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CEBS GBA Exam 3
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Exam of 108 pages for the course CEBS GBA Exam 3 at CEBS GBA Exam 3 (CEBS GBA Exam 3)
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CEBS GBA Exam 3An employee welfare benefit plan has four basis elements. What are these
elements? (Mod 1.1) - -1) There must be a plan, fund or program.
2) The plan, fund or program is established or maintained by an employer.
3) The plan, fund or program is for the purpose of providing specifically listed
benefits, through the purchase of insurance or otherwise.
4) Benefits are provided to participants and beneficiaries.
-Explain how a "plan, fund or program" for an employee benefit plan is
defined (Mod 1.1) - -The phrase "plan, fund or program" is not defined in
ERISA but rather has been laid out in several court cases. Courts have held a
"plan, fund or program" under ERISA is established if, from the surrounding
circumstances, a reasonable person can ascertain the intended benefits, the
class of beneficiaries, the source of financing and the procedure to receive
benefits.
-Describe the procedures required to establish an ERISA employee welfare
benefit plan (Mod 1.1) - -No particular formalities are required to create an
ERISA plan and no single action in and of itself necessarily constitutes
establishment of ERISA employee welfare benefit plan. Thus, ERISA plans
have been deemed to be "established or maintained" by a practice that
would cause a reasonable EE to perceive an ongoing commitment by the ER
to provide EE benefits. This would include any contributions by an ER toward
payment of benefits or by the ER simply administering the benefit.
It is easy to have a plan, fund or program - generally any ongoing
administrative scheme will satisfy this condition. Showing that an ER
maintains a plan is also easy - any contribution by the ER towards payment
of benefits or administration of the plan is enough (including a contribution
toward insurance coverage).
-List the types of employee welfare benefit plans not covered under ERISA
and specifically excluded under the statute (Mod 1.1) - -1) Governmental
Plans: includes plans established by the US Gov't, the gov't of any state or
political subdivision and any agency of any of the foregoing or a plan to
which the Railroad Retirement Act applies, as well as certain plans
associated with Native American Tribal gov'ts.
2) Church plans: a plan established and maintained for its EE's by a church
or by a convention or association of churches is exempt from tax under IRC
Sec 501.
3) A plan maintained to comply with state laws on Worker's Comp,
Unemployment or Mandated Disability Insurance.
4) A plan maintained outside the US primarily for nonresident aliens.
,5) Plans that cover only self-employed individuals and that cover no
"common-law employees" generally not subject to ERISA.
6) Plans that cover only married shareholders of a corporation are not
treated as ERISA plans.
ER should be aware that is may be required to comply with other federal
laws that affect EE benefit plans.
-List the types of benefits provided by ERISA health and welfare, and provide
examples of such plans (Mod 1.1) - -a) Medical, Surgical or Hospital Care or
Benefits
b) Benefits in the event of sickness, accident, disability, death or
unemployment
c) Vacation Benefits
d) Apprenticeship or other training benefits
e) Day-care centers
f) Scholarship funds
g) Prepaid legal services
Ex: Medical Insurance, Dental, Vision, Prescription Drug Plans, Drug or
Alcohol Treatment programs, FSAs, EAPs, Wellness Programs, AD&D and
STD/LTD Plans.
-Discuss whether plans that involve payroll practices are treated as ERISA
health and welfare plans (Mod 1.1) - -The payment of an employee's normal
compensation in full or in part out of the
employer's general assets for periods when the employee is physically or
mentally
unable to work—that is, an unfunded short-term disability plan—is generally
not a
welfare benefit plan subject to ERISA. However, if a disability program
provides
more than an employee's normal compensation or is funded in any way—for
example, it is provided through insurance - the program will be a welfare
benefit plan subject to ERISA.
The Dept of Labor (DOL) regulations list additional types of payroll practices
as not being ERISA plans. These include plans where compensation is paid to
an EE:
a) While absent on holiday/vacation
b) While absent on active military duty
c) While absent for jury duty/witness
d) On account of periods of time during which the EE performs little or no
work while in training
e) EE is relieved of duties while on sabbatical leave or while pursuing further
education.
