Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 1
1. Which of the following is true of employee benefits?
a.
Workers in the United States are entitled to greater employee benefits than workers in many other nations.
b.
Employers who are seen as skimping on employee benefits are often viewed positively within a community.
c.
Surveys show that a majority of individuals regard employee benefits as unimportant in their decision to join
or remain with an organization.
d.
Employee benefits are used to create and maintain a competitive advantage for organizations.
ANSWER:
d
2. In the context of the types of benefits offered by employers, which of the following is a voluntary benefit?
a.
Social Security
b.
Wellness programs
c.
Medical plans
d.
Workers’ compensation
ANSWER:
b
3. A flexible benefits plan typically _____.
a.
allows only higher-risk employees to select and use certain benefits
b.
continuously updates the benefit options provided by an employer according to the demands and requirements
of employees
c.
provides flexibility in choosing the time of the year when employees would like to make use of the benefits
provided to them
d.
allows employees to select the benefits they prefer from options established by the employer
ANSWER:
d
4. A situation in which only higher-risk employees select and use certain benefits under a flexible benefits plan provided
by employers is referred to as _____.
a.
risk dispersion
b.
benefits concentration
c.
adverse selection
d.
open enrollment
ANSWER:
c
5. Which of the following is a disadvantage of providing flexible benefits plans?
a.
These plans do not cover higher-risk employees.
b.
There is a risk that employees will choose an inappropriate benefits package.
c.
These plans are typically discriminatory in nature.
d.
There is a risk that these plans will increase the attrition rate.
ANSWER:
b
6. Which of the following statements is true of part-time employees?
a.
Anti-discrimination laws enable part-time employees in the United States to receive the same benefits as those
received by full-time employees.
b.
Many employers in the United States do not provide any part-time employee benefits, except some paid time
off.
c.
Over 90 percent of the part-time employees in the United States have access to health care benefits.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 2
d.
Less than 5 percent of the part-time employees in the United States have access to retirement benefits.
ANSWER:
b
7. A problem with providing flexibility in benefit choice is that it _____.
a.
does not cover higher-risk employees
b.
increases the risk of adverse selection by employees
c.
is typically discriminatory in nature
d.
increases attrition rate
ANSWER:
b
8. In the context of benefits administration, which of the following statements is true of information technology?
a.
It makes it possible for companies to offer self-service to employees.
b.
It increases the costs associated with benefits administration.
c.
It necessitates the involvement of a third-party administrator to manage employee benefits.
d.
It prevents companies from providing employees access to HR experts.
ANSWER:
a
9. Sylvia and Co. provides enrollment and recordkeeping services to Widgeton Inc. In this scenario, Sylvia and Co. is
most likely _____.
a.
Widgeton’s parent organization
b.
Widgeton’s subsidiary
c.
an in-house claims processor
d.
a third-party administrator
ANSWER:
d
10. Cost sharing _____.
a.
involves employers sharing the costs of government-mandated health insurance plans with the government
b.
requires employees to pay for more of their benefit costs
c.
requires insurance firms to share profits with employers who purchase insurance plans
d.
allows employees to track their fund balances
ANSWER:
b
11. Which of the following is a benefit that employers must provide?
a.
Wellness programs
b.
Unemployment compensation
c.
Education assistance
d.
Public-service leave
ANSWER:
b
12. Which of the following is a voluntary employee benefit that employers may provide in addition to legally required
benefits?
a.
Medical plans
b.
Workers’ compensation
c.
Education assistance
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 3
d.
Social Security
ANSWER:
c
13. What is the normal retirement age for employees in the United States to receive maximum Social Security benefits?
a.
50
b.
57
c.
70
d.
67
ANSWER:
d
14. Medicare is the health insurance program that was implemented by the U.S. government in 1965 to provide medical
care primarily for _____.
a.
disabled workers
b.
government employees
c.
people over the age of 65
d.
cancer patients
ANSWER:
c
15. Which of the following best describes workers’ compensation?
a.
Compensation provided to workers after retirement
b.
A benefit program provided to workers injured on the job
c.
A benefit program provided to workers who survive terminal diseases
d.
Total pay package that includes both basic wages and benefits
ANSWER:
b
16. Jim, a 23-year-old factory worker, was seriously injured when a hammer fell on his head while he was at his
workstation. Jim did not have his safety helmet on at the time of the accident even though the factory’s safety rules
mandate the use of safety helmets at all times. In this scenario, which of the following is most likely to be true of Jim?
a.
