CEBS GBA 1 ACTUAL EXAM/QUESTIONS & CORRECT
ANSWERS WITH ALL CHAPTERS | A+ GRADE.
What is the starting point in the design of any employee benefit plan? - CORRECT
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: - CORRECT
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? - CORRECT 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
- CORRECT 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? - CORRECT 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: - CORRECT 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) - CORRECT 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) - CORRECT 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) - CORRECT 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: - CORRECT 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: - CORRECT 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.)
Broad View of Employee Benefits - CORRECT 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 - CORRECT 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 - CORRECT 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? - CORRECT ANSWERS -Legally mandated benefits - Social security, medicare,
unemployment etc.
What impact have labor unions historically had in employee benefits? - CORRECT
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 - CORRECT
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
- CORRECT 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? - CORRECT ANSWERS -Employment based insurance is
convenient for employees. They don't need to search for individual coverage and it is
