CEBS - GBA 1 Questions & Answers 100%
Correct!!
Broad View of Employee Benefits - ANSWERAny from of compensation other than direct wages.
Includes government mandated plans and private plans (Social Security, paid vacation and pension
plans)
Narrow View of Employee Benefits - ANSWERAny type of plan sponsored or initiated unilaterally or
jointly by employers and employees and engaged in providing benefits that result from the
employment relationship and that are not underwritten or paid directly by government
Categories that fall under the broad view of employee benefits - ANSWER1) Legally required benefits
(social security etc) 2) Payments for time not worked 3) Employers share of medical and medically
related benefits 4) Employers share of retirement and savings plan payments 5) Misc. benefits
What benefits are excluded when the term employee benefits is defined in a narrow sense? -
ANSWERLegally mandated benefits - Social security, medicare, unemployment etc.
What impact have labor unions historically had in employee benefits? - ANSWERIn 1948 when the
National Labor Relations Board (NLRB) ruled in the Inland Steel Case the duty to bargain in good faith
over wages. Then, in the W.W. Cross & Co Case, NLRB ruled that wages include a health and accident
plan
Explain the significance of the Taft Harley Act in employee benefit planning - ANSWERThe Labor-
Management Relations Act, also called the Taft-Harley Act sets forth the framework for good-faith
collective bargaining over wages, hours, conditions, and terms of employment for employee benefits.
The act, along with the internal revenue code (IRC), established the distinction between retirement
and welfare benefits. It also provides the regulatory framework for admin of these benefits in a
collective bargaining agreement. As such, it is the legislative basis on which jointly trusteed benefit
plans are founded
Summarize three major federal tax advantages associated with employee benefit plans - ANSWER1)
Most contributions to employee benefit plans are tax deductible
,2) Within certain limits, these employer contributions are generally not considered income to
employees
3) In certain types of retirement and capital allocation plans, benefits accumulate tax-free to the
employee until distributed
Why is the employee benefit mechanism an effective and efficient way of providing insurance
coverage? - ANSWEREmployment based insurance is convenient for employees. They don't need to
search for individual coverage and it is often less expensive. Providers and suppliers find it easier to
communicate and market employee benefits through an employer
In addition to business reasons, collective bargaining activity, favorable tax legislation and the
efficiency of the employee benefits approach, other factors have enhanced the appeal of employee
benefits. Summarize some of these factors - ANSWERPrice controls during WW2 and Korean War
froze wages but allowed additional increases for employee benefits. Also, the idea that the
government might mandate certain benefits.
What is the starting point in the design of any employee benefit plan? - ANSWERSetting overall
objectives from the standpoint of both the employer and the employees. Thus, there should be a
meaningful and well-reasoned rationale for any and every employee benefit plan.
List the Questions that should be addressed in setting benefits objectives: - ANSWER1) What benefits
should be provided? 2) Who should be covered by the benefit plans? 3) Should employees have
benefit options? 4) How should the benefit plan be financed? 5) How should the benefit plan be
administered? 6) How should the benefit plan be communicated?
What is the functional approach to employee benefit planning? - ANSWERThe functional approach is
essentially is the application of a systematic method of analysis to an employer's total employee
benefit program (12-13)
Describe the reasons the functional approach is considered to be an appropriate approach for the
effective planning, designing, and administration of employee benefits - ANSWEREmployee benefits
are a significant element of total employee compensation and are a tax-effective way of
compensating employees, employee benefits are a large portion of labor cost for employees, in the
past employee benefits were on a piecemeal basis and not a coordinated effort, a systematic
approach allows benefit plan to be current, competitive, and in compliance. Finally the functional
approach allows benefits to be integrated properly with each other
What elements of its compensation system should an employer seek to balance in designing a total
compensation package? - ANSWERAn employer should seek to balance various elements of its
, compensation system including basic cash wages and salary, current incentive compensation, longer-
term incentive plans and so-called employee benefits to help meet the needs and desires of
employees.