Jim will be able to claim additional Social Security benefits.
b.
Jim will be able to claim additional wages if he files a lawsuit against the company.
c.
Jim will receive a severance payment when he returns to work after he recovers from his injuries.
d.
Jim will receive workers’ compensation even though he is responsible for the injury.
ANSWER:
d
17. Workers’ compensation programs are typically funded _____.
a.
at the expense of the employer
b.
at the expense of all the stakeholders
c.
by the value-added taxes levied by the federal government on specific goods
d.
by the contributions made to state governments by both employees and employers
ANSWER:
a
18. Which of the following statements is true in the context of part-time employee benefits and status?
a.
Part-time employees are more likely to receive life insurance benefits than paid holidays.
b.
Part-time employees are more likely to receive retirement benefits than health care benefits.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 4
c.
Part-time employees are less likely to receive short-term disability benefits than long-term disability benefits.
d.
Part-time employees are less likely to receive paid disability leave benefits than health care benefits.
ANSWER:
b
19. Every company is required to pay an unemployment tax that is based on the _____.
a.
actuarial calculations of the benefits to be paid to employees
b.
the total number of employees covered under workers’ compensation
c.
employees’ lengths of service
d.
the number of claims filed by workers who leave employment
ANSWER:
d
20. Claudia, a Legal Assistant, worked with Malag Inc. for 10 years after which she became fully vested. This implies that
she _____.
a.
will receive the amounts contributed by both the employer and herself when she retires
b.
can transfer her entire pension fund balances to a new employer’s plan if she moves to a new company
c.
will receive the maximum amount of pension available under her company’s retirement plan when she retires
d.
can no longer move her retirement benefits to another employer
ANSWER:
a
21. A company that has been providing generous defined benefit pension plans to all its retirees for the past 50 years is
now facing bankruptcy and is unable to pay the pension amount. Which of the following statements is true in the given
scenario?
a.
The Pension Benefit Guaranty Corporation will pay the company’s retiree benefits from its solvency fund.
b.
The Pension Benefit Guaranty Corporation will reduce the pension amount based on the available amount of
money in the pension fund.
c.
The retirees will have to forfeit their pension benefits.
d.
The company can suspend pension payments until the pension fund is fully recovered.
ANSWER:
a
22. Which of the following is true of defined benefit retirement plans?
a.
In these plans, the investment risk is borne by the employee.
b.
In these plans, the amount of benefit paid at retirement is predetermined.
c.
They are most common in private sector and nonunion workforces.
d.
They typically do not guarantee benefits.
ANSWER:
b
23. A _____ is a retirement program in which employees are promised a pension amount based on age and years of
service.
a.
stock purchase plan
b.
defined contribution plan
c.
defined benefit plan
d.
cash balance pension plan
ANSWER:
c
24. In defined contribution plans, _____.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 5
a.
investment risks are borne by employees
b.
the amount of benefit paid at retirement is predetermined
c.
benefits are guaranteed by the Pension Benefit Guaranty Corporation (PBGC)
d.
the amount of contribution changes on the basis of actuarial assumption
ANSWER:
a
25. According to a 1986 amendment to the Age Discrimination in Employment Act (ADEA), _____.
a.
most employees cannot be forced to retire at a specific age
b.
workers should contribute to defined benefit plans
c.
older workers should be discouraged from retiring before the normal retirement age
d.
employees above age 50 are ineligible for full pension benefits
ANSWER:
a
26. Which of the following is true of the Older Workers Benefit Protection Act (OWBPA)?
a.
It has set the maximum retirement age for employees to be eligible for retirement benefits at 60 years.
b.
It was enacted in 1990 as an amendment to the Age Discrimination in Employment Act (ADEA).
c.
It extends dependent coverage up to age 60.
d.
It exclusively covers employees in the government sector.
ANSWER:
b
27. Which of the following is a strategy that is most frequently used by employers offering health care benefits to control
and reduce their costs?
a.
Decreasing deductibles and copayments
b.
Instituting low-deductible plans
c.
Increasing employee contributions
d.
Expanding family coverage
ANSWER:
c
28. Which of the following is true of the Patient Protection and Affordable Care Act?
a.
It requires firms with 30 or more employees to provide health care coverage.
b.
It encourages insurance companies to set rates based on an individual’s health status.
c.
