Exam (elaborations)
FP512 Module 6 Employee Group Benefits 2024
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FP512 Module 6 Employee Group Benefits 2024
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FP512 Module 6 Employee GroupBenefits
Group Life Insurance - ✅✅ -provides life insurance on a group of people in a
single master contract. Structured as contributory or noncontributory
(employees pay part of the premiums or the employer covers it all)
Tenprarily fills the earnings gap that would result from a workers death.
Pros:
Typically easier and less costly than indivdual insurance
Medical exams typically not required
Con:
coverage typically ends when the emplyee leaves the group
Group Term Life Insurance - ✅✅ -Form of insurance carried by employers for
their employees that provides a lump-sum payment to the employees'
beneficiaries. Low cost and simple.
No medical exam.
Face value can be established through one of many means ;
percentage/multiple of earnings, based on years of service, classes of
employees
Can also have ancillary benefits like conversion to permanent coverage after
termination.
Section 79 - ✅✅ -For an employer to receive favorable tax treatment with a
plan the group policy plan must be these requirements:
-The coverage must provide a general benefit
-Must be provided to a group of employees as part of their compensation for
services rendered to the employer
-Self employed individual, partner, 2% owner of an S Corp are not employees
for this purpose
-Must be provided by the employer as a master policy or a group of individual
policies
-Must be provided to more than 10 employees
, -The amount of insurance provided must be consistent with no individual
selection
If fewer than 10 employees, for favorable tax treatment :
-coverage is provided for all full time employees
-amount of insurance is based on a uniform percentage of compensation
-amount of insurance is based on bracket coverage - with no bracket
exceeding the bracket below by more than 2.5 times - and the insurance
amount of the lowest bracket is at least 10% of the top bracket
- evidence of insurability may be requested via a medical questionnaire; but
may not be based on physical examination
*Cannot discriminate in favor of key employees
Key employees - ✅✅ --annual compensation is greater than the set annual
amount
-has greater than a 5% ownership in the company
-has greater than 1% ownership and has annual compensation great than a
determined amount
✅✅
Eligibility is considered non discriminatory if.... - -Must meet 1 of 4
criteria:
-At least 70% of employees benefit from the plan
-at least 85% of participating employees are not key employees
-the plan benefits a nondiscriminatory employee classification
-the plan is part of a cafeteria plan and coverage complies with the Section
125 non discrimination requirements
Accidental death and dismemberment - ✅✅ -An insurance policy provision
that protects the insured if he or she suffers loss of sight or loss of limb(s) or
death by accident
Typically a percentage of group term life coverage.
2 types: Business travel insurance and voluntary accident insurance
Group Permanent Insurance Coverage - ✅✅-For employer favorable tax
treatment 2 things must be met -
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