworkwhileintraining
e)EEisrelievedofdutieswhileonsabbaticalleaveorwhilepursuingfurthereducation.
ForavoluntarybenefitarrangementtobeexemptfromERISAbasedontheDOLsafeharbor,itmustmeetcertainr
equirements,whichare?(Mod1.1)-VERIFIEDANSWER✔✔-a)NoERorEEorganizationcontributions
b)Participationiscompletelyvoluntary
c)NoERconsiderationexceptforreasonablecompensationandadministration
d)Noemployerendorsement
Explainthemeaningoftheterm"noemployerendorsement"(Mod1.1)-VERIFIEDANSWER✔✔-
MeansanERcanpublicize,collectpremiums,remitpremiums,provideemployeeinformationtoaninsuranceco
mpanyandmaintaina
fileonthevoluntaryplan.However,anemployercannotexpresspositivenormative
judgmentandcannoturge/encourageemployeeparticipation.Theparticipationof
theemployeroremployeeorganizationshouldbelimitedtothedutiesspecifiedin
theregulation,noneofwhichinvolvetheexerciseofdiscretionaryduties.An
employerhopingtorelyonthisexemptionshouldalsobecarefulnottocreatethe
impressionthatthebenefitispartofitsbenefitpackageby,forexample,includingit
inenrollmentmaterialsorencouragingemployeestoenroll.DOLwarnsinthefinal
FamilyandMedicalLeave(FMLA)regulationsthatifaplanisintendedtobe
exemptfromERISAunderthisprovision,theERshouldnotpayanEE'spremiumwhiletheEEisonFMLAleave.
DefineeachofthefollowingERISAterms:
a)planadministrator/sponsor
b)participant
c)beneficiary(Mod1.2)-VERIFIEDANSWER✔✔-(a)Planadministrator/plansponsor
Aplanadministratorisapersonwithstatutoryresponsibilityforensuringthatalloftherequiredfilingswiththefe
deralgovernmentaretimelymadeandisthepersonuponwhomthestatuteimposesauthoritytomakeimportan
tdisclosures
toparticipantsaboutplanbenefits.Generally,theplanadministratorisdesignatedintheplandocument.Howev
er,iftheplanadministratorisnotsodesignated,thentheresponsibilitydefaultstotheplansponsor,whichisusua
lly
theemployer.Generally,inasingleemployersituation,theemployeristheplansponsor.Therefore,theemploye
risultimatelyresponsibleforallreportinganddisclosurerequirementsandshouldimplementaprocesstomake
certainthoseresponsibilitiesarefollowed.
, b)Participant:
Thetermparticipanthasbeeninterpretedbroadlytoincludeemployeesin,orreasonablyexpectedtobein,curre
ntlycoveredemployment.Thiswouldincludeemployeeswhoareeligibleforaplanbutwhoarenotenrolled.Ho
wever,employeesinaclassnoteligibletoparticipateinaplanarenotparticipants
undertheERISAdefinition.Inaddition,becausethedefinitionisnotlimitedtocurrentemployees,itcanincludeC
OBRA-qualifiedbeneficiaries,coveredretireesandotherformerEE'swhomayremaineligibleunderaplan.
(c)Beneficiary:
Abeneficiaryisanypersondesignatedbyaparticipant(orbythetermsofanERISAplan)whoisormaybecomeenti
tledtoabenefitundertheplan.Abeneficiaryhasrightsprovidedundertheplaninquestion,andtheplan
fiduciariesowefiduciarydutiestoplanbeneficiariesaswellastoplanparticipants.AbeneficiarymaysueunderER
ISAforplanbenefitsandtoremedyERISAviolations.Abeneficiaryalsohastherighttoexamineand
requestcopiesofplandocuments.