, -For a voluntary benefit arrangement to be exempt from ERISA based on the
DOL safe harbor, it must meet certain requirements, which are? (Mod 1.1) - -
a) No ER or EE organization contributions
b) Participation is completely voluntary
c) No ER consideration except for reasonable compensation and
administration
d) No employer endorsement
-Explain the meaning of the term "no employer endorsement" (Mod 1.1) - -
Means an ER can publicize, collect premiums, remit premiums, provide
employee information to an insurance company and maintain a
file on the voluntary plan. However, an employer cannot express positive
normative
judgment and cannot urge/encourage employee participation. The
participation of
the employer or employee organization should be limited to the duties
specified in
the regulation, none of which involve the exercise of discretionary duties. An
employer hoping to rely on this exemption should also be careful not to
create the
impression that the benefit is part of its benefit package by, for example,
including it
in enrollment materials or encouraging employees to enroll. DOL warns in
the final
Family and Medical Leave (FMLA) regulations that if a plan is intended to be
exempt from ERISA under this provision, the ER should not pay an EE's
premium while the EE is on FMLA leave.
-Define each of the following ERISA terms:
a) plan administrator/sponsor
b) participant
c) beneficiary (Mod 1.2) - -(a) Plan administrator/plan sponsor
A plan administrator is a person with statutory responsibility for ensuring
that all of the required filings with the federal government are timely made
and is the person upon whom the statute imposes authority to make
important disclosures
to participants about plan benefits. Generally, the plan administrator is
designated in the plan document. However, if the plan administrator is not so
designated, then the responsibility defaults to the plan sponsor, which is
usually
the employer. Generally, in a single employer situation, the employer is the
plan sponsor. Therefore, the employer is ultimately responsible for all
reporting and disclosure requirements and should implement a process to
make certain those responsibilities are followed.
, b) Participant:
The term participant has been interpreted broadly to include employees in,
or reasonably expected to be in, currently covered employment. This would
include employees who are eligible for a plan but who are not enrolled.
However, employees in a class not eligible to participate in a plan are not
participants
under the ERISA definition. In addition, because the definition is not limited
to current employees, it can include COBRA-qualified beneficiaries, covered
retirees and other former EE's who may remain eligible under a plan.
(c) Beneficiary:
A beneficiary is any person designated by a participant (or by the terms of
an ERISA plan) who is or may become entitled to a benefit under the plan. A
beneficiary has rights provided under the plan in question, and the plan
fiduciaries owe fiduciary duties to plan beneficiaries as well as to plan
participants. A beneficiary may sue under ERISA for plan benefits and to
remedy ERISA violations. A beneficiary also has the right to examine and
request copies of plan documents.
-What are the main disclosure requirements under ERISA? (Mod 1.2) - -(a) A
plan document must exist for each plan
(b) A summary plan description (SPD) must be furnished automatically to
participants
(c) A summary of material modifications (SMM) must be furnished
automatically to participants when a plan is amended
(d) A four-page summary of benefits and coverage (SBC) must be provided
to applicants and enrollees before enrollment or reenrollment
(e) Copies of certain plan documents must be furnished to participants and
beneficiaries upon written request
(f) Claim procedures must be established and followed when processing
benefits claims and when reviewing appeals of denied claims
-What are the main requirements that pertain to ERISA plan assets? (Mod
1.2) - -a) Plan assets, including participant contributions, may be used only
to pay plan benefits and reasonable admin costs.
b) For some plans, plan assets may have to be held in trust.
c) A fidelity bond must be purchased to cover every person who handles plan
funds.
-Define plan document and explain why it is vital to meet the written
document requirement (Mod 1.2) - -ERISA requires that every ERISA health
and welfare plan be established and maintained in writing, and the scope of
an ERISA plan is defined by the official plan document. The plan document
describes the plan's terms and conditions related to the operation and
administration of a plan. An insurance company's master contract, certificate
of coverage or summary of benefits is usually not sufficient to serve as a
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