GBA 1 All Assignments Questions
with All Correct Answers
What are the bonding requirements for fiduciaries? - Answer-Every person who handles
plan funds or property is required to be bonded for at least 10 percent of the amount of
funds handled and for at least $1,000.
Can the fiduciary transfer the assets of a plan to an investment manager? - Answer-
Yes, but the fiduciary would still be liable for concealing or failing to remedy a known
breach.
Who is a participant when referring to ERISA benefit claims? - Answer-This person is
any employee or former employee who is or may become eligible to receive a benefits
or whose beneficiaries may receive a benefit.
What is the ERISA Section 510? - Answer-A nonretaliation, nondiscrimination provision
that states an employer cannot terminate an employee to avoid benefit coverage or
benefit claims.
What is promissory estoppel? - Answer-The legal doctrine that allows recovery on a
promise made without consideration when the reliance on the promise was reasonable,
and the promisee relied on it to his or her detriment.
Which of the following statements concerning the duties and liabilities of persons
designated as fiduciaries under ERISA is correct?
A. Every person associated with an employee benefit plan is a fiduciary.
B. The standard of care required of fiduciaries is basically not to commit a misdemeanor
or felony.
C. Fiduciaries are always jointly and severally liable for the breaches of trust of each
other.
D. A plan may purchase liability insurance for its fiduciaries to cover losses resulting
from their acts or omissions.
E. An exculpatory clause must be included in a plan. - Answer-D. A plan may purchase
liability insurance for its fiduciaries to cover losses resulting from their acts or omissions.
ERISA provides that a fiduciary shall discharge his or her responsibilities according to
which of the following standards?
,I. Solely in the interest of the participants and beneficiaries
II. For the exclusive purpose of providing benefits and defraying reasonable
administrative expenses
III. With the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims - Answer-I. Solely in
the interest of the participants and beneficiaries
II. For the exclusive purpose of providing benefits and defraying reasonable
administrative expenses
III. With the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims
All the following persons are considered parties in interest under the ERISA prohibited
provisions EXCEPT:
A. Any fiduciary
B. A participant or beneficiary receiving benefits
C. A person providing services to the plan
D. Any employer or union whose members are covered by a plan
E. A direct or indirect owner of 50 percent of more of the business unit - Answer-B. A
participant or beneficiary receiving benefits
What are utilization management (UM) or utilization review programs? - Answer-
Programs intended to preauthorize certain forms of medical are and/or concurrently
monitor the use of more expensive form of care such as inpatient treatment.
What is managed indemnity? - Answer-A very broad form of group health benefits,
which include most standard fee-for-service plans.
What is the PPO incentive approach? - Answer-1. The primary objective is to introduce
managed care with the least employee disruption.
2. This approach will cover 100% for in-network coverage and 80% for out-of-network
coverage.
3. Premiums are higher.
What is the PPO disincentive approach? - Answer-1. The primary objective is cost
savings.
2. This approach will cover 80% for in-network coverage and 60% for out-of-network
coverage.
3. Premiums are lower.
What is the PPO combination approach? - Answer-1. The primary objective is a balance
between improved benefits and cost savings.
,2. This approach will cover 90% for in-network coverage and 70% for out-of-network
coverage.
3. Premiums are average.
What is another name for standard indemnity plans? - Answer-Fee-for-service plans
What is another name for fee-for-service plans? - Answer-Standard indemnity plans
Which product(s) require members to select a primary care physician?
I. PPO
II. HMO
III. POS - Answer-II. HMO
III. POS
Open Formulary - Answer-There is a list of drugs for which lower prices have been
negotiated, but it is not an exhaustive list of ALL drugs that are covered.
The view of employee benefits as virtually any form of compensation other than direct
wages, including both government-mandated benefits and private plans is called the: -
Answer-Broad view of employee benefits
The view of employee benefits as any type of plan sponsored or initiated unilaterally or
jointly by employers and employees engaged in providing benefits that result from the
employment relationship, which are not underwritten or paid directly by the government,
is called the: - Answer-Limited view of employee benefits
What is one reason for the growth of employee benefits? - Answer-To attract and retain
employees
What is the Taft-Hartley Act? - Answer-Also known as the Labor-Management Relations
Act, it sets for the framework for good-faith collective bargaining over wages, hours,
conditions and terms of employment and employee benefits. Additionally, it establishes
the distinction between retirement and welfare benefits. Finally, it provides the
framework for the administration of these benefits (i.e. the administration of plans).