WhatarethemaindisclosurerequirementsunderERISA?(Mod1.2)-VERIFIEDANSWER✔✔-
(a)Aplandocumentmustexistforeachplan
(b)Asummaryplandescription(SPD)mustbefurnishedautomaticallytoparticipants
(c)Asummaryofmaterialmodifications(SMM)mustbefurnishedautomaticallytoparticipantswhenaplanisam
ended
(d)Afour-
pagesummaryofbenefitsandcoverage(SBC)mustbeprovidedtoapplicantsandenrolleesbeforeenrollmentor
reenrollment
(e)Copiesofcertainplandocumentsmustbefurnishedtoparticipantsandbeneficiariesuponwrittenrequest
(f)Claimproceduresmustbeestablishedandfollowedwhenprocessingbenefitsclaimsandwhenreviewingapp
ealsofdeniedclaims
WhatarethemainrequirementsthatpertaintoERISAplanassets?(Mod1.2)-VERIFIEDANSWER✔✔-
a)Planassets,includingparticipantcontributions,maybeusedonlytopayplanbenefitsandreasonableadminco
sts.
b)Forsomeplans,planassetsmayhavetobeheldintrust.
c)Afidelitybondmustbepurchasedtocovereverypersonwhohandlesplanfunds.
Defineplandocumentandexplainwhyitisvitaltomeetthewrittendocumentrequirement(Mod1.2)-
VERIFIEDANSWER✔✔-
ERISArequiresthateveryERISAhealthandwelfareplanbeestablishedandmaintainedinwriting,andthescopeo
fanERISAplanisdefinedbytheofficialplandocument.Theplandocumentdescribestheplan'stermsandconditio
Anemployeewelfarebenefitplanhasfourbasiselements.Whataretheseelements?(Mod1.1)-
VERIFIEDANSWER✔✔-1)Theremustbeaplan,fundorprogram.
2)Theplan,fundorprogramisestablishedormaintainedbyanemployer.
3)Theplan,fundorprogramisforthepurposeofprovidingspecificallylistedbenefits,throughthepurchaseofins
uranceorotherwise.
4)Benefitsareprovidedtoparticipantsandbeneficiaries.
Explainhowa"plan,fundorprogram"foranemployeebenefitplanisdefined(Mod1.1)-VERIFIEDANSWER✔✔-
Thephrase"plan,fundorprogram"isnotdefinedinERISAbutratherhasbeenlaidoutinseveralcourtcases.Court
shavehelda"plan,fundorprogram"underERISAisestablishedif,fromthesurroundingcircumstances,areasona
blepersoncanascertaintheintendedbenefits,theclassofbeneficiaries,thesourceoffinancingandtheprocedur
etoreceivebenefits.
DescribetheproceduresrequiredtoestablishanERISAemployeewelfarebenefitplan(Mod1.1)-
VERIFIEDANSWER✔✔-
NoparticularformalitiesarerequiredtocreateanERISAplanandnosingleactioninandofitselfnecessarilyconsti
tutesestablishmentofERISAemployeewelfarebenefitplan.Thus,ERISAplanshavebeendeemedtobe"establis
hedormaintained"byapracticethatwouldcauseareasonableEEtoperceiveanongoingcommitmentbytheERt
oprovideEEbenefits.ThiswouldincludeanycontributionsbyanERtowardpaymentofbenefitsorbytheERsimpl
yadministeringthebenefit.
Itiseasytohaveaplan,fundorprogram-
generallyanyongoingadministrativeschemewillsatisfythiscondition.ShowingthatanERmaintainsaplanisals
oeasy-
anycontributionbytheERtowardspaymentofbenefitsoradministrationoftheplanisenough(includingacontri
butiontowardinsurancecoverage).
ListthetypesofemployeewelfarebenefitplansnotcoveredunderERISAandspecificallyexcludedunderthestat
ute(Mod1.1)-VERIFIEDANSWER✔✔-
1)GovernmentalPlans:includesplansestablishedbytheUSGov't,thegov'tofanystateorpoliticalsubdivisionan
danyagencyofanyoftheforegoingoraplantowhichtheRailroadRetirementActapplies,aswellascertainplansa
ssociatedwithNativeAmericanTribalgov'ts.
