41. Which of the following does
not
help explain why it is less expensive for groups versus individuals to purchase many benefits?
A. Groups can spread fixed costs over more people, thereby reducing the cost per person.
B. Insurance risks are pooled in large groups.
C. ERISA rules provide favorable tax treatment for large groups.
D. Larger groups have greater bargaining power when negotiating over prices.
ERISA does not provide favorable tax treatment for large groups as it covers retirement benefits and not private group insurance.
42. _____ requires employers to permit employees to extend their health insurance coverage at group rates for up to 36 months following a qualifying event, such as a layoff.
A. The SEC
B. ADA
C. ERISA
D. COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 requires employers to permit employees to extend their health insurance coverage at group rates for up to 36 months following a qualifying event, such as a layoff.
43. From which source do most retirees receive most of their retirement income?
A. Social Security
B. Private pensions
C. Earnings from assets
D. Disability insurance
Social Security remains the largest single component of the elderly's overall retirement income (39 percent), while private pensions constitute 18 percent, and earnings from assets constitute16 percent. The remainder of the elderly's income comes from earnings (24 percent) and other sources (3 percent).
44. Identify the act that increased the fiduciary responsibilities of pension plan trustees, established vesting rights and portability provisions.
A. ERISA
B. ADA
C. COBRA
D. FAS 106
The Employee Retirement Income Security Act (ERISA) of 1974 increased the fiduciary responsibilities of pension plan trustees, established vesting rights and portability provisions, and established the Pension Benefit Guaranty Corporation (PBGC).
45. Which of the following is
not
typically a factor used to determine retirement benefit levels of employees under a defined benefit retirement plan?
A. Years of service
B. Number of dependents
C. Age
D. Wages or salary level
A defined benefit plan guarantees a specified retirement benefit level to employees based typically on a combination of years of service and age as well as on the employee's earnings level.
46. Which of the following statements concerning the Pension Benefit Guaranty Corporation (PBGC) is
not
true?
A. It was created by the Employee Retirement Income Security Act (ERISA) of 1974.
B. It provides a basic benefit, not necessarily complete benefit replacement.
C. It guarantees healthcare benefits.
D. It is funded by a fee assessed on each plan participant.
The PBGC does not guarantee health care benefits.
47. Which of the following is
not
a type of defined contribution pension plan?
A. A money purchase plan
B. A profit-sharing plan
C. A gainsharing plan
D. An employee stock option plan
A gainsharing plan does not involve monetary contributions from either employee or employer. Rather, it focuses on sharing productivity gains of a group or plant with employees.
48. Which one of the following is true of defined contribution plans?
A. They shift the investment risk to the employer.
B. They present greater administrative challenges to employers.
C. They require annual premium payments to the PBGC.
D. They are more prevalent in smaller than larger companies.
Defined contribution plans shift the investment risk to employees, have fewer administrative challenges and do not require payments to the PGBC. They are preferred in smaller companies, perhaps because of small employers' desire to avoid long-term obligations or perhaps because small companies tend to be younger, often being founded since the trend toward defined contribution plans.
49. _____ plans do not promise a specific benefit level for employees upon retirement. Rather, an individual account is set up for each employee with a guaranteed size of contribution.
A. Defined benefit
B. Term benefit
C. Defined contribution
D. Unspecified contribution
Defined contribution plans do not promise a specific benefit level for employees upon retirement. Rather, an individual account is set up for each employee with a guaranteed size of contribution.
50. A _____ permits employees to defer compensation on a pretax basis.
A. defined benefit plan
B. 401(k) plan
C. money purchase plan
D. specified retirement benefit plan
Section 401(k) plans (named after the tax code section) permit employees to defer compensation on a pretax basis.