Employee Benefits: Legal Requirements and Best Practices

Question 1

Under the Employee Retirement Income Security Act (ERISA), which of the following is NOT a fiduciary duty of plan administrators?

Accepted Answer

Duty to maximize profits

Answer

Duty of loyalty

Answer

Duty of prudence

Answer

Duty of care

Question 2

Which type of health insurance plan offers the broadest range of coverage, but typically has the highest premiums?

Accepted Answer

Preferred provider organization (PPO)

Answer

Managed care plan

Answer

Point-of-service (POS) plan

Answer

Exclusive provider organization (EPO)

Question 3

Which of the following is a key benefit provided by a defined benefit pension plan?

Accepted Answer

Guaranteed monthly payments upon retirement

Answer

Employer contributions to a 401(k) plan

Answer

Profit sharing

Answer

Stock options

Question 4

What is the primary aim of the Family and Medical Leave Act (FMLA)?

Accepted Answer

To provide unpaid, job-protected leave for employees with eligible family or medical reasons

Answer

To guarantee health insurance coverage for employees on leave

Answer

To prevent discrimination against employees who take leave

Answer

To establish a national paid family leave program

Question 5

What is the purpose of a summary plan description (SPD) for an employee benefit plan?

Accepted Answer

To provide a clear and concise overview of the plan's benefits and terms

Answer

To serve as a legal document binding the plan administrator and participants

Answer

To disclose the plan's financial information to participants

Answer

To obtain approval from the government before the plan can be implemented

Question 6

Which of the following is a benefit that is typically provided through a defined contribution pension plan?

Accepted Answer

Employer contributions to a 401(k) plan

Answer

Fixed monthly payments upon retirement

Answer

Profit sharing

Answer

Stock options

Question 7

Which of the following is not a traditional major category of employee benefits?

Accepted Answer

Transportation reimbursement

Answer

Health insurance

Answer

Retirement plans

Answer

Paid time off

Question 8

Which of the following benefits is covered by the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Accepted Answer

Health insurance

Answer

Life insurance

Answer

Disability insurance

Answer

Paid time off

Question 9

An employee stock ownership plan (ESOP) is primarily designed to:

Accepted Answer

Allow employees to purchase company stock

Answer

Provide retirement income

Answer

Increase paid time off

Answer

Facilitate 401(k) contributions

Question 10

The primary objective of the Employee Retirement Income Security Act (ERISA) is to:

Accepted Answer

Regulate employee benefit plans

Answer

Provide health insurance to all Americans

Answer

Ensure equal pay for equal work

Answer

Promote collective bargaining

Question 11

Which of the following is not a potential benefit of providing employee benefits?

Accepted Answer

Increased employer liability

Answer

Improved employee morale

Answer

Increased employee productivity

Answer

Reduced turnover rates

Question 12

Which federal statute regulates the creation and upkeep of employee benefit programs?

Accepted Answer

Employee Retirement Income Security Act (ERISA)

Answer

Fair Labor Standards Act (FLSA)

Answer

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Question 13

What is the primary purpose of a summary plan description (SPD) for an employee benefit plan?

Accepted Answer

To provide employees with a clear and concise summary of the plan's terms

Answer

To file with the IRS for tax purposes

Answer

To serve as a legal document governing the plan

Answer

To provide investment advice to plan participants

Question 14

According to the Americans with Disabilities Act (ADA), an individual with a disability is defined as someone who has:

Accepted Answer

A physical or mental impairment that substantially limits a major life activity

Answer

An inability to perform the essential functions of their job

Answer

A history of disability

Answer

A perception of having a disability

Question 15

Which of the following is NOT a type of flexible benefit plan offered by employers?

Accepted Answer

401(k) plan

Answer

Cafeteria plan

Answer

Health savings account (HSA)

Answer

Flexible spending account (FSA)

Question 16

What is the primary goal of the Employee Retirement Income Security Act (ERISA)?

