RMI 2101 final

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tmoy4565
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274413
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RMI 2101 final
Updated:
2014-05-14 11:19:40
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chapters 10 11 12 13
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chapters 10,11,12,13
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  1. Every benefit has a______.
    cost
  2. Non contributory basis
    • er pays entire cost.
    • ee does not have to contribute any funds.
    • happens once all eligibility conditions are satisfied ee's automatically become participants
  3. On a non contributory basis the_______ pays the entire cost
    employer
  4. Contributory basis
    • ee and er share the cost
    • once all eligibility conditions are satisfied, willingness to make a contribution by the employee becomes an additional eligibility requirement.
  5. on a contributory basis the _____ usually pays more.
    employer
  6. What are the three methods of benefit financing?
    • Non contributory basis
    • contributory basis
    • ee-pay all
  7. Ee-pay-all
    • also known as voluntary benefits
    • ex. dental,vision
  8. Group insurance(GI)
    the insurer insures the group as a whole under a single contract
  9. Who is covered under Er based group insurance?
    ee's,former ee's, and dependents of the ee's
  10. In group insurance the insurer establishes_____ premium/rate per exposure in the group.
    ONE
  11. Is there individual underwriting or individual evidence of insurability in group insurance?
    nope
  12. What is the premium in group insurance based on?
    The very broad characteristics of the group.(gained through group underwriting)
  13. to be insurable in group insurance you must_______.
    simply be a member of the group.
  14. Employee benefits receive____tax treatment.
    Favorable.
  15. In general are employees taxed on the value of er provided benefits?
    nope.
  16. formula for computing pre tax salary equivalent of a tax free benefit.
    • benefit$
    • 1-Tax
  17. group term life insurance
    • If insured dies during the term of the insurance the face amount (FA)is paid.
    • If not,they get nothing
  18. ee's can recieve______ of group term life insurance tax free
    50,000.
  19. If group term life insurance exceeds 50,000
    ee's are taxed on the value that exceeds 50,000
  20. Disability income insurance
    Salary paid to an ee if they become disabled
  21. How is disability insurance taxed on a non contributory basis?
    Not taxed on the value of the disability insurance premium, but they are taxed on the benefit should they become disabled.
  22. EE pay all pre tax salary agreement for Disability insurance
    Ee's are taxed on the benefit should they become disabled
  23. After tax salary deduction arrangement for disability insurance
    The taxes are taken out of payroll, but ee's are not taxed on the benefit should they become disabled
  24. What amount of disability benefits are taxable should you collect benefits under a contributory basis
    50 percent of the benefit is taxed
  25. What are the advantages of employer provided benefits and group insurance?(3)
    • 1.no individual underwriting
    • 2. generally less expensive than individual insurance
    • 3. er provided benefits lower "search costs" for ee's
  26. Why are group insurance plans generally less expensive than individual insurance?
    The administrative costs are less and there is no individual underwriting. also the commissions tend to be lower
  27. Disadvantages of ER provided benefits
    • 1. coverage may be temporary
    • 2.lack of flexibility
  28. portability issues with er provided benefits
    • if an ee leaves the group is the insurance temporary
    • or what if a dependent no longer meets definition of a dependent
  29. What is a conversion option in group insurance?
    the option to convert from group individual evidence of insurability.
  30. does every group insurance contract have a conversion option?
    yup
  31. what are the two ways to deal with the portability issue?
    cobra and exercising  the conversion option.
  32. what does cobra stand for?
    Consolidated omnibus budget reconciliation act of 1985
  33. flexible spending account
    An ee agrees to take a pre tax salary reduction which is placed in a fsa.
  34. What is a FSA used for
    to reimburse certain eligible expenses
  35. What does a Medical care FSA cover?(2)
    • 1.medical care expenses not fully covered by a health care(deductibles,copayments etc)
    • 2. expenses not covered at all by your health plan(child care expenses,elder care expenses)
  36. What are the advantages of a FSA?
    NOT TAXED
  37. What is the use it or lose it rule?
    In a fsa any unused funds at the end of the year are forfeited by the employee.
  38. How much can be put in a fsa?
    • 5000 in a dep fsa
    • 2500 in a medical fsa
  39. fee for service reimbursement
    for every service or procedure a separate fee is paid.
  40. Third party payment +ffs=
    over utilization of hcgs
  41. In third party payment, who bears the risk for over utilization of hcgs?
    the insurer and the employer if the plan is experience rated
  42. What are the three categories of healthcare plans?
    • traditional indemnity plans
    • consumer driven health plan(CDHP)
    • Managed care plans
  43. in 1980_____ plans made up 95 percent of the healthcare plans
    Traditional indemnity plans
  44. traditional indemnity plans now make up ______ percent of the market
    3
  45. traditional indemnity plan
    • complete freedom of choice of providers
    • insurers role is to indemnify the insured for covered losses
  46. What are the two most popular types of managed care plans?
    hmo's and ppo's
  47. hmo
    • network of providers
    • doctors are in contracts with the hmo
  48. In an hmo how is the primary care provider(pcp) paid?
    they are given a budget to take care of ___ people
  49. Disadvantages of a hmo vs an indemnity plan?
    • 1.may have to change providers to join the hmo
    • 2. no coverage for out of network utilization
  50. what does hmo stand for?
    health maintenance organization
  51. What does ppo stand for?
    preferred provider organization
  52. how does a ppo work?
    insurer has contracts with preferred providers who provide services at a discount and accept them as full payment.