It extends dependent coverage up to age 26.
d.
It eliminates coverage for preventive services.
ANSWER:
c
29. Meredith, the General Manager at Gladfle Inc., is planning to use certain new strategies to control and reduce the
health care benefit costs to her company. Which of the following should she include in her list of strategies?
a.
Decreasing copayments
b.
Eliminating high-deductible plans
c.
Switching to consumer-driven health plans
d.
Avoiding managed care
ANSWER:
c
30. Samuel works for a company that provides health care benefits to all its insured employees. However, every time
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 6
Samuel visits a physician, he is required to pay a fixed amount of $20 from his own pocket, whereas the rest of the
amount is covered by the medical insurance. The $20 that Samuel has to pay is an example of a(n) _____.
a.
insurance premium
b.
end-user cost
c.
copayment
d.
deductible
ANSWER:
c
31. _____ typically consists of approaches that monitor and reduce medical costs through restrictions and market system
alternatives.
a.
Utilization review
b.
Managed care
c.
A medical review program
d.
A medical option plan
ANSWER:
b
32. Preferred provider organizations (PPOs) and health maintenance organizations (HMOs) _____.
a.
primarily aim at reducing health care costs paid by employees
b.
do not provide health care services to private-sector organizations
c.
separate their prescription drug coverage from the general health care plan
d.
are the most common forms of managed care
ANSWER:
d
33. In a _____, an employer makes financial contributions to help employees cover their health-related expenses.
a.
consumer-driven health plan
b.
cash balance plan
c.
self-directed health plan
d.
managed care plan
ANSWER:
a
34. According to the Consolidated Omnibus Budget Reconciliation Act (COBRA), _____.
a.
employers with more than 50 employees must provide medical insurance for all full-time employees
b.
most employers with 20 or more employees must offer extended health care coverage to certain groups of plan
participants
c.
widowed or divorced spouses and dependent children of former or current employees need not be offered
health care coverage
d.
employees who are terminated need not be offered health care coverage
ANSWER:
b
35. The Health Insurance Portability and Accountability Act (HIPAA) _____.
a.
requires employers with more than 50 employees to provide medical insurance for all full-time employees
b.
encourages insurance companies to set rates based on an individual’s health status
c.
allows group insurance plans to drop coverage for a sick employee
d.
allows employees to switch their health insurance plans when they change jobs
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 7
ANSWER:
d
36. The _____ ensures the privacy of employee medical records.
a.
Health Insurance Portability and Accountability Act (HIPAA)
b.
Age Discrimination in Employment Act (ADEA)
c.
Employee Retirement Income Security Act (ERISA)
d.
Family and Medical Leave Act (FMLA)
ANSWER:
a
37. Karen, a diabetic, has quit her job as an Internal Auditor with a bank and has joined another company as the Assistant
Chief Financial Officer. Which of the following acts will enable Karen to switch her health insurance plan from her
former employer to her new employer?
a.
Employee Retirement Income Security Act (ERISA)
b.
Family and Medical Leave Act (FMLA)
c.
Age Discrimination in Employment Act (ADEA)
d.
Health Insurance Portability and Accountability Act (HIPAA)
ANSWER:
d
38. How do insurance plans offered by employers benefit employees even when the employers do not pay any of the
costs?
a.
If the employers do not contribute to insurance costs, they are required to offer special benefits to their
employees.
b.
The employees are offered insurance plans at lower rates through group programs.
c.
The employers pay all of the costs of formal education courses taken up by the employees’ dependents.
d.
The amount paid by the employees is tax-free only when the employers make no contribution.
ANSWER:
b
39. Glen, a line manager, is informed that his company will be introducing a stock purchase plan for employees. This
implies that _____.
a.
Glen will receive monthly dividends from his employer
b.
Glen will be able to sell his share of the company stocks at the market rate
c.
Glen will be able to buy shares in the company at a discount
d.
Glen will be provided financial counseling on the purchase and sale of stocks
ANSWER:
c
40. Long-term disability insurance _____.
a.
applies exclusively to nongovernmental employers with over 50 employees
b.
pays for temporary living expenses and moving expenses incurred by disabled employees
c.
pays a flat fee for a fixed number of hours of legal assistance each month for disabled employees
d.
provides continuing income protection for employees who become disabled and are unable to work
ANSWER:
d
41. The Worker Adjustment and Retraining Notification Act (WARN) of 1988 _____.
a.
does not require employers to give prior notice of mass layoff or plant closings
b.
requires employers to give six months’ notice of mass layoff or plant closings
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 8
c.
mandates the payment of severance pay to employees in the case of mass layoff or plant closings
d.
does not mandate severance pay in case of mass layoffs or plant closings
ANSWER:
d
42. Which of the following statements is true of the Family and Medical Leave Act?
a.