Accepted Answer

To protect the interests of employee benefit plan participants

Answer

To provide tax incentives for employers to offer employee benefits

Answer

To regulate the investment of employee benefit plan assets

Answer

To create a national health insurance system

Question 17

What is the primary tax benefit of contributing to a traditional 401(k) plan?

Accepted Answer

Contributions are made on a pre-tax basis, reducing current taxable income

Answer

Withdrawals are tax-free

Answer

Earnings grow tax-free until withdrawn

Answer

Contributions can be made from both employee and employer sources

Question 18

What is the primary purpose of the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Accepted Answer

To provide limited continuation of health insurance coverage for employees who lose their job or experience certain qualifying events

Answer

To regulate the provision of employer-sponsored pension plans

Answer

To mandate minimum paid time off for employees

Question 19

Which of the following is a key provision of the Family and Medical Leave Act (FMLA)?

Accepted Answer

Entitles eligible employees to take up to 12 weeks of unpaid, job-protected leave for family and medical reasons

Answer

Limits the amount of overtime hours employees can work

Answer

Requires employers to provide paid maternity leave

Question 20

Select the correct definition of a cafeteria plan under ERISA.

Accepted Answer

A flexible benefits plan that allows employees to choose from a menu of benefits using pre-tax contributions

Answer

A health insurance plan that covers a wide range of medical expenses

Answer

A retirement savings plan where contributions are made on a post-tax basis

Question 21

What is the purpose of a vesting schedule in an employee retirement plan?

Accepted Answer

To determine the rate at which an employee gradually gains ownership and control of their retirement benefits

Answer

To specify the minimum age at which an employee can access their retirement savings

Answer

To limit the maximum amount of money an employee can contribute to their retirement plan

Question 22

Identify a prohibited transaction under the Employee Retirement Income Security Act (ERISA).

Accepted Answer

A plan fiduciary selling plan assets to a party-in-interest

Answer

A plan investing in a diversified portfolio of stocks and bonds

Answer

A plan using a portion of its assets to cover administrative expenses

Answer

A plan sponsor hiring an investment advisor to manage plan assets

Question 23

What is the primary responsibility of the Department of Labor (DOL) in regulating employee benefits?

Accepted Answer

To ensure compliance with ERISA and other federal laws governing employee benefits

Answer

To set standards for the design and administration of health insurance plans

Answer

To provide financial assistance to employers offering employee benefits

Question 24

Which of the following is a prohibited practice under the Employee Retirement Income Security Act (ERISA)?

Accepted Answer

Fiduciary breach

Answer

Plan amendment

Answer

Plan merger

Answer

Plan termination

Question 25

Which of the following is a potential drawback of providing employee benefits?

Accepted Answer

Increased employee turnover

Answer

Reduced absenteeism

Answer

Enhanced employer reputation

Answer

Improved employee morale

Question 26

What is considered a best practice for effectively communicating employee benefits to employees?

Accepted Answer

Provide clear and concise information using multiple communication channels

Answer

Use only written materials to communicate benefits

Answer

Rely solely on HR to communicate benefits

Question 27

Under the Affordable Care Act, employers with 50 or more employees providing health insurance are subject to which of the following penalties?

Accepted Answer

Employer shared responsibility penalty

Answer

ACA mandate

Answer

Individual mandate

Answer

Health coverage tax credit

Question 28

What is the primary purpose of the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Accepted Answer

To provide temporary health insurance coverage to employees who lose their job involuntarily

Answer

To establish minimum standards for retirement plans

Answer

To regulate the design and administration of employee benefit plans

Question 29

What is the key difference between a defined benefit plan and a defined contribution plan?

Accepted Answer

In a defined benefit plan, the employer assumes the investment risk and guarantees a specific retirement benefit, while in a defined contribution plan, the employee bears the investment risk.

Answer

Defined benefit plans are more common in the public sector, while defined contribution plans are more common in the private sector

Question 30

What is the primary purpose of a health savings account (HSA)?

