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CEBS GBA Exam 1|232 Questions with 100% Verified Answers
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CEBS GBA Exam 1|232 Questionswith 100% Verified Answers
Broad view of Employee Benefits (Mod 1.1) - -Considers Employee Benefits
to be virtually any form of compensation other than direct wages paid to
Employees (Ex: WC, Unemployment, State DI, SS, Vacation, Holidays,
401K/Retirement, Employer share of Medical, Severance Pay, Child Care,
etc..)
-Narrow view of Employee Benefits (Mod 1.1) - -Any type of plan sponsored
or initiated by Employees and Employers and engaged in providing benefits
that result from the employment relationship and that are not underwritten
or paid directly by the government; (Ex: Benefits excluded include those
legally mandated - WC, SS).
-Impact of Labor Unions on Employee Benefits (Mod 1.2) - -Through
Collective Bargaining, Employee Benefit Plans have been impacted. In 1948
ruling states that the duty to bargain in good faith over wages also included
insurance and fringes (pension). In WW Cross & Co, NLRB ruled wages
included health and accident plan.
-What is the Taft-Hartley Act? (Mod 1.2) - -The Labor Management Relations
Act of 1947 is a United States federal law that restricts the activities and
power of labor unions. This set forth good-faith collective bargaining over
wages, hours, terms of employment and benefits.
-3 Examples of Tax Advantages of Employee Benefit Plans (Mod 1.2) - -1:
Employer Contributions are Tax Deductible
2: Employer Contributions are not considered income to Employees
3: Certain Retirement Benefits Accumulate Tax-Free until distributed.
-Examples of Questions that should be addressed when creating benefit
objectives (Mod 1.3) - -Ex: What benefits should be provided? Who should be
covered? Should Employees have options? How should plan be financed?
How should plan be administered? How should plan be communicated to
Employees?
-What is the Functional Approach to Employee Benefit Planning? (Mod 1.4) -
-Application of a systematic method of analysis to an Employer's Total
Employee Benefits Program. It analyzes the organization's EBP as a whole in
terms of its ability to meet various employee's needs and to manage loss
exposures within the overall compensation goals and parameters.
, -Why is the Functional Approach appropriate when planning, designing and
administering Employee Benefits? (Mod 1.4) - -1: EE Benefits Significant
Element of EE Comp and are a Tax-Effective Way to Compensate
2: EE Benefit Represent Large Labor Cost, so ER's should effectively
plan/cost-control
3: In the past, EE Benefits were adopted on piece-meal basis; helps to now
fill gaps/overlap
4: Systematic Approach to planning helps to keep the EBP current,
competitive and in compliance with updated requirements (ACA)
5: Benefits to be integrated properly together
-Compare Compensation/Service Oriented Benefit Philosophy with the
Needs-Oriented (Mod 1.4) - -Compensation/Service: EBP comprised of
primarily compensation, service or both. Level of benefits tied to salary or
pay levels/years of service
Needs Orientated: Focuses on Needs of EE's and their dependents
-Identify Steps in Applying Functional Approach (Mod 1.4) - -1: Classify
EE/Dep Needs & Objectives (in logical/functional categories)
2: Classify Categories of EE's to be protected
3: Analyze present benefits in terms of functional categories of
needs/objectives, persons to benefit, and regulatory requirements
4: Determine any gaps or overlap in benefits from all sources in terms of
functional categories of needs & the persons to be protected
5: Consider recommendations for changes
6: Estimate costs/savings from each recommendation
7: Evaluate alternative methods of financing for those recommended
benefits (and existing ben)
8: Consider other cost-saving techniques
9: Decide upon appropriate benefits and methods of financing as a result of
analysis
10: Implement Changes
11: Communication Changes to Employees
12: Periodically re-evaluate EBP
-Define Needs/Exposures covered under EBP (Mod 1.4) - -1: Medical
Expenses (EE/Dep)
2: Losses due to Disability (Short/Long Term)
3: Death (EE/Dep/Retirees)
4: Retirement Needs
5: Capital Accumulation Needs/Goals
6: Needs for Unemployment/Layoff/Termination
7: Needs for Financial/Retirement Counseling
8: Losses from property/liability exposures
9: Needs for Dependent Care Assistance
10: Needs for Educational Assistance (EE/Dep)
,11: Needs for Custodial-Care Expenses (LTC)
12: Other Needs/Goals (Stock Purchase Plan)
-Explain Concept of Replacement Ratio in terms of creating
Retirement/Disability Plans (Mod 1.5) - -A Replacement Ratio is a person's
gross income after retirement, divided by his or her gross income before
retirement. Should include SS, capital accumulation benefits as well as
retirement plans.