Identify and describe three types of total compensation/benefits policies that employers may adopt:
- ANSWER1) Average compensation/benefits policies follow the generally prevailing
compensation/benefits level in a firm's industry or community or both 2) High
compensation/benefits policies attempt to attract higher levels of management, technical, and
general employee talent 3) Low compensation/benefits policies are lower than average and more
modest in scale
How does the industry in which a firm is operating impact the its total compensation philosophy and
employee benefits approach? (16) - ANSWERA larger, well-established firm in a mature industry may
take a relatively liberal approach towards meeting the benefits needs and desires of employees.
Developing firms, or growth industries with considerable current needs for capital, rely heavily on
short-term incentive forms of compensation. Further, industries that are highly competitive, subject
to cyclical changes, or in a depressed state may not be willing to spend more on additional employee
benefit costs
Compare the compensation/service orientated philosophy and the needs orientated benefit
philosophy: (16) - ANSWERWith the compensation/service oriented benefit philosophy, employee
benefits are related to compensation, service, or both. The needs orientated benefit philosophy
tends to focus on the needs of employees and their dependents.
identify the steps used in applying the functional approach to employee benefit plan design, review,
and revision: (17-18) - ANSWER1) Classify employee (and dependent) needs or objectives into logical
functional categories 2) Classify the categories of persons the employer may want to protect 3)
Analyze the benefits presently available under the plan in terms of functional categories of needs or
objectives, categories of persons the employer may want to benefit, and regulatory requirements
and possibly mandated coverages 4) Determine any gaps in benefits, overlapping of benefits, or
both, provided from all sources under the plan 5) Consider recommendations for changes in the
employer's present employee benefit plan to meet any gaps, estimate the cost or saving from each
recommendation, 6) Evaluate alternative methods for financing or securing the benefits previously
recommended, 7) Consider cost saving techniques in connection with the recommended benefits or
existing benefits, 8) Decide upon the appropriate benefits, methods of financing and sources of
benefits as a result of the preceding analyses 9) Implement the changes 10) Communicate benefit
changes to employees 11) Communicate benefit changes to employees 12) Periodically reevaluate
the employee benefit plan
Describe the types of employee needs and exposures to loss that may be covered under employee
benefit plan: - ANSWER1) medical expenses 2) losses due to employee disability (short or long term)
3) Losses resulting from current or formal employee death 4) Retirement needs of employees 5)
Correct!!
Broad View of Employee Benefits - ANSWERAny from of compensation other than direct wages.
Includes government mandated plans and private plans (Social Security, paid vacation and pension
plans)
Narrow View of Employee Benefits - ANSWERAny type of plan sponsored or initiated unilaterally or
jointly by employers and employees and engaged in providing benefits that result from the
employment relationship and that are not underwritten or paid directly by government
Categories that fall under the broad view of employee benefits - ANSWER1) Legally required benefits
(social security etc) 2) Payments for time not worked 3) Employers share of medical and medically
related benefits 4) Employers share of retirement and savings plan payments 5) Misc. benefits
What benefits are excluded when the term employee benefits is defined in a narrow sense? -
ANSWERLegally mandated benefits - Social security, medicare, unemployment etc.
What impact have labor unions historically had in employee benefits? - ANSWERIn 1948 when the
National Labor Relations Board (NLRB) ruled in the Inland Steel Case the duty to bargain in good faith
over wages. Then, in the W.W. Cross & Co Case, NLRB ruled that wages include a health and accident
plan
Explain the significance of the Taft Harley Act in employee benefit planning - ANSWERThe Labor-
Management Relations Act, also called the Taft-Harley Act sets forth the framework for good-faith
collective bargaining over wages, hours, conditions, and terms of employment for employee benefits.
The act, along with the internal revenue code (IRC), established the distinction between retirement
and welfare benefits. It also provides the regulatory framework for admin of these benefits in a
collective bargaining agreement. As such, it is the legislative basis on which jointly trusteed benefit
plans are founded
Summarize three major federal tax advantages associated with employee benefit plans - ANSWER1)
Most contributions to employee benefit plans are tax deductible
,2) Within certain limits, these employer contributions are generally not considered income to
employees
3) In certain types of retirement and capital allocation plans, benefits accumulate tax-free to the
employee until distributed
Why is the employee benefit mechanism an effective and efficient way of providing insurance
coverage? - ANSWEREmployment based insurance is convenient for employees. They don't need to
search for individual coverage and it is often less expensive. Providers and suppliers find it easier to
communicate and market employee benefits through an employer
In addition to business reasons, collective bargaining activity, favorable tax legislation and the
efficiency of the employee benefits approach, other factors have enhanced the appeal of employee
benefits. Summarize some of these factors - ANSWERPrice controls during WW2 and Korean War
froze wages but allowed additional increases for employee benefits. Also, the idea that the
government might mandate certain benefits.