Accepted Answer

To save money on qualified medical expenses on a pre-tax basis

Answer

To provide long-term care insurance

Answer

To cover high out-of-pocket medical expenses

Question 31

Which of the following is a major type of employee benefit that provides financial protection for employees and their families in the event of unexpected life events such as illness, injury, or disability?

Accepted Answer

Health insurance

Answer

Stock options

Answer

Paid time off

Answer

Retirement plan

Question 32

Under the Employee Retirement Income Security Act (ERISA), which of the following is a fundamental requirement for employee benefit plans?

Accepted Answer

Fiduciary responsibility

Answer

Pre-tax contributions

Answer

Vesting provisions

Answer

Minimum funding requirements

Question 33

Which of the following is a type of defined contribution retirement plan where employees contribute a portion of their paycheck and the employer may also make matching contributions?

Accepted Answer

401(k) plan

Answer

Cash balance plan

Answer

Defined benefit plan

Question 34

In which of the following situations is an employer required to provide reasonable accommodations for an employee with a disability, under the Americans with Disabilities Act (ADA)?

Accepted Answer

When the employee is otherwise qualified for the job and the accommodation does not impose an undue hardship on the employer

Answer

When the employee's disability is not a threat to safety

Answer

When the employee can perform all of the essential functions of the job without accommodation

Answer

When the employee's disability is severe

Question 35

What is the primary purpose of the Consolidated Omnibus Budget Reconciliation Act (COBRA)?

Accepted Answer

To allow employees who lose their job to continue their health insurance coverage for a limited period

Answer

To regulate the amount of employee contributions to health insurance plans

Answer

To ensure that all employees have access to affordable health insurance

Question 36

What is the concept of "reasonable notice" in the context of employee benefits?

Accepted Answer

Employers must provide sufficient advance notice to employees about changes to benefit plans, allowing them to make informed decisions

Answer

Employers have a reasonable amount of time to implement new benefit plans

Answer

Employees are entitled to reasonable notice before their benefits are terminated

Question 37

Under the Employee Retirement Income Security Act (ERISA), which fiduciary duty does a plan administrator owe to plan participants and beneficiaries?

Accepted Answer

Acting solely in the best interests of plan participants and beneficiaries.

Answer

Maximizing returns on plan investments, regardless of the level of risk.

Answer

Minimizing administrative costs even if it means reducing plan benefits.

Answer

Prioritizing the financial interests of the employer over the plan participants.

Question 38

Which law primarily governs the design and administration of employer-sponsored health insurance plans in the United States?

Accepted Answer

The Affordable Care Act (ACA)

Answer

The National Labor Relations Act (NLRA)

Answer

The Fair Labor Standards Act (FLSA)

Answer

The Occupational Safety and Health Act (OSHA)

Question 39

A company is downsizing and needs to lay off employees. Which law mandates the requirements for providing employees with notice about their COBRA continuation rights in such a situation?

Accepted Answer

The Consolidated Omnibus Budget Reconciliation Act (COBRA)

Answer

The Employee Retirement Income Security Act (ERISA)

Answer

The Fair Labor Standards Act (FLSA)

Question 40

What is the key distinction between a defined benefit retirement plan and a defined contribution retirement plan?

Accepted Answer

In a defined benefit plan, the employer guarantees a specific retirement benefit amount, while in a defined contribution plan, the benefit amount depends on the performance of investments within the plan.

Answer

Defined contribution plans require higher employee contributions than defined benefit plans.

Answer

Defined benefit plans are only available to unionized employees, while defined contribution plans are available to all employees.

Question 41

According to the Family and Medical Leave Act (FMLA), which of the following is NOT a qualifying reason for unpaid leave?

Accepted Answer

Caring for a pet with a serious health condition.

Answer

A serious health condition that makes the employee unable to perform essential job functions.

Answer

Birth and care of a newborn child.

Answer

Adoption or foster care of a child.