2)Churchplans:aplanestablishedandmaintainedforitsEE'sbyachurchorbyaconventionorassociationofchurc
hesisexemptfromtaxunderIRCSec501.
3)AplanmaintainedtocomplywithstatelawsonWorker'sComp,UnemploymentorMandatedDisabilityInsura
nce.
,4)AplanmaintainedoutsidetheUSprimarilyfornonresidentaliens.
5)Plansthatcoveronlyself-employedindividualsandthatcoverno"common-
lawemployees"generallynotsubjecttoERISA.
6)PlansthatcoveronlymarriedshareholdersofacorporationarenottreatedasERISAplans.
ERshouldbeawarethatismayberequiredtocomplywithotherfederallawsthataffectEEbenefitplans.
ListthetypesofbenefitsprovidedbyERISAhealthandwelfare,andprovideexamplesofsuchplans(Mod1.1)-
VERIFIEDANSWER✔✔-a)Medical,SurgicalorHospitalCareorBenefits
b)Benefitsintheeventofsickness,accident,disability,deathorunemployment
c)VacationBenefits
d)Apprenticeshiporothertrainingbenefits
e)Day-carecenters
f)Scholarshipfunds
g)Prepaidlegalservices
Ex:MedicalInsurance,Dental,Vision,PrescriptionDrugPlans,DrugorAlcoholTreatmentprograms,FSAs,EAPs,
WellnessPrograms,AD&DandSTD/LTDPlans.
DiscusswhetherplansthatinvolvepayrollpracticesaretreatedasERISAhealthandwelfareplans(Mod1.1)-
VERIFIEDANSWER✔✔-Thepaymentofanemployee'snormalcompensationinfullorinpartoutofthe
employer'sgeneralassetsforperiodswhentheemployeeisphysicallyormentally
unabletowork—thatis,anunfundedshort-termdisabilityplan—isgenerallynota
welfarebenefitplansubjecttoERISA.However,ifadisabilityprogramprovides
morethananemployee'snormalcompensationorisfundedinanyway—for
example,itisprovidedthroughinsurance-theprogramwillbeawelfarebenefitplansubjecttoERISA.
TheDeptofLabor(DOL)regulationslistadditionaltypesofpayrollpracticesasnotbeingERISAplans.Theseinclud
eplanswherecompensationispaidtoanEE:
a)Whileabsentonholiday/vacation
b)Whileabsentonactivemilitaryduty
c)Whileabsentforjuryduty/witness
,d)OnaccountofperiodsoftimeduringwhichtheEEperformslittleornoworkwhileintraining
e)EEisrelievedofdutieswhileonsabbaticalleaveorwhilepursuingfurthereducation.
ForavoluntarybenefitarrangementtobeexemptfromERISAbasedontheDOLsafeharbor,itmustmeetcertainr
equirements,whichare?(Mod1.1)-VERIFIEDANSWER✔✔-a)NoERorEEorganizationcontributions
b)Participationiscompletelyvoluntary
c)NoERconsiderationexceptforreasonablecompensationandadministration
d)Noemployerendorsement
Explainthemeaningoftheterm"noemployerendorsement"(Mod1.1)-VERIFIEDANSWER✔✔-
MeansanERcanpublicize,collectpremiums,remitpremiums,provideemployeeinformationtoaninsuranceco
mpanyandmaintaina
fileonthevoluntaryplan.However,anemployercannotexpresspositivenormative
judgmentandcannoturge/encourageemployeeparticipation.Theparticipationof
theemployeroremployeeorganizationshouldbelimitedtothedutiesspecifiedin
theregulation,noneofwhichinvolvetheexerciseofdiscretionaryduties.An
employerhopingtorelyonthisexemptionshouldalsobecarefulnottocreatethe
impressionthatthebenefitispartofitsbenefitpackageby,forexample,includingit
inenrollmentmaterialsorencouragingemployeestoenroll.DOLwarnsinthefinal
FamilyandMedicalLeave(FMLA)regulationsthatifaplanisintendedtobe
exemptfromERISAunderthisprovision,theERshouldnotpayanEE'spremiumwhiletheEEisonFMLAleave.