It requires employers to allow eligible employees to take a maximum of 12 weeks of paid leave during any 12–
month period to care for a spouse, child, or parent with a serious health condition.
b.
It requires employers to allow eligible employees to take a maximum of 12 weeks of unpaid, job-protected
leave during any 12-month period for foster care placement of a child.
c.
It requires employers to allow eligible employees to take a maximum of 12 weeks of unpaid leave during the
birth of a child but not for the adoption of a child.
d.
It requires employers to allow eligible employees to take a maximum of 8 weeks of paid, job-protected leave
to care for a military servicemember injured while on active duty.
ANSWER:
b
43. The Family and Medical Leave Act of 1993 requires that employers allow eligible employees to take a maximum of
_____ during any 12-month period.
a.
12 weeks of paid leave
b.
24 weeks of paid leave
c.
12 weeks of unpaid leave
d.
24 weeks of unpaid leave
ANSWER:
c
44. The Family and Medical Leave Act (FMLA) defines a _____ as an illness or injury that requires inpatient care or
continuing treatment by a health care provider for medical problems that exist beyond three days.
a.
mental disorder
b.
serious health condition
c.
life-threatening illness
d.
chronic disease
ANSWER:
b
45. In the context of health care legislations, which of the following is true of the Health Insurance Portability and
Accountability Act (HIPAA)?
a.
It mandates employees to switch their health insurance plans when they change jobs.
b.
It prohibits group insurance plans from dropping coverage for a sick employee.
c.
It does not regulate the disclosure of protected health information.
d.
It exclusively applies to employers with 100 or more full-time and/or part-time employees.
ANSWER:
b
46. Which of the following is a typical abuse-control measure used by employers to keep employees from taking
excessive time off around holidays?
a.
Employees are required to work the last scheduled day before a holiday and the first scheduled workday after a
holiday to be eligible for holiday pay.
b.
Employees are mandated to take a leave on the last scheduled day before a holiday and the first scheduled
workday after a holiday to be eligible for holiday pay.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 9
c.
Employees are paid extra to work the days immediately following and preceding a holiday.
d.
Employees are required to work on the weekend before and after a holiday to be eligible for holiday pay.
ANSWER:
a
47. In the context of legally required benefits, which of the following is true of unemployment compensation?
a.
Each U.S. state operates its own unemployment compensation system.
b.
Benefit levels under unemployment compensation are the same across all U.S. states.
c.
The unemployment compensation system is controlled by organizations with more than 500 employees.
d.
The job-search provisions in the unemployment compensation system are drafted and implemented by
preferred provider organizations (PPOs).
ANSWER:
a
48. Why do a relatively low percentage of men take paternity leave?
a.
Men who are not single parents are not covered in the Family and Medical Leave Act.
b.
Employers typically reject paternity leave applications because employees are likely to obtain such leaves
under fraudulent conditions.
c.
Men have a perception that it is not considered socially acceptable for them to stay home for child-related
reasons.
d.
A provision in the Family and Medical Leave Act mandates that only one parent per family can take leaves,
which are usually taken by the mother.
ANSWER:
c
49. Kenneth is a Programmer in the customer service department in Kynol Inc. When his father dies, he applies for a
leave. In this scenario, Kenneth is most likely to have applied for a _____.
a.
paternity leave
b.
sick leave
c.
bereavement leave
d.
jury leave
ANSWER:
c
50. A program that combines sick leave, vacations, and holidays into a total number of hours or days that employees can
take off with pay is called a(n) _____ plan.
a.
consolidated-time-off
b.
flexible benefits
c.
accumulated leave
d.
paid-time-off
ANSWER:
d
51. Employers rarely use benefits as tools for attracting and retaining employees because employees generally lack a
complete understanding of the benefits provided by their employers.
a.
True
b.
False
ANSWER:
False
52. Most benefits, except for paid time off, are taxed as income to employees.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 10
a.
True
b.
False
ANSWER:
False
53. Public-sector workers (police, firefighters, teachers, and other government workers) belong to labor unions at a much
higher rate than do nongovernment workers.
a.