Question 42

Which federal law specifically prohibits employers from discriminating against employees based on their genetic information, including family medical history?

Accepted Answer

The Genetic Information Nondiscrimination Act (GINA)

Answer

The Health Insurance Portability and Accountability Act (HIPAA)

Answer

The Americans with Disabilities Act (ADA)

Question 43

Under the Americans with Disabilities Act (ADA), what is an employer's obligation when an employee requests a reasonable accommodation for their disability?

Accepted Answer

The employer must engage in an interactive process with the employee to determine a suitable accommodation, unless it would impose an undue hardship on the employer.

Answer

The employer is obligated to grant any requested accommodation, regardless of the cost or burden.

Answer

The employer can deny the request for accommodation if it believes the employee's disability is not severe enough.

Question 44

Which scenario would most likely be considered a violation of the Fair Labor Standards Act (FLSA) regarding employee compensation?

Accepted Answer

An employer requires employees to work through their unpaid lunch break without providing any compensation for that time.

Answer

An employer provides employees with paid time off for vacation.

Answer

An employer offers its employees a performance-based bonus as part of their compensation package.

Question 45

According to the Pregnancy Discrimination Act, how should an employer treat pregnancy compared to other temporary disabilities?

Accepted Answer

An employer must treat pregnancy like any other temporary disability, providing the same benefits, accommodations, and leave opportunities.

Answer

Employers can terminate pregnant employees if they believe the pregnancy will hinder their work performance.

Answer

Employers are allowed to treat pregnancy differently from other disabilities, as it is a unique condition.

Question 46

What is a key advantage of offering a cafeteria plan to employees?

Accepted Answer

Cafeteria plans allow employees to select benefits that best align with their individual needs, potentially reducing their taxable income.

Answer

Cafeteria plans simplify the process of managing employee benefits for employers.

Answer

Cafeteria plans eliminate the need for employers to offer health insurance to employees.

Question 47

Which of the following is NOT typically considered an employee benefit?

Accepted Answer

Company car

Answer

Health insurance

Answer

Retirement plan

Answer

Paid time off

Question 48

Under which federal law are employers with 50 or more employees generally required to offer health insurance coverage?

Accepted Answer

Affordable Care Act (ACA)

Answer

Employee Retirement Income Security Act (ERISA)

Answer

Family and Medical Leave Act (FMLA)

Answer

Fair Labor Standards Act (FLSA)

Question 49

What is the primary characteristic of a defined benefit pension plan?

Accepted Answer

Guarantees a specific retirement benefit based on years of service and salary

Answer

Provides employees with tax-free savings for retirement

Answer

Allows employees to invest in various investment options

Question 50

What is the main role of the Equal Employment Opportunity Commission (EEOC) in relation to employee benefits?

Accepted Answer

Enforces laws preventing discrimination in employee benefits based on protected characteristics

Answer

Provides guidance on the tax implications of employee benefits

Answer

Regulates the design and administration of employee benefits plans

Question 51

Which of the following is a common example of a flexible benefit plan?

Accepted Answer

Cafeteria plan

Answer

401(k) plan

Answer

Health savings account (HSA)

Answer

Defined benefit pension plan

Question 52

What is the primary purpose of a vesting period in a retirement plan?

Accepted Answer

To ensure employees have a certain period of service before they can fully access their retirement savings

Answer

To provide employees with a tax break on their retirement savings

Question 53

What is the key difference between a qualified and a non-qualified deferred compensation plan?

Accepted Answer

Qualified plans are subject to IRS regulations and offer tax benefits, while non-qualified plans are not.

Answer

Qualified plans are only available to highly compensated employees, while non-qualified plans are available to all employees.

Question 54

What is the main purpose of a health savings account (HSA)?

Accepted Answer

To allow individuals to save money tax-free for qualified medical expenses

Answer

To supplement Medicare coverage for individuals who are over 65

Answer

To provide health insurance coverage for individuals who are not eligible for employer-sponsored coverage