CHAPTER 11—EMPLOYEE BENEFITS
TRUE/FALSE
1. Benefits generally account for approximately 14% of payroll costs.
2. Surveys show that employees who are satisfied with their benefits are more likely to be satisfied with
their jobs.
3. Generation Y employees are probably less likely to be concerned with having pensions than Baby
Boomers.
U
4. Online benefits programs allow employees self-service freedom and availability virtually any time.
5. Most online benefits systems are adaptable and transfer information with full security.
6. There has been a reduction in the number of single-parent families and two-earner couples in the
workplace as compared to decades past.
7. Typically, employees are offered a basic or core benefits package of life and health insurance, sick
leave, and vacation.
8. A need for a new benefit should be established before adding it to a benefits package.
9. Employers are increasingly tailoring their benefits programs to be family-friendly, because employees
increasingly desire more work-life balance.
10. To accommodate the individual needs of employees, it would be desirable for employers to implement
a cafeteria benefits plan.
11. An advantage of flexible benefit plans is that if employees make poor selections and do not use their
benefits, it saves the employer money.
12. Compensation specialists often see flexible benefits plans as ideal.
13. The Social Security Act was designed to protect workers against the loss of earnings resulting from old
age and unemployment.
14. Employees can sue employers who deliberately mislead them about health and welfare benefits.
15. When communicating benefits packages to employees, using one, uniform method or technique is
recommended for consistency, so that everyone hears the same message in the same way.
16. Although some government programs provide money to people with partial disabilities or short-term
disabilities, Social Security does not.
17. Generally speaking, a firm with a record of laying off large numbers of employees will have to pay a
lower rate than those that do not.
18. The Social Security program is funded by a tax paid by the employer, based on the employee’s
earnings.
19. In order to qualify for Social Security benefits, all individuals must be at least 65 years of age.
20. To be eligible for Social Security disability benefits, an individual’s disability must have existed for at
least six months and must result in, or be expected to result in, death.
21. Employers pay unemployment taxes directly to their respective state governments, which in turn are
responsible for paying eligible unemployed individuals.
22. Workers who are laid off are eligible for 52 weeks of unemployment insurance per occurrence.
23. Workers’ compensation programs serve to prevent financial disaster to employees who are injured or
become ill through their work.
24. Workers eligible for unemployment benefits must submit an application for unemployment
compensation with their state employment agencies, register for available work, and be willing to
accept any suitable employment that may be offered to them.
25. One of the major problems of workers’ compensation programs is that the injured employee faces
substantial legal expense to obtain a settlement.
26. Workers’ compensation laws provide for uniform compensation to disabled workers regardless of the
state in which they work.
27. Worker’s compensation insurance rates depend on the seriousness of the occupations, each state’s level
of benefits for injuries, and the company’s frequency and severity of employee injury.
28. The Consolidated Omnibus Budget Reconciliation Act requires all employers to provide health care
coverage to employees and their spouses for 18 months following termination, death, or divorce of the
employee.
29. Under the Family and Medical Leave Act, a convenience store owner with 20 employees is required to
provide up to 12 weeks of unpaid leave to an eligible employee for medical reasons.
30. If an employee takes a leave of absence under the Family and Medical Leave Act, the employer must
continue the employee’s medical benefits for the duration of the leave.
31. The Family and Medical Leave Act permits substitution of paid leave and vacation during leave.
32. Under the Family and Medical Leave Act, an employee returning to work does not necessarily have to
be restored to his or her original job.
33. Beginning in 2014, firms that employ fifty or more people who work thirty or more hours per week but
do not offer them health insurance will have to pay a penalty to the government.
34. Some states provide rights to employees that are lesser than those provided by the FMLA.
35. Health care plans only cover medical, surgical, and hospital expenses.
36. Today, the majority of U.S. employees get health coverage through their employers.
37. To contain health care costs, an employer may increase the employee’s deductible amount or
co-payments.
38. Employers pay a fixed annual fee to an HMO to cover a majority of their employees’ medical costs.
39. Employee costs for medical services provided by a health maintenance organization (HMO) vary
according to the type of service and how often the employee needs it.
40. A preferred provider organization (PPO) is a group of physicians who establish an organization that
guarantees the quality of health care provided by an HMO.
41. Unlike PPOs, where employees may have little choice in the doctor they see, HMOs allow employees
to select from a list of physicians (participating doctors) their doctor of choice.
42. Unlike private plans, employer-provided plans frequently cover all employees and their dependents
regardless of their current health conditions.
43. Employees do not have to pay taxes on the amounts they are reimbursed under a health reimbursement
account.