What is the starting point in the design of any employee benefit plan? - ANSWERSetting overall
objectives from the standpoint of both the employer and the employees. Thus, there should be a
meaningful and well-reasoned rationale for any and every employee benefit plan.
List the Questions that should be addressed in setting benefits objectives: - ANSWER1) What benefits
should be provided? 2) Who should be covered by the benefit plans? 3) Should employees have
benefit options? 4) How should the benefit plan be financed? 5) How should the benefit plan be
administered? 6) How should the benefit plan be communicated?
What is the functional approach to employee benefit planning? - ANSWERThe functional approach is
essentially is the application of a systematic method of analysis to an employer's total employee
benefit program (12-13)
Describe the reasons the functional approach is considered to be an appropriate approach for the
effective planning, designing, and administration of employee benefits - ANSWEREmployee benefits
are a significant element of total employee compensation and are a tax-effective way of
compensating employees, employee benefits are a large portion of labor cost for employees, in the
past employee benefits were on a piecemeal basis and not a coordinated effort, a systematic
approach allows benefit plan to be current, competitive, and in compliance. Finally the functional
approach allows benefits to be integrated properly with each other
What elements of its compensation system should an employer seek to balance in designing a total
compensation package? - ANSWERAn employer should seek to balance various elements of its
, compensation system including basic cash wages and salary, current incentive compensation, longer-
term incentive plans and so-called employee benefits to help meet the needs and desires of
employees.
Identify and describe three types of total compensation/benefits policies that employers may adopt:
- ANSWER1) Average compensation/benefits policies follow the generally prevailing
compensation/benefits level in a firm's industry or community or both 2) High
compensation/benefits policies attempt to attract higher levels of management, technical, and
general employee talent 3) Low compensation/benefits policies are lower than average and more
modest in scale
How does the industry in which a firm is operating impact the its total compensation philosophy and
employee benefits approach? (16) - ANSWERA larger, well-established firm in a mature industry may
take a relatively liberal approach towards meeting the benefits needs and desires of employees.
Developing firms, or growth industries with considerable current needs for capital, rely heavily on
short-term incentive forms of compensation. Further, industries that are highly competitive, subject
to cyclical changes, or in a depressed state may not be willing to spend more on additional employee
benefit costs
Compare the compensation/service orientated philosophy and the needs orientated benefit
philosophy: (16) - ANSWERWith the compensation/service oriented benefit philosophy, employee
benefits are related to compensation, service, or both. The needs orientated benefit philosophy
tends to focus on the needs of employees and their dependents.
identify the steps used in applying the functional approach to employee benefit plan design, review,
and revision: (17-18) - ANSWER1) Classify employee (and dependent) needs or objectives into logical
functional categories 2) Classify the categories of persons the employer may want to protect 3)
Analyze the benefits presently available under the plan in terms of functional categories of needs or
objectives, categories of persons the employer may want to benefit, and regulatory requirements
and possibly mandated coverages 4) Determine any gaps in benefits, overlapping of benefits, or
both, provided from all sources under the plan 5) Consider recommendations for changes in the
employer's present employee benefit plan to meet any gaps, estimate the cost or saving from each
recommendation, 6) Evaluate alternative methods for financing or securing the benefits previously
recommended, 7) Consider cost saving techniques in connection with the recommended benefits or
existing benefits, 8) Decide upon the appropriate benefits, methods of financing and sources of
benefits as a result of the preceding analyses 9) Implement the changes 10) Communicate benefit
changes to employees 11) Communicate benefit changes to employees 12) Periodically reevaluate
the employee benefit plan
Describe the types of employee needs and exposures to loss that may be covered under employee
benefit plan: - ANSWER1) medical expenses 2) losses due to employee disability (short or long term)
3) Losses resulting from current or formal employee death 4) Retirement needs of employees 5)