What are some federal tax advantages of employee benefit plans? - Answer-1.
Employer contributions are tax deductible
2. Benefits are not considered income for employees
3. Benefits accumulate tax-free
What is the Taft-Hartley Act also known as? - Answer-The Labor-Management
Relations Act.
, What did the Taft-Hartley Act accomplish? - Answer-It set forth the framework for good-
faith collective bargaining over wages, hours, conditions and terms of employment and
employee benefits. It also provided the regulatory framework for administration of these
benefits in a collective bargaining agreement.
Summarize three major federal tax advantages associated with employee benefit plans.
- Answer-1. Most employer contributions to employee benefit plans are deductible
provided that they are reasonable business expenses.
2. Employer contributions are generally not considered "income" for employees.
3. Benefits are considered tax-free until distributed.
Why is the employee benefit mechanism an effective way of providing insurance
coverage? - Answer-1. Employees do not have to search for individual coverage.
2. Coverage is often less expensive.
3. Providers and suppliers find it more convenient and simpler to communicate benefits
via an employer.
What is the starting point in the design of any employee benefit plan? - Answer-Setting
overall objectives that meet the needs of the employer and its employees.
Which of the following benefits is/are categorized in industry surveys as legally
mandated benefits?
I. Unemployment compensation
II. Premiums paid to the Pension Benefit Guaranty Corporation for defined benefit
pension plans
III. Death benefits payments - Answer-I only
(T/F) Reasons for using the functional approach in the design and administration of
employee benefit plans include: employee benefits currently represent a large item of
labor costs for employers - Answer-True
What is the functional design approach to employee benefit planning? - Answer-The
application of a systematic method of analysis to an employer's total employee benefits
program. It is based on an analysis of what employees' need while staying within the
employer's compensation goals and cost parameters.
Why is the functional approach appropriate for the effective planning, designing and
administration of employee benefits? - Answer-1. Employee benefits are a significant
way of compensating employees.
2. Employee benefits represent a large item of labor cost for employers.
3. Employee benefits used to be adopted on a piecemeal basis, without coordination
with existing benefit programs.
4. Benefits keep employers in compliance with regulatory requirements and make them
competitive.
5. Benefits can be integrated properly with one another.
with All Correct Answers
What are the bonding requirements for fiduciaries? - Answer-Every person who handles
plan funds or property is required to be bonded for at least 10 percent of the amount of
funds handled and for at least $1,000.
Can the fiduciary transfer the assets of a plan to an investment manager? - Answer-
Yes, but the fiduciary would still be liable for concealing or failing to remedy a known
breach.
Who is a participant when referring to ERISA benefit claims? - Answer-This person is
any employee or former employee who is or may become eligible to receive a benefits
or whose beneficiaries may receive a benefit.
What is the ERISA Section 510? - Answer-A nonretaliation, nondiscrimination provision
that states an employer cannot terminate an employee to avoid benefit coverage or
benefit claims.
What is promissory estoppel? - Answer-The legal doctrine that allows recovery on a
promise made without consideration when the reliance on the promise was reasonable,
and the promisee relied on it to his or her detriment.
Which of the following statements concerning the duties and liabilities of persons
designated as fiduciaries under ERISA is correct?
A. Every person associated with an employee benefit plan is a fiduciary.
B. The standard of care required of fiduciaries is basically not to commit a misdemeanor
or felony.
C. Fiduciaries are always jointly and severally liable for the breaches of trust of each
other.
D. A plan may purchase liability insurance for its fiduciaries to cover losses resulting
from their acts or omissions.
E. An exculpatory clause must be included in a plan. - Answer-D. A plan may purchase
liability insurance for its fiduciaries to cover losses resulting from their acts or omissions.
ERISA provides that a fiduciary shall discharge his or her responsibilities according to
which of the following standards?
,I. Solely in the interest of the participants and beneficiaries
II. For the exclusive purpose of providing benefits and defraying reasonable
administrative expenses
III. With the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims - Answer-I. Solely in
the interest of the participants and beneficiaries
II. For the exclusive purpose of providing benefits and defraying reasonable
administrative expenses
III. With the care, skill, prudence and diligence under the circumstances then prevailing
that a prudent person acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like aims
All the following persons are considered parties in interest under the ERISA prohibited
provisions EXCEPT:
A. Any fiduciary
B. A participant or beneficiary receiving benefits
C. A person providing services to the plan
D. Any employer or union whose members are covered by a plan
E. A direct or indirect owner of 50 percent of more of the business unit - Answer-B. A
participant or beneficiary receiving benefits
What are utilization management (UM) or utilization review programs? - Answer-
Programs intended to preauthorize certain forms of medical are and/or concurrently
monitor the use of more expensive form of care such as inpatient treatment.