  53. In a ppo providers agree to(2)
    • 1. provide services at a discount from full charges
    • 2. accept the ppo payment+ any deductibles/copayments as payment in full for services
  54. ppo's pay providers by _____
    discounted ffs
  55. what happens when a person goes out of network in a ppo?
    ppo pays something, but has higher out of pocket costs and may be balance billed and there is reimbursement hassle
  56. in a ppo the freedom of choice has a cost or price which is________and________
    reimbursement hassle and increased oop costs
  57. consumer driven health plan(CDHP)
    employer offers a high deductible health plan and the money is put in a health savings account.
  58. sources of retirement income(3)
    • personal savings
    • oasdi
    • er sponsored retirement plan
  59. defined benefit plan(Db)
    traditional pension plan
  60. what is known in a db plan
    the formula to determine the benefit
  61. what is unknown in a db plan?
    amount needed to contribute in advance in a particular year to fund the promised benefit
  62. What must a db plan be pre funded?
    the employer bears all investment risk which creates a liability for employers
  63. defined contribution plans
    employer contributes a % of ee's salary to a dc plan
  64. what is known in a dc plan?
    annual contribution by the er
  65. what is unknown in a dc plan?
    the annual benefit received at retirement
  66. why is the annual benefit received at retirement unknown in a dc plan?(5)
    • 1pattern of future salary
    • 2.length of service
    • 3.ror on plan asset
    • 4. ee might also contribute
    • 5. price of life annuity when the ee retires
  67. who bears all the investment risk in a dc plan?
    the employee
  68. who bears all the investment risk in a db plan?
    the employer
  69. 401k and 403b
    voluntary plans designed to supplement other retirement plans
  70. 4o1k'sw are also known as?
    coda plans(cash or deferred arrangement)
  71. What are the two ways in which a 4-01k is taxed?
    taxable now or in the future
  72. what is the 2014 combined maximum of employers and employees in a 401k?
    52000
  73. What are the two types of formulas in a db plan?
    yos formulas and unit % of salary(final average salary formula) and career average salary
  74. How yos works
    for each yos an er promises __/mo at the nra.
  75. career average salary formula
    career average salary* percentage of salary guaranteed by the employer
  76. final average salary formula
    final____years of working the employer promises a % of the final avg salary starting at the nra.
  77. Unit=$ amount formula
    for each yos an er promises a dollar amount per month at the normal retirement age
  78. what does ERISA(1974) stand for
    employee retirement income security act
  79. Under erisa the minimum age and service requirement to determine eligibility
    cannot exceed 21
  80. vesting
    the degree to which a participants pension benefits are non forfeitable
  81. Is a vested benefit portable?
    yes. meaning, if you leave the company you can receive the benefit at the nra
  82. what are the 3 vesting schedules under ERISA
    • 1. 5 year cliff vesting.
    • 2.graded 3-7 rule
    • 3. 100% vested after 2yos with a 2yr waiting period
  83. 5 year cliff vesting
    o% vested up to year 5. then, 100% vested.
  84. graded 3-7 rule
    20% added from years 3-7
  85. Nra
    earliest age at which ee's can retire and receive full benefits
  86. Early retirement
    earliest age in which ee's may retire and receive some benefits
  87. Late retirement age
    Retirement after the NRA
  88. Pension fund issues
    Er's must pre-fund obligations and funds are held in a trust fund
  89. At retirement, funds are released and paid in one of two forms
    Lump sum distribution or by purchasing a life annuity
  90. If married and you retire you receive
    joint+1/2 survivor annuity
  91. Pension benefit guarantee corporation
    sell plan termination insurance that pays a portion of the underfunded pension(required for db plans)
  92. Types of social insurance programs
    • Oasdi
    • workers compensation
    • unemployment insurance
  93. characteristics of social insurance programs(2)
    Usually some compulsory purchase of insurance and the government often is engaged in the risk bearing. (acting as an insurer.)
  94. what does oasdi stand for
    old age,survivor,disability insurance
  95. Participation in oasdi is______
    compulsory for both er's and ee's
  96. how is oasdi financed
    • payroll taxes
    • federal law
    • fica taxes
    • 6.2% for oasdi and 1.45 for medicare pt 1
  97. oasdi taxes ______% of the first 117,000
    7.65
  98. oasdi taxes______beyond 117,000 up to 200000
    1.45%
  99. oasdi taxes 200000-250000
    an additional .9%
  100. the funds of oasdi are held in a_____
    trust fund
  101. How to get insured status in oasdi?
    4o quarters of coverage to get fully insured
  102. how many quarters of coverage can you earn in a year?
    4
  103. how much do you have to earn to get a quarter of coverage?
    1200 dollars
  104. primary insurance amount
    what the benefits in oasdi are based on
  105. primary insurance amount(pia) is a function of ___________
    average indexed monthly earnings(aime).
  106. replacement ratio
    ratio of PIA to AIME
  107. in aime _____of the first 816 is earned, ___percent from 816-4917, and_____percent of any aime in excess of 4917
    • 90
    • 32
    • 15
  108. the replacement ratio favors____-workers
    lower income
  109. the replacement ratio also rises if______
    spouses received benefits (50 percent of the pia of the retired worker)
  110. what is the nra
    65
  111. Under the nra how much can you make before losing benefits
    15480. after this amount you lose 1 dollar in benefits for every 2 dollars you make.
  112. at nra any amount over ______ you lose 1 dollar for every 3 dollars earned
    41400
  113. Income rate
    rate of non interest income to oasdi taxable payroll
  114. cost rate
    ratio of the cost of the program to oasdi taxable payroll
  115. trust fund ratio
    assets at the beginning of the year (BOY) as a percentage of cost for that year
  116. oasdi is expected to be exhausted in____ and DI is predicted to be exhausted in_______
    2035 and 2016
  117. types of exposures that are managed in an ee benefit plan
    death injury illness retirement
  118. on average firms spend about______ on ee benefits
    40 cents for every dollar
  119. if you do offer a retirement plan, are survivor benefits required?
    yup

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