GBA/RPA 3 Exam with Verified Answers

The 4 basic elements of an employee welfare benefit plan are: - Answer- 1. there must be a plan, fund or program 2. the plan, fund or program is established or maintained by an ER 3. the plan, fund or program is for the purpose of providing specifically listed benefits, through the purchase of insurance or otherwise 4. benefits are provided to participants and beneficiaries The courts have held that a plan, fund or program under ERISA is established if - Answer- from the surrounding circumstances, a reasonable person can ascertain the intended benefits, the class of beneficiaries, the source of financing and the procedure to receive benefits Types of benefit plans that are not subject to ERISA requirements: - Answer- - governmental plans - church plans - a plan maintained to comply with state laws on workers' compensation, unemployment or mandated disability insurance - a plan mandated outside the U.S. primarily for nonresident aliens - plans that cover only self-employed individuals and that cover no "common-law employees" - plans that cover only married shareholders of a corporation An ERISA health and welfare plan provides: - Answer- - medical, surgical or hospital care or benefits - benefits in the event of sickness, accident, disability, death or unemployment - vacation benefits - apprenticeship or other training benefits - day-care centers - scholarship funds - prepaid legal services The requirements for a voluntary benefit arrangement to be exempt from ERISA are: - Answer- - no employer or employee organization contributions - participation is completely voluntary - no employer consideration except for reasonable compensation and administration - no employer endorsement The main disclosure requirements under ERISA are: - Answer- - a plan document must exist for each plan - a summary plan description (SPD) must be furnished automatically to participants - a summary of material modifications (SMM) must be furnished automatically when a plan is amended - a four-page summary of benefits and coverage (SBC) must be provided to applicants and enrollees before enrollment or reenrollment - copies of certain plan docs must be furnished to participants and beneficiaries upon written request - claim procedures must be established and followed when processing benefits claims and when reviewing appeals of denied claims The main disclosure requirements for ERISA plan assets are: - Answer- - plan assets, including participant contributions, may be used only to pay plan benefits and reasonable admin costs - for some plans, plan assets may be held in trust - a fidelity bond must be purchased to cover every person who handles plan funds DOL defines a material reduction in a health plan as any modification or change that: - Answer- - eliminates benefits payable under the plan - reduces benefits payable under the plan (Ex: from a change in formulas, methodologies or schedules that serve as the basis for benefit determination) - increases deductibles, copayments or other amounts paid by a participant or beneficiary - reduces the service area covered by a health maintenance organization (HMO) - establishes new requirements (Ex: preauthorization requirements) to obtain services or benefits SPDs and SMMs must be furnished in a manner "reasonably calculated to ensure actual receipt of the material". Acceptable methods include: - Answer- - in-hand delivery to employees - first-class mail - second or third-class mail, but only if return and forwarding postage is guaranteed and address correction is requested - inclusion in a union or company publication, but only if certain requirements are met - disclosure to participants (both employees and non-employees) may be made electronically Basic rules for presenting the SBC to entitled parties: - Answer- - must be presented in a uniform format - utilize terminology understandable by the average plan participant - not exceed four pages in length - not include print smaller than 12-point font ER contributions toward health insurance must be made under a plan to be free from FICA and FUTA taxation. A plan exists if any of the following requirements are met: - Answer- - the plan is in writing and copies of the plan details are made available to EEs either in print or electronically by e-mail - the plan is referred to in an employment contract - the ER can document that employees contribute to the plan - ER contributions are kept in a separate account from the ER's salary account - the ER is required to make the contributions Coverage types and arrangements that need not be reported on a W-2 form: - Answer- - long-term care coverage - HIPAA "excepted benefits" and dental or vision plan coverage that is not part of a group health plan - MSAs, HSAs and HRAs - cost of EAP, wellness program and on-site medical clinic, unless the ER charges a COBRA premium for continued coverage - salary reduction election amounts contributed to FSAs 3 conditions that must be met for HRA coverage and reimbursements to not be included in an EE's gross income: - Answer- 1. the HRA only reimburses medical care expenses, as defined by the IRC 2. every request for reimbursement is substantiated 3. the HRA does not reimburse medical expenses for a prior tax year, expenses incurred before the HRA plan became effective or expenses incurred before the employee enrolled in the plan Common types of qualified benefits that may be offered under a cafeteria plan: - Answer- - a 401(k) plan - health and accidental insurance plan coverage - HSA contributions - long-term and short-term disability coverage - COBRA continuation coverage premiums Benefits that are non-qualified, are taxable income to EE's and may not be offered as part of a cafeteria plan: - Answer- - scholarships and fellowships - nontaxable fringe benefits under Section 132 - educational assistance benefits - meals and lodging provided for the ER's benefit - MSA contributions made by the ER - certain HSA's - certain long-term care insurance benefits - certain group-term life insurance benefits - tax-sheltered annuity plan elective deferrals under Section 403(b) Five of the important reporting and disclosure requirements of ERISA plans are: - Answer- 1. a written plan document 2. a summary plan description 3. a summary of material modification 4. an annual financial report (Form 5500) 5. a summary annual report Some elements that would be prudent to include in a plan document are: - Answer- - the name(s) of the plan fiduciary(ies) - policies and procedures relating to plan administration - funding requirements - a description of how benefit payments will be made - claims and appeals procedures - plan amendment and termination authority and procedures - method for distribution of plan assets upon plan termination - a statement that plan assets can be used to pay reasonable costs of plan administration Best practice guidelines require the following documents for the management of plan investments: - Answer- - SPD - Investment committee charter - Investment policy statement (IPS) The committee charter should" - Answer- - specify activities for which the committee is responsible, such as coordinating vendor analysis and recommending plan design features - define the governing bodies with whom the committee must consult and whom they need to provide recommendations - define how committee members are selected and appointed - establish how often regular committee meetings should occur - define roles of any outside consultants The IPS should: - Answer- - define the plan and its purpose - describe responsibilities for those involved with the investment program - establish the investment menu structure - assign investment performance benchmarks and develop performance measurement standards and processes - determine criteria for selecting and terminating investment managers - document the investment decision-making process The components that should be included in a well-constructed IPS are: - Answer- - statement of purpose - statement of roles and responsibilities - asset allocation - investment goals and objectives - investment guidelines - investment performance review and evaluation The 3 segments of investment committee education: - Answer- 1. understanding fiduciary responsibility