What is managed indemnity? - Answer-A very broad form of group health benefits,
which include most standard fee-for-service plans.
What is the PPO incentive approach? - Answer-1. The primary objective is to introduce
managed care with the least employee disruption.
2. This approach will cover 100% for in-network coverage and 80% for out-of-network
coverage.
3. Premiums are higher.
What is the PPO disincentive approach? - Answer-1. The primary objective is cost
savings.
2. This approach will cover 80% for in-network coverage and 60% for out-of-network
coverage.
3. Premiums are lower.
What is the PPO combination approach? - Answer-1. The primary objective is a balance
between improved benefits and cost savings.
,2. This approach will cover 90% for in-network coverage and 70% for out-of-network
coverage.
3. Premiums are average.
What is another name for standard indemnity plans? - Answer-Fee-for-service plans
What is another name for fee-for-service plans? - Answer-Standard indemnity plans
Which product(s) require members to select a primary care physician?
I. PPO
II. HMO
III. POS - Answer-II. HMO
III. POS
Open Formulary - Answer-There is a list of drugs for which lower prices have been
negotiated, but it is not an exhaustive list of ALL drugs that are covered.
The view of employee benefits as virtually any form of compensation other than direct
wages, including both government-mandated benefits and private plans is called the: -
Answer-Broad view of employee benefits
The view of employee benefits as any type of plan sponsored or initiated unilaterally or
jointly by employers and employees engaged in providing benefits that result from the
employment relationship, which are not underwritten or paid directly by the government,
is called the: - Answer-Limited view of employee benefits
What is one reason for the growth of employee benefits? - Answer-To attract and retain
employees
What is the Taft-Hartley Act? - Answer-Also known as the Labor-Management Relations
Act, it sets for the framework for good-faith collective bargaining over wages, hours,
conditions and terms of employment and employee benefits. Additionally, it establishes
the distinction between retirement and welfare benefits. Finally, it provides the
framework for the administration of these benefits (i.e. the administration of plans).
What are some federal tax advantages of employee benefit plans? - Answer-1.
Employer contributions are tax deductible
2. Benefits are not considered income for employees
3. Benefits accumulate tax-free
What is the Taft-Hartley Act also known as? - Answer-The Labor-Management
Relations Act.
, What did the Taft-Hartley Act accomplish? - Answer-It set forth the framework for good-
faith collective bargaining over wages, hours, conditions and terms of employment and
employee benefits. It also provided the regulatory framework for administration of these
benefits in a collective bargaining agreement.
Summarize three major federal tax advantages associated with employee benefit plans.
- Answer-1. Most employer contributions to employee benefit plans are deductible
provided that they are reasonable business expenses.
2. Employer contributions are generally not considered "income" for employees.
3. Benefits are considered tax-free until distributed.
Why is the employee benefit mechanism an effective way of providing insurance
coverage? - Answer-1. Employees do not have to search for individual coverage.
2. Coverage is often less expensive.
3. Providers and suppliers find it more convenient and simpler to communicate benefits
via an employer.
What is the starting point in the design of any employee benefit plan? - Answer-Setting
overall objectives that meet the needs of the employer and its employees.
Which of the following benefits is/are categorized in industry surveys as legally
mandated benefits?
I. Unemployment compensation
II. Premiums paid to the Pension Benefit Guaranty Corporation for defined benefit
pension plans
III. Death benefits payments - Answer-I only
(T/F) Reasons for using the functional approach in the design and administration of
employee benefit plans include: employee benefits currently represent a large item of
labor costs for employers - Answer-True
What is the functional design approach to employee benefit planning? - Answer-The
application of a systematic method of analysis to an employer's total employee benefits
program. It is based on an analysis of what employees' need while staying within the
employer's compensation goals and cost parameters.
Why is the functional approach appropriate for the effective planning, designing and
administration of employee benefits? - Answer-1. Employee benefits are a significant
way of compensating employees.
2. Employee benefits represent a large item of labor cost for employers.
3. Employee benefits used to be adopted on a piecemeal basis, without coordination
with existing benefit programs.
4. Benefits keep employers in compliance with regulatory requirements and make them
competitive.
5. Benefits can be integrated properly with one another.