True
b.
False
ANSWER:
True
54. Individuals who work for federal contractors are entitled to 56 hours of paid sick leave per year as a result of
Executive Order 13706.
a.
True
b.
False
ANSWER:
True
55. In the United States, part-time employees are most likely to receive health and life insurance benefits and paid time off
and least likely to receive retirement benefits.
a.
True
b.
False
ANSWER:
False
56. In the United States, benefit costs have significantly reduced between 2001 and 2015.
a.
True
b.
False
ANSWER:
False
57. Employees’ satisfaction with benefits is most definitely linked to benefit communications.
a.
True
b.
False
ANSWER:
True
58. The costs associated with legally required benefits are typically more than half of the total benefit costs.
a.
True
b.
False
ANSWER:
False
59. Individuals who rely solely on Social Security retirement benefits may have difficulty living at the level of comfort
they envision as those benefits typically are not adequate.
a.
True
b.
False
ANSWER:
True
60. No-fault insurance means that an injured worker does not receive benefits if the accident was the employee’s fault.
a.
True
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 11
b.
False
ANSWER:
False
61. Workers cannot be required to make financial contributions for coverage under workers’ compensation programs.
a.
True
b.
False
ANSWER:
True
62. An employee who is out of work and actively looking for employment can receive up to 26 weeks of pay through
unemployment compensation.
a.
True
b.
False
ANSWER:
True
63. Workers in the private sector are far more likely to have a defined benefit plan than are workers in the public sector.
a.
True
b.
False
ANSWER:
False
64. In companies that provide defined benefit plans, if the funding is inadequate to pay the benefits promised, the
employees must make up the shortfall.
a.
True
b.
False
ANSWER:
False
65. Defined contribution pension plans offer greater security to employees because these benefits are guaranteed by the
Pension Benefit Guaranty Corporation (PBGC).
a.
True
b.
False
ANSWER:
False
66. 401(k) plans are unattractive to employees because these plans require them to pay higher income taxes during
working years.
a.
True
b.
False
ANSWER:
False
67. The Employee Retirement Income Security Act (ERISA) requires pension plans to periodically provide participants
with information about plan features (such as vesting), funding, and benefit accrual amounts.
a.
True
b.
False
ANSWER:
True
68. The Patient Protection and Affordable Care Act requires companies with 50 or more employees (who work 30 hours a
week or more) to provide health care coverage or pay a penalty.
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 12
a.
True
b.
False
ANSWER:
True
69. Copayments are the portion of medical expenses paid by an insured individual for medical treatment.
a.
True
b.
False
ANSWER:
True
70. As per the provisions of the Affordable Care Act, companies in the United States are prohibited from increasing the
fixed copay amount, decreasing the percentage, or decreasing the dollar amount that employees share for costs.
a.
True
b.
False
ANSWER:
False
71. Spousal exclusion provisions limit access to a company’s health plan when an employee’s spouse works for another
company that offers health insurance.
a.
True
b.
False
ANSWER:
True
72. Divorced spouses and dependent children of former or current employees are offered extended health care coverage
under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
a.
True
b.
False
ANSWER:
True
73. Both short-term and long-term disability insurance provide continuing income protection for employees who become
disabled and are unable to work.
a.
True
b.
False
ANSWER:
True
74. The federal government mandates a minimum of two weeks of severance pay for older employees who are asked to
retire early.
a.
True
b.
False
ANSWER:
False
75. Only employees who have worked at least 12 months and 1,250 hours in the previous year are eligible for leave under
the Family and Medical Leave Act (FMLA).
a.
True
b.
False
ANSWER:
True
Name:
Class:
Date:
outsourcing of benefits administration. Third-party administrators (TPAs) are vendors that provide enrollment,
record keeping, and other administrative services to organizations. Outsourcing is on the rise, and many
76. Family and Medical Leave Act (FMLA) leaves are typically paid.
a.
True
b.
False
ANSWER:
False
77. Employees are more likely to stay with employers who provide child-care and elder-care benefits.
a.
True
b.
False
ANSWER:
True
78. Union contracts have an impact on the number of paid holidays offered by organizations.
a.
True
b.
False
ANSWER:
True
79. Paid-time-off (PTO) plans combine all sick leave, vacation time, and holidays into a total number of hours or days that
employees can take off with pay.
a.
True
b.