-Define Protection-Oriented Benefits (Mod 1.5) - -Consist of Medical Expense
Benefits, Life/STD/LTD Insurance - protect against serious loss exposures that
could spell immediate financial disaster. As such, they have a relatively short
probationary period due to the need of immediate coverage.
-Define Accumulation-Orientated Benefits (Mod 1.5) - -Consist of Pension
Plans, Profit-Sharing, Savings, 401K, etc...which reward an Employee for long
service with an Employer. Involve a longer probationary period since viewed
as a reward - not a disadvantage for long-term employees.
-Impact of making a plan Contributory on Employee Participation (Mod 1.5) -
-Impacts group as a whole - not everyone will elect due to cost. If
participation is mandatory in a contributory plan, may create employee
relations problem.
-Describe arguments of flexibility in designing employee benefit plans as it
relates to functional approach (Mod 1.5) - -Argument 1: More flexibility EE
has, more likely he or she will select a benefit that best meets needs/goals -
thus, flexibility in plan design/options facilitates functional approach.
Argument 2: Works against functional approach because some EE's may not
recognize all their needs and leave some uncovered.
-Define concept of risk (Mod 2.1) - -Uncertainty with respect to possible
losses. Inability to determine with certainty the actual number and value of
claims.
-Define relationship between peril and hazard (Mod 2.1) - -Peril: Cause of a
loss (fires, floods, theft, death)
Hazard: Condition that increases probability that a peril will occur or tends to
increase severity of loss when a peril occurs.
-Define physical hazard, moral hazard, morale hazard (Mod 2.1) - -Physical:
Physical Condition (Defective Wiring, No Fire Extinguisher), increases chance
of loss
Moral: Dishonesty increases chance of loss (Arson)...b/c of Moral, premiums
are higher to all. Attempt to control by careful UW and provisions such as
deductibles, waiting periods, exclusions
, Morale: Carelessness or Indifference by insureds since they have insurance
(protected from loss).
-How does pure risk differ from speculative risk (Mod 2.2) - -Pure Risk:
Situations where two alternatives are possible - risk will happen (no loss) or it
will happen and a financial loss takes place. Many EB Coverages fall into this
classification. Nothing positive can result from Pure Risk, but many are
insured (Fire, Auto, Illness, Disability)
Speculative Risk: Involve a possibility (that is not present in pure risk) of a
gain. Three potential outcomes: Loss, No Loss, Gain (Ex: Purchase Stock,
Gambling)
-Most Important Type of Pure Risk (Mod 2.2) - -Personal Risk (Death, Illness,
DI, Unemployment)
-Summarize Methods for Handling Risk (Mod 2.2) - -1: Avoidance - does not
take on risk/gets rid of
2: Control - attempts to prevent or reduce the probability/severity of a loss
taking place
3: Retention - risk is assumed and paid for by the person suffering the loss
4: Transfer - one shifts the financial burden of risk to another party
5: Insurance - form of transfer which the financial burden is transferred to
insurance company
-How is insurance a mechanism for EBP's? (Mod 2.3) - -Insured (EE/ER) pays
money (premium) into a fund (insurance company). Upon occurrence of loss,
reimbursement is provided to person suffering loss. Thus, risk has been
reduced/eliminated and all who paid into the fund share the resulting loss.
-Compare insurance mechanism to gambling (Mod 2.3) - -Insurance is a
mechanism to handling existing risk - gambling creates risk where one did
not previously exist. Risk caused by gambling is 100% speculative, while
insurance deals with pure risk. Gambling involves a gain for one party while
insurance is a mutual sharing of any losses. The loser in the gambling
transaction remains in a negative situation while the insured is financially
restored in whole or part to prior condition.
-Define Indemnification (Mod 2.3) - -Principle of making the insured whole
again after reimbursement for covered loss takes place - similar financial
situation than prior to claim.
-Which risk handling technique is mutually exclusive (Mod 2.3) - -Avoidance
- when you avoid a risk, you have no losses so there is no need for other
techniques
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