44. The Health Insurance Portability and Accountability Act grants employees the right to switch their
medical insurance between former and present employers.
45. The “payment for time not worked” category of benefits includes all absences from work except for
sick leave and personal days taken by employees.
46. One estimate is that the “payment for time not worked” category of benefits comprises a large
expenditure—over 25 percent—of the employer’s total payroll costs.
47. All workers are guaranteed at least ten paid holidays each year.
48. Severance pay plans grant employees weekly benefits in addition to state unemployment
compensation.
49. Severance pay is considered a supplemental unemployment benefit.
50. Supplemental unemployment benefits are not required by law, and are usually funded by the employer.
51. Almost all workers with health coverage receive mental health benefits as part of their plans.
52. It is not uncommon for larger companies to cut the health care plans they once provided their retirees.
53. Some firms are penalizing employees for unhealthy habits by charging them higher health care
premiums for habits such as smoking.
54. One approach to preparing workers for retirement is to offer unpaid leave for a few months.
55. Paid time off for hours not worked is not mandatory in the United States.
56. Research shows that workers who use their vacation time are more productive and less prone to
job-related burnout.
57. Most companies require their employees to either take their vacation days by the end of the year or
forfeit them.
58. At the present time, employers are required to provide pension plans to all full-time employees.
59. With contributory pension plans, contributions are made jointly by employers and the government.
60. In a defined-contribution pension plan, the amount an employee is to receive upon retirement is
specifically set forth.
61. A 401(k) plan allows employees the opportunity to build a tax-sheltered savings fund.
62. Typically, in a 401(k) saving plan, the employer matches the employee contribution at the rate of 50
cents for every worker dollar contributed.
63. Companies may match employee contributions to a 401(k) with cash or company stock.
64. A 401(k) plan transfers responsibility for investment choices to the employee.
65. A 401(k) plan is also called a cash-balance pension plan.
66. Vesting is a guarantee of accrued benefits to participants at retirement age provided they are currently
employed.
67. Child-care, elder-care, and extended leave policies are all examples of work/life benefits.
68. Employee assistance programs (EAPs) help employees mainly with relocation costs.
69. A common child care benefit offered by employers is the dependent care spending account.
70. Mildly ill child-care facilities offer medical supervision in addition to traditional child-care
arrangements.
MULTIPLE CHOICE
1. Benefits can represent more than ______ of the total payroll costs an employer pays.
a.
28 percent
b.
40 percent
c.
52 percent
d.
66 percent
2. Which of the following represents the greatest of money to which a dollar of employee compensation
goes to in the United States?
a.
Supplemental pay
b.
Paid leave
c.
Legally required benefits
d.
Health, life, and disability insurance
3. _____ enable(s) individual employees to choose the benefits that are best suited to their particular
needs.
a.
Employee self-service systems
b.
Cafeteria plans
c.
An employee wellness program
d.
Social Security plans
4. Online benefits systems are often referred to as ______________ and can result in a significant cost
savings in benefits administration.
a.
cafeteria plans
b.
a value based initiative
c.
employee self-service systems
d.
a high-deductible health insurance plan
5. To obtain employee input regarding benefits packages, employers often use:
a.
performance appraisals.
b.
psychological tests.
c.
union reports.
d.
opinion surveys.
6. The communication of employee benefits information improved significantly with the passage of
_____.
a.
the Employee Retirement Income Security Act
b.
the Social Security Act
c.
the Old Age, Survivors, and Disability Insurance Act
d.
the Consolidated Omnibus Budget Reconciliation Act
7. Which of the following is NOT a method that employers commonly use to communicate benefits to
employees?
a.
brochures
b.
word of mouth
c.
social media
d.
blogs
8. Flexible benefit plans:
a.
are offered to employees who then must purchase each benefit they select
b.
are favored by employers because they reduce administration costs
c.
result in wasted benefits because of the number of different types available to employees
d.
allow employees to choose benefits suited to their needs
9. Which of the following is NOT a general pointer for designing benefits information, regardless of the
medium?
a.
Avoid complex language when describing benefits. Clear, concise, and understandable
language is a must
b.
Explain the purpose behind a benefit and the value it offers employees. Be up front about
the pros and cons of different benefit plans
c.
Provide numerous examples to illustrate how a benefit choice might affect different types
of employees, depending upon their personal circumstances
d.
Avoid the use of graphics whenever possible to make the information understandable and
prevent confusion
10. When communicating benefits programs to employees:
a.
use correct legal language to avoid subsequent liability
b.
use one, uniform method to communicate to all employees
c.
use multiple media techniques
d.
use graphics and presentation software to conceal unpleasant news
11. According to the Social Security Administration, in 2011 about _____ people received retirement
survivors and disability benefits from Social Security.
a.