False
ANSWER:
True
80. Employers are mandated to pay time-and-a-half to hourly employees who must work on holidays.
a.
True
b.
False
ANSWER:
False
81. How is the provision of benefits rather than wages advantageous for employees?
ANSWER:
Providing employees benefits rather than wages can be advantageous for employees. Most benefits (except for
paid time off) are not taxed as income to employees. During World War II, wage and price controls were
instituted to ensure appropriate use of resources and to keep inflation rates low. Wishing to attract and reward
hardworking employees, companies began to offer paid fringe benefits as added incentives. Since benefits
were not paid in wages, they were never taxed as income to the employee, yet the company could deduct the
cost as a business expense. This explains why the United States differs from many other countries in how
benefits (especially health insurance) are provided to workers.
82. Juan is a part-time employee in a publishing company. Is he eligible to receive benefits?
ANSWER:
Juan’s eligibility to receive benefits depends on the company. Some employers provide benefits to part-time
employees, whereas others only provide some paid time off. Part-time employees are most likely to receive
retirement benefits and paid holidays and vacation. However, they are far less likely to have access to health
care, life insurance, and paid disability leave benefits. Benefits for part-time employees are often provided in
proportion to the percentage of full-time work they provide.
83. Why do companies outsource benefits administration?
ANSWER:
With the myriad of benefits, many organizations make a coordinated effort to administer their benefits
programs. One significant trend is the outsourcing of benefits administration. One significant trend is the
Name:
Class:
Date:
programs often include incentives such as outplacement services, health care benefits, and a severance
payment. There is, of course, a risk that too many employees will participate, thereby leaving the company
organizations use TPAs to help manage costs and to provide expertise and efficiency in plan administration.
However, employers need to be careful when selecting TPAs because sensitive employee information will be
shared with vendors.
84. George is unemployed and is actively searching for a job. Is there any legal provision regarding benefits that can help
George?
ANSWER:
George is eligible to receive unemployment compensation. Unemployment compensation was established as
part of the Social Security Act of 1935 to provide a minimum level of benefits for workers who are out of
work. Each U.S. state operates its own unemployment compensation system, and benefit levels and job-search
provisions differ significantly from state to state. Each company pays an unemployment tax that is based on an
“experience rate,” which reflects the number of claims filed by workers who leave employment.
Under normal circumstances, an employee who is out of work and actively looking for employment can
receive up to 26 weeks of pay at the rate of 50 percent to 80 percent of normal pay. Most employees are
eligible. However, workers fired for misconduct or those not actively seeking employment are generally
ineligible.
85. Define the concepts of vesting and portability.
ANSWER:
Certain rights are associated with retirement plans. One such right, called vesting, gives employees a benefit
that cannot be taken away. If employees resign or are terminated before they have worked long enough to
become vested, no pension rights accrue to them except the funds they have contributed. If employees work
for the required number of years to be fully vested, they retain their pension rights and receive the amounts
contributed by both the employer and themselves.
Another feature of some retirement plans is portability. In a portable plan, employees can move their
retirement benefits from one employer to another. Instead of requiring workers to wait until they retire to
move their retirement plan benefits, once workers have vested in a plan, they can transfer their fund balances
to other retirement plans if they change jobs.
86. What are the family-oriented benefits offered by employers? Which of these are mandated by the federal government?
ANSWER:
The Family and Medical Leave Act (FMLA) requires employers to allow eligible employees to take a
maximum of 12 weeks of unpaid, job-protected leave during any 12-month period for the following situations:
• Birth of a child and care for the newborn within one year of birth
• Adoption or foster care placement of a child
• Caring for a spouse, child, or parent with a serious health condition
• Serious health condition of the employee
• Military family members who must handle the affairs for military members called to active duty
• Twenty-six weeks leave to care for a military servicemember injured while on active duty
A serious health condition is an illness or injury that requires inpatient care or continuing treatment by a health
care provider for medical problems that exist beyond three days. An employer may require a medical
certificate from a health care provider to support the reason for the employee’s leave.
Name:
Class:
Date:
Name:
Class:
Date:
employer and/or employee makes payments to fund an employee’s retirement account. The key to this plan is
Profit-sharing plans, employee stock ownership plans (ESOPs), and 401(k) plans are commonly defined
One problem with flexibility in benefit choice is that employees may choose an inappropriate benefits
package. Younger employees may decide not to participate in the retirement plan because they believe
retirement is decades away and that there is sufficient time to save in the future. However, this may result in
inadequate retirement savings for the employee. Part of this problem can be overcome by requiring employees
to select a core set of benefits (life, health, retirement, and disability insurance) and then offering options on
other benefits.
