RMI 2101 final
Card Set Information
RMI 2101 final
chapters 10 11 12 13
Every benefit has a______.
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
On a non contributory basis the_______ pays the entire cost
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.
on a contributory basis the _____ usually pays more.
What are the three methods of benefit financing?
Non contributory basis
also known as voluntary benefits
the insurer insures the group as a whole under a single contract
Who is covered under Er based group insurance?
ee's,former ee's, and dependents of the ee's
In group insurance the insurer establishes_____ premium/rate per exposure in the group.
Is there individual underwriting or individual evidence of insurability in group insurance?
What is the premium in group insurance based on?
The very broad characteristics of the group.(gained through group underwriting)
to be insurable in group insurance you must_______.
simply be a member of the group.
Employee benefits receive____tax treatment.
In general are employees taxed on the value of er provided benefits?
formula for computing pre tax salary equivalent of a tax free benefit.
group term life insurance
If insured dies during the term of the insurance the face amount (FA)is paid.
If not,they get nothing
ee's can recieve______ of group term life insurance tax free
If group term life insurance exceeds 50,000
ee's are taxed on the value that exceeds 50,000
Disability income insurance
Salary paid to an ee if they become disabled
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.
EE pay all pre tax salary agreement for Disability insurance
Ee's are taxed on the benefit should they become disabled
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
What amount of disability benefits are taxable should you collect benefits under a
50 percent of the benefit is taxed
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
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
Disadvantages of ER provided benefits
1. coverage may be temporary
2.lack of flexibility
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
What is a conversion option in group insurance?
the option to convert from group individual evidence of insurability.
does every group insurance contract have a conversion option?
what are the two ways to deal with the portability issue?
cobra and exercising the conversion option.
what does cobra stand for?
Consolidated omnibus budget reconciliation act of 1985
flexible spending account
An ee agrees to take a pre tax salary reduction which is placed in a fsa.
What is a FSA used for
to reimburse certain eligible expenses
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)
What are the advantages of a FSA?
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.
How much can be put in a fsa?
5000 in a dep fsa
2500 in a medical fsa
fee for service reimbursement
for every service or procedure a separate fee is paid.
Third party payment +ffs=
over utilization of hcgs
In third party payment, who bears the risk for over utilization of hcgs?
the insurer and the employer if the plan is experience rated
What are the three categories of healthcare plans?
traditional indemnity plans
consumer driven health plan(CDHP)
Managed care plans
in 1980_____ plans made up 95 percent of the healthcare plans
Traditional indemnity plans
traditional indemnity plans now make up ______ percent of the market
traditional indemnity plan
complete freedom of choice of providers
insurers role is to indemnify the insured for covered losses
What are the two most popular types of managed care plans?
hmo's and ppo's
network of providers
doctors are in contracts with the hmo
In an hmo how is the primary care provider(pcp) paid?
they are given a budget to take care of ___ people
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
what does hmo stand for?
health maintenance organization
What does ppo stand for?
preferred provider organization
how does a ppo work?
insurer has contracts with preferred providers who provide services at a discount and accept them as full payment.
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
ppo's pay providers by _____
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
in a ppo the freedom of choice has a cost or price which is________and________
reimbursement hassle and increased oop costs
consumer driven health plan(CDHP)
employer offers a high deductible health plan and the money is put in a health savings account.
sources of retirement income(3)
er sponsored retirement plan
defined benefit plan(Db)
traditional pension plan
what is known in a db plan
the formula to determine the benefit
what is unknown in a db plan?
amount needed to contribute in advance in a particular year to fund the promised benefit
What must a db plan be pre funded?
the employer bears all investment risk which creates a liability for employers
defined contribution plans
employer contributes a % of ee's salary to a dc plan
what is known in a dc plan?
annual contribution by the er
what is unknown in a dc plan?
the annual benefit received at retirement
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
who bears all the investment risk in a dc plan?
who bears all the investment risk in a db plan?
401k and 403b
voluntary plans designed to supplement other retirement plans
4o1k'sw are also known as?
coda plans(cash or deferred arrangement)
What are the two ways in which a 4-01k is taxed?
taxable now or in the future
what is the 2014 combined maximum of employers and employees in a 401k?
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
How yos works
for each yos an er promises __/mo at the nra.
career average salary formula
career average salary* percentage of salary guaranteed by the employer
final average salary formula
final____years of working the employer promises a % of the final avg salary starting at the nra.
Unit=$ amount formula
for each yos an er promises a dollar amount per month at the normal retirement age
what does ERISA(1974) stand for
employee retirement income security act
Under erisa the minimum age and service requirement to determine eligibility
cannot exceed 21
the degree to which a participants pension benefits are non forfeitable
Is a vested benefit portable?
yes. meaning, if you leave the company you can receive the benefit at the nra
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
5 year cliff vesting
o% vested up to year 5. then, 100% vested.
graded 3-7 rule
20% added from years 3-7
earliest age at which ee's can retire and receive full benefits
earliest age in which ee's may retire and receive some benefits
Late retirement age
Retirement after the NRA
Pension fund issues
Er's must pre-fund obligations and funds are held in a trust fund
At retirement, funds are released and paid in one of two forms
Lump sum distribution or by purchasing a life annuity
If married and you retire you receive
joint+1/2 survivor annuity
Pension benefit guarantee corporation
sell plan termination insurance that pays a portion of the underfunded pension(required for db plans)
Types of social insurance programs
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.)
what does oasdi stand for
old age,survivor,disability insurance
Participation in oasdi is______
compulsory for both er's and ee's
how is oasdi financed
6.2% for oasdi and 1.45 for medicare pt 1
oasdi taxes ______% of the first 117,000
oasdi taxes______beyond 117,000 up to 200000
oasdi taxes 200000-250000
an additional .9%
the funds of oasdi are held in a_____
How to get insured status in oasdi?
4o quarters of coverage to get fully insured
how many quarters of coverage can you earn in a year?
how much do you have to earn to get a quarter of coverage?
primary insurance amount
what the benefits in oasdi are based on
primary insurance amount(pia) is a function of ___________
average indexed monthly earnings(aime).
ratio of PIA to AIME
in aime _____of the first 816 is earned, ___percent from 816-4917, and_____percent of any aime in excess of 4917
the replacement ratio favors____-workers
the replacement ratio also rises if______
spouses received benefits (50 percent of the pia of the retired worker)
what is the nra
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.
at nra any amount over ______ you lose 1 dollar for every 3 dollars earned
rate of non interest income to oasdi taxable payroll
ratio of the cost of the program to oasdi taxable payroll
trust fund ratio
assets at the beginning of the year (BOY) as a percentage of cost for that year
oasdi is expected to be exhausted in____ and DI is predicted to be exhausted in_______
2035 and 2016
types of exposures that are managed in an ee benefit plan
death injury illness retirement
on average firms spend about______ on ee benefits
40 cents for every dollar
if you do offer a retirement plan, are survivor benefits required?