100 million
b.
75 million
c.
50 million
d.
25 million
12. With a diverse workforce, more employers are willing to provide benefits to employees who establish
a:
a.
dual taxing relationship.
b.
joint employment status.
c.
codependent relationship.
d.
domestic partnership.
13. A standard definition of domestic partnership includes all of the following except:
a.
a requirement that the couple live together.
b.
a specification of financial interdependence.
c.
a requirement that the relationship be a permanent one.
d.
a minimum term of cohabitation requirement.
14. Employees desiring domestic partner benefits typically must sign:
a.
a writ of Common Law Marriage
b.
an Affidavit of Domestic Partnership
c.
an Affidavit of Residency within their state of residence
d.
a waiver of legal liability
15. Which of the following benefits are not legally required employee benefits?
a.
employer contributions to Social Security
b.
employer contributions to unemployment insurance
c.
employer contributions to workers’ compensation insurance
d.
employer contributions to minimum life insurance
16. Of the following, which group of employees is not covered by Social Security insurance?
a.
railroad workers
b.
clergy
c.
self-employed persons
d.
most military personnel
17. The Social Security insurance program is funded by:
a.
employer contributions.
b.
employee contributions.
c.
employee contributions with matching employer contributions.
d.
employee contributions and general tax funds.
18. Of the following, which is not a benefit covered under Social Security insurance?
a.
old-age insurance benefits
b.
disability benefits
c.
short-term disability caused by a job-related accident
d.
survivors’ benefits
19. Tax revenues derived from Social Security pay for each of the following benefits, EXCEPT:
a.
Disability benefits
b.
Unemployment
c.
Retirement
d.
Survivors’ benefits
20. The amount of survivors’ insurance benefits paid by Social Security:
a.
is based on the cause of death
b.
is based on a formula that takes into consideration the number of remaining years the
deceased worker had to work until retirement
c.
is fixed by law and adjusted only by the cost-of-living
d.
is based on the worker’s lifetime earnings covered by Social Security
21. Individuals can receive Social Security benefits as early as age:
a.
58
b.
62
c.
65
d.
67
22. Laid off employees who have been working in employment covered by the Social Security Act may
get unemployment insurance benefits for up to ____ weeks.
a.
20
b.
22
c.
24
d.
26
23. A typical unemployment insurance program does not require that:
a.
all eligible individuals must register for available work.
b.
all eligible individuals must submit an application for benefits.
c.
recipients must be willing to accept any job that is offered to them.
d.
recipients must be willing to accept any suitable job that is offered to them.
24. Unemployment compensation payments to individuals vary according to:
a.
the type of job held before layoff.
b.
their previous wage rate and length of previous employment.
c.
job type and length of previous employment.
d.
their previous wage rate and the type of job held before layoff.
25. To qualify for old-age benefits, a person must reach retirement age and have earned:
a.
20 credits
b.
40 credits
c.
60 credits
d.
80 credits
26. One of the limitations of the federal Family and Medical Leave Act is that it only applies to those
companies that have ____ or more employees during 20 or more calendar workweeks in the current or
preceding year.
a.
30
b.
40
c.
50
d.
60
27. The federal Family and Medical Leave Act:
a.
applies to employers having 10 or more employees during 20 or more calendar workweeks
in the current or preceding year.
b.
preempts state laws under all circumstances.
c.
provides for continuation of medical coverage.
d.
requires the employer to provide up to 24 weeks of unpaid, job-protected leave for certain
family and medical reasons.
28. The federal Family and Medical Leave Act provides all of the following except:
a.
up to 12 weeks of unpaid leave.
b.
promotions missed during leave.
c.
continuation of medical benefits.
d.
job protection.
29. Under the Family and Medical Leave Act, if an employee is returned to an equivalent job, rather than
their original job, it must have:
a.
identical pay, benefits, and terms of employment
b.
identical pay and promotional opportunity
c.
identical pay and benefits
d.
identical pay, benefits, terms of employment, and promotional opportunity
30. Retired persons are eligible for Medicare at age:
a.
59 1/2
b.
62
c.
65
d.
67
31. A portion of the payroll taxes is paid by workers and matched by their employers. In 2011, workers
and their employers each paid _____ percent on every dollar of salary or wages paid.
a.
1.15
b.
1.30
c.
1.45
d.