Another problem can be adverse selection by employees, a situation in which only higher-risk employees
select and use certain benefits. For example, employees with young children are far more likely to enroll in
orthodontia benefit plans that provide braces than are older employees. Since insurance plans are based on a
group rate, the premium rates might be higher because too few employees who do not need braces enroll in the
plan.
Offering more choices leads to higher administrative costs for the organization. Since many flexible plans
have become complex, they require more administrative time and information systems to track the choices
made by employees. Despite the disadvantages, flex plans will likely continue to grow in popularity.
93. Why is the effective communication of benefits important for the efficient functioning of a company?
ANSWER:
Employees are often not fully aware of the values and costs associated with the benefits provided by
employers. This is in large measure due to ineffective communication by the company and the lack of a clear
strategy for discussing benefits with employees. This means that the investments many companies make in
benefits may not be helping them effectively attract and retain competent employees.
Employees’ satisfaction with benefits is most definitely linked to benefit communications. For instance,
employees often do not fully understand their health benefits, a situation that can cause dissatisfaction in the
workplace. Consequently, many employers develop special benefits communication systems to inform
employees about the monetary value of the benefits they provide.
94. What is workers’ compensation? Explain.
ANSWER:
Workers’ compensation is a benefit program provided to workers who are injured on the job. State laws
require most employers to provide workers’ compensation coverage by purchasing insurance from a private
carrier, state insurance fund, or self-insuring.
Workers’ compensation regulations require employers to provide cash benefits, medical care, and
rehabilitation services to employees for injuries or illnesses that occur within the scope of their employment.
In exchange, employees give up the right to pursue legal actions and awards. However, various circumstances
may influence a company’s obligation to pay workers’ compensation.
The concepts of no-fault insurance and exclusive remedy balance the rights of employers and employees under
workers’ compensation. No-fault insurance means that an injured worker receives benefits even if the accident
was the employee’s fault. For example, if an employee violates the safety rules and fails to wear safety shoes
and drops a heavy object on his foot that causes a broken toe, his medical and disability expenses will still be
paid by the employer’s insurance coverage. Exclusive remedy means that workers’ compensation benefits are
the only benefits injured workers may receive from the employer to compensate for work-related injuries. In
most instances, an injured worker cannot file a lawsuit for additional money.
95. Elaborate on the two main types of retirement benefits.
Name:
Class:
Date:
Name:
Class:
Date:
outplacement assistance as part of the severance pay package.
prevent violations and the resulting fines.
98. Discuss the financial benefits that companies commonly offer their employees.
ANSWER:
Companies may offer employees a wide range of special benefits that provide financial support and security.
Employers find that such benefits can be useful in attracting and retaining employees. Workers like receiving
these benefits, which are often not taxed as income. Some types of financial benefits offered by companies are
as follows:
1. Insurance benefits: In addition to health care insurance, some companies provide other types of insurance.
These benefits offer major advantages for employees because employers may pay some or all of the costs.
Even when employers do not pay any of the costs, employees still benefit because of the lower rates available
through group programs. The most common types of insurance benefits are the following:
• Life insurance: A typical level of coverage is one and one-half or two times an employee’s annual
salary.
• Disability insurance: Both short-term and long-term disability insurance provide continuing income
Name:
Class:
Date:
pay and the military, election, or jury pay. Federal law prohibits discriminating against military reservists by
requiring them to take vacation time when deployed or in training.
Funeral leave, or bereavement leave, is another common type of leave offered. An absence of up to three days
for the death of immediate family members is often granted. Some policies also allow unpaid time off for the
death of more distant relatives.
The FMLA guarantees unpaid leave for certain family and medical reasons, such as paternity leave.
Many employers allow employees to miss a limited number of days because of illness without losing pay.
100. What are the advantages of using paid-time-off (PTO) plans?
ANSWER:
A growing number of employers have made use of paid-time-off (PTO) plans. These plans combine all sick
leave, vacation time, and holidays into a total number of hours or days that employees can take off with pay.
Many employers have found PTO plans to be more effective than other means of reducing absenteeism,
scheduling time off, increasing employee understanding of leave policies, and assisting with recruiting and
retention.