DefineeachofthefollowingERISAterms:
a)planadministrator/sponsor
b)participant
c)beneficiary(Mod1.2)-VERIFIEDANSWER✔✔-(a)Planadministrator/plansponsor
Aplanadministratorisapersonwithstatutoryresponsibilityforensuringthatalloftherequiredfilingswiththefe
deralgovernmentaretimelymadeandisthepersonuponwhomthestatuteimposesauthoritytomakeimportan
tdisclosures
toparticipantsaboutplanbenefits.Generally,theplanadministratorisdesignatedintheplandocument.Howev
er,iftheplanadministratorisnotsodesignated,thentheresponsibilitydefaultstotheplansponsor,whichisusua
lly
theemployer.Generally,inasingleemployersituation,theemployeristheplansponsor.Therefore,theemploye
risultimatelyresponsibleforallreportinganddisclosurerequirementsandshouldimplementaprocesstomake
certainthoseresponsibilitiesarefollowed.
, b)Participant:
Thetermparticipanthasbeeninterpretedbroadlytoincludeemployeesin,orreasonablyexpectedtobein,curre
ntlycoveredemployment.Thiswouldincludeemployeeswhoareeligibleforaplanbutwhoarenotenrolled.Ho
wever,employeesinaclassnoteligibletoparticipateinaplanarenotparticipants
undertheERISAdefinition.Inaddition,becausethedefinitionisnotlimitedtocurrentemployees,itcanincludeC
OBRA-qualifiedbeneficiaries,coveredretireesandotherformerEE'swhomayremaineligibleunderaplan.
(c)Beneficiary:
Abeneficiaryisanypersondesignatedbyaparticipant(orbythetermsofanERISAplan)whoisormaybecomeenti
tledtoabenefitundertheplan.Abeneficiaryhasrightsprovidedundertheplaninquestion,andtheplan
fiduciariesowefiduciarydutiestoplanbeneficiariesaswellastoplanparticipants.AbeneficiarymaysueunderER
ISAforplanbenefitsandtoremedyERISAviolations.Abeneficiaryalsohastherighttoexamineand
requestcopiesofplandocuments.
WhatarethemaindisclosurerequirementsunderERISA?(Mod1.2)-VERIFIEDANSWER✔✔-
(a)Aplandocumentmustexistforeachplan
(b)Asummaryplandescription(SPD)mustbefurnishedautomaticallytoparticipants
(c)Asummaryofmaterialmodifications(SMM)mustbefurnishedautomaticallytoparticipantswhenaplanisam
ended
(d)Afour-
pagesummaryofbenefitsandcoverage(SBC)mustbeprovidedtoapplicantsandenrolleesbeforeenrollmentor
reenrollment
(e)Copiesofcertainplandocumentsmustbefurnishedtoparticipantsandbeneficiariesuponwrittenrequest
(f)Claimproceduresmustbeestablishedandfollowedwhenprocessingbenefitsclaimsandwhenreviewingapp
ealsofdeniedclaims
WhatarethemainrequirementsthatpertaintoERISAplanassets?(Mod1.2)-VERIFIEDANSWER✔✔-
a)Planassets,includingparticipantcontributions,maybeusedonlytopayplanbenefitsandreasonableadminco
sts.
b)Forsomeplans,planassetsmayhavetobeheldintrust.
c)Afidelitybondmustbepurchasedtocovereverypersonwhohandlesplanfunds.
Defineplandocumentandexplainwhyitisvitaltomeetthewrittendocumentrequirement(Mod1.2)-
VERIFIEDANSWER✔✔-
ERISArequiresthateveryERISAhealthandwelfareplanbeestablishedandmaintainedinwriting,andthescopeo
fanERISAplanisdefinedbytheofficialplandocument.Theplandocumentdescribestheplan'stermsandconditio