1.60
32. Despite its high unemployment rate, in 2011, _____ became the first state to cut the number of weeks
to twenty because its unemployment fund was so far in the red.
a.
Pennsylvania
b.
Michigan
c.
South Dakota
d.
California
33. Organizations of physicians and other health care professionals that provide a wide range of services to
subscribers on a prepaid basis are known as:
a.
preferred provider organizations (PPOs).
b.
major medical plans.
c.
health maintenance organizations (HMOs).
d.
integrated medical practices.
34. The _____ mandates that employers make health care coverage-at the same rate the employer would
pay-available to employees, their spouses, and their dependents on termination of employment, death,
or divorce.
a.
Health Care and Education Reconciliation Act
b.
Patient Protection and Affordable Care Act
c.
Consolidated Omnibus Budget Reconciliation Act
d.
Social Security Act
35. Groups of physicians that contract with an employer to provide medical resources on a more
cost-efficient basis in exchange for a greater share of patients are known as:
a.
preferred provider organizations (PPOs).
b.
major medical plans.
c.
health maintenance organizations (HMOs).
d.
integrated medical practices.
36. Beginning in 2014, firms that employ _____ or more people who work thirty or more hours per week
but do not offer them health insurance will have to pay a penalty to the government.
a.
12
b.
20
c.
25
d.
50
37. An advantage of a health savings account is that if there are funds remaining in the account at the end
of the year:
a.
the money goes back to the employer, helping the employer contain costs
b.
the money is forfeited
c.
the money belongs to the employee
d.
the money can be withdrawn and placed in the employees’ retirement account
38. Disease management programs:
a.
are comprehensive insurance benefits that serve as supplemental health insurance
b.
assist employees by providing information on monitoring and treating health conditions
c.
are work-site fitness programs
d.
are a major portion of worker’s compensation insurance
39. The Health Insurance Portability and Accountability Act:
a.
requires employers to offer a health maintenance organization (HMO) as a health care
option
b.
grants employees the right to switch medical insurance between former and present
employers
c.
guarantees employees the right to employer-provided health benefits
d.
is limited by pre-existing health conditions
40. Holiday pay, sick leave, and vacation pay are examples of:
a.
payment for time not worked
b.
benefits required by law
c.
categories of health care benefits
d.
unearned benefits
41. Federal government employees can usually be expected to be paid for ____ holidays a year.
a.
5
b.
10
c.
15
d.
20
42. Beginning in 2014, firms with ____ full-time employees will be required to automatically enroll new
full-time employees in their health care plans.
a.
50
b.
100
c.
200
d.
250
43. A plan that enables an employee who is laid off to draw, in addition to state unemployment
compensation, weekly benefits from the employer that are paid from a fund created for this purpose is
referred to as:
a.
severance pay.
b.
supplemental unemployment benefits (sub’s).
c.
leave insurance compensation.
d.
unemployment protection payments.
44. Under the FMLA, employees are eligible to take leave if they have worked for their employers for at
least twelve months, have at least ____ hours of service, and work in organizations that have fifty or
more employees within a seventy-five-mile radius.
a.
750
b.
1,000
c.
1,250
d.
1,500
45. In January 2008, Congress passed the __________ which amended the FLMA to provide eligible
employees working for covered employers new leave rights related to military service.
a.
National Defense Authorization Act
b.
Consolidated Omnibus Budget Reconciliation Act
c.
Patient Protection and Affordable Care Act
d.
Health Care and Education Reconciliation Act
46. The ___________ grants employees the right to switch their medical insurance between former and
present employers.
a.
Health Insurance Portability and Accountability Act
b.
Family Medical Leave Act
c.
Patient Protection and Affordable Care Act
d.
Health Care and Education Reconciliation Act
47. A ____ is a plan in which employees fund accounts by having money deducted from their paychecks.
a.
consumer-driven plan
b.
healthcare spending plan
c.
health reimbursement account
d.
flexible spending account
48. Polaroid allows employees the opportunity to try out retirement with a leave program, or gradually
reduce their work hours as they approach retirement age. These are examples of:
a.
severance leave
b.
a pre-retirement program
c.
family-friendly benefits
d.
policies recommended by Social Security
49. The decision on whether or not a pension plan should be offered is the responsibility of the:
a.
union and Department of Labor representatives.
b.
employees in consultation with the employer.
c.
employer.
d.
Pension Benefit Guaranty Corporation.
50. Today, about _____ of households nearing retirement have 401(k)-type of accounts.
a.
20 percent
b.
30 percent
c.
50 percent
d.
