CEBS - GBA 1 Exam Questions and Answers Latest Update 2025 Already Passed
Broad View of Employee Benefits - Answers Any 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 - Answers Any 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 - Answers 1) 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? - Answers
Legally mandated benefits - Social security, medicare, unemployment etc.
What impact have labor unions historically had in employee benefits? - Answers In 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 - Answers The 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 - Answers 1)
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?
- Answers Employment 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 - Answers Price 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? - Answers Setting 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: - Answers 1) 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? - Answers The 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 - Answers Employee 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? - Answers An 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: -
Answers 1) 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) - Answers A 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) - Answers With 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) - Answers 1) 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: - Answers 1) 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) Capital
accumulation goals 5) Needs arising from unemployment 6) Needs for financial counseling or coaching
7) Losses resulting from property and liability exposures 8) Needs for dependent care assistance 9)
Needs for educational assistance 10) Needs for custodial care expenses (long-term care) for employees
or their dependents 11) Other employee benefit needs or goals
The categories of persons that a firm may want to include in its employee benefit coverages are: -
Answers 1) Active full-time employees 2) Dependents of active full-time employees 3) Retired former
employees 4) Dependents of retired former employees 5) Disabled employees and their dependents 6)
Surviving dependents of deceased employees 7) Terminated employees and their dependents 8)
employees and their dependents who are temporarily separated from the employer's service such as
military duty, leaves of absences, strikes, etc. 9) Individuals other than full-time employees (part-time
employees etc.)
Explain how the concept of replacement ratio can be used by firms for setting benefit levels of
retirement and disability plans (26) - Answers The retirement income objective might be expressed in
terms of some estimated final-pay of an employee, or so-called replacement ratio. A replacement ratio
is a rule of thumb that estimates what percentage of a person's pre-retirement income will be needed to
maintain their lifestyle at retirement.
Explain how the use of length of service, probationary periods, may very with respect to protection-
oriented benefits and accumulation oriented benefits (27-28) - Answers Protection oriented benefits
Broad View of Employee Benefits - Answers Any 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 - Answers Any 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 - Answers 1) 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? - Answers
Legally mandated benefits - Social security, medicare, unemployment etc.
What impact have labor unions historically had in employee benefits? - Answers In 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 - Answers The 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 - Answers 1)
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?
- Answers Employment 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 - Answers Price 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? - Answers Setting 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: - Answers 1) 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? - Answers The 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 - Answers Employee 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? - Answers An 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: -
Answers 1) 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) - Answers A 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) - Answers With 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) - Answers 1) 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: - Answers 1) 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) Capital
accumulation goals 5) Needs arising from unemployment 6) Needs for financial counseling or coaching
7) Losses resulting from property and liability exposures 8) Needs for dependent care assistance 9)
Needs for educational assistance 10) Needs for custodial care expenses (long-term care) for employees
or their dependents 11) Other employee benefit needs or goals
The categories of persons that a firm may want to include in its employee benefit coverages are: -
Answers 1) Active full-time employees 2) Dependents of active full-time employees 3) Retired former
employees 4) Dependents of retired former employees 5) Disabled employees and their dependents 6)
Surviving dependents of deceased employees 7) Terminated employees and their dependents 8)
employees and their dependents who are temporarily separated from the employer's service such as
military duty, leaves of absences, strikes, etc. 9) Individuals other than full-time employees (part-time
employees etc.)
Explain how the concept of replacement ratio can be used by firms for setting benefit levels of
retirement and disability plans (26) - Answers The retirement income objective might be expressed in
terms of some estimated final-pay of an employee, or so-called replacement ratio. A replacement ratio
is a rule of thumb that estimates what percentage of a person's pre-retirement income will be needed to
maintain their lifestyle at retirement.
Explain how the use of length of service, probationary periods, may very with respect to protection-
oriented benefits and accumulation oriented benefits (27-28) - Answers Protection oriented benefits