60 percent
51. A pension plan where contributions are made jointly by employees and employers is referred to as a:
a.
contributory plan
b.
noncontributory plan
c.
defined-benefit plan
d.
defined-contribution plan
52. A pension plan where contributions are made solely by the employer is referred to as a:
a.
contributory plan
b.
noncontributory plan
c.
defined-benefit plan
d.
defined-contribution plan
53. A pension plan where the amount that an employee is to receive upon retirement is set forth in advance
is referred to as a:
a.
contributory plan
b.
noncontributory plan
c.
defined-benefit plan
d.
defined-contribution plan
54. A pension plan that establishes the basis on which an employer will contribute to a pension plan is
referred to as a:
a.
contributory plan
b.
noncontributory plan
c.
defined-benefit plan
d.
defined-contribution plan
55. A popular plan that offers employees an opportunity to save through payroll deductions and have their
contributions matched by the employer is known as the:
a.
401(k) plan.
b.
tax reduction plan.
c.
ERISA benefit plan.
d.
Individual Retirement Plan.
56. A significant change in pension coverage has been the tremendous growth of tax-deferred:
a.
401(k) plans.
b.
tax reduction plans.
c.
ERISA benefit plans.
d.
Individual Retirement Plans.
57. Annual interest earned on cash-balance pension plans are often tied to:
a.
five-year treasury rate
b.
ten-year treasury rate
c.
fifteen-year treasury rate
d.
thirty-year treasury rate
58. Private pensions are subject to federal legislation under:
a.
Employee Retirement Income Security Act (ERISA).
b.
Consolidated Omnibus Budget Reconciliation Act (COBRA).
c.
Tax Equity and Fiscal Responsibility Act (TEFRA).
d.
Retirement Equity Act (REA).
59. After an employee works for an employer for a certain period of time, the employee is entitled to the
money in his or her pension plan. This worker is now:
a.
secured.
b.
endowed.
c.
vested.
d.
integrated.
60. Vesting guarantees:
a.
withdrawal of benefits at any time.
b.
automatic funding of pension plans.
c.
accrued pension benefits at retirement age.
d.
selection of pension options.
61. To help employees pay for the college expenses of their children and other family members, an
increasing number of companies are offering _____.
a.
additional overtime
b.
a contributory benefit plan
c.
cafeteria plans
d.
529 college savings plans
62. In 1996, Congress passed the ______, which provides that a same-sex domestic partner may not be
treated as an employee’s spouse for purposes of federal law.
a.
Defense of Marriage Act
b.
Employee Retirement Income Security Act
c.
Health Insurance Portability and Accountability Act
d.
Health Care and Education Reconciliation Act
63. Mildly ill child care facilities provide:
a.
tax benefits
b.
medical supervision
c.
a negative investment
d.
telecommuting facilities for working parents with ill children
64. Employer-sponsored child care programs and elder care programs are similar in that:
a.
under both programs, most of the caregivers are men.
b.
both types of programs typically offer on-site care facilities.
c.
both programs try to maintain or increase productivity by assisting employees with their
responsibilities outside the workplace.
d.
both programs offer substantial income tax benefits to employees.
65. In recent years, several companies have banded together to provide elder care in a cooperative
arrangement referred to as a:
a.
consortium.
b.
limited partnership.
c.
combined subsidiary.
d.
hostel.
66. The Social Security Administration administers the ______________ program.
a.
COBRA
b.
ERISA
c.
Medicare
d.
SNL
67. Workers’ compensation insurance may be provided through private or _______________ insurance.
a.
state funded
b.
employee prepaid
c.
federally funded
d.
SNL funded
68. Workers’ compensation covers certain work-related:
a.
lawsuits
b.
misunderstandings
c.
pay inequities
d.
illnesses
69. Employers pay for workers’ compensation insurance in ___________ states.
a.
all
b.
a majority of
c.
large
d.
heavily industrialized
70. A major objective of the Pension Protection Act is to _________________ 401(k) pension plans.
a.
reduce the number of
b.
alter the tax status of
c.
limit to very small employers the use of
d.
provide greater control over
ESSAY
1. Explain why an organization may choose to develop a cafeteria benefits plan for its employees.
2. Describe issues that employers have to consider while providing domestic partner benefits.
3. Describe the requirements and provisions of the Family and Medical Leave Act.
ANS:
4. Describe some of the ways employers have been trying to contain health insurance costs.
5. Compare and contrast the risks to the employee in regard to defined-contribution and defined-benefit
pension plans.
6. Explain the concept of work/life benefits. Name and discuss at least five of these benefits employers
offer their employees.
ANS:
7. Why have 401(k) plans become so popular?