TOOLS & TECHNIQUES OF EMPLOYEE BENEFIT AND RETIREMENT PLANNING
11th Edition
College Course Materials
Deanna L. Sharpe, Ph.D., CFP®, CRPC®, CRPS®
Associate Professor
CFP® Program Director
Personal Financial Planning Department
University of Missouri-Columbia
Please Note: Correct answers for each question are indicated in bold type. After each question,
the number of the page containing information relevant to answering the question is given. When
a calculation is necessary or the reasoning behind a given answer may be unclear, a brief
rationale for the correct answer is also given.
Part B: Employee Benefit Planning
Health Coverage
Chapter 45: Health Insurance
True/False
45.1
Benefits from health insurance are included in employee taxable income as an in-kind
benefit
45.2
Most major medical plans cover routine doctor visits.
45.3
According to tax law, individuals with preexisting conditions can be excluded from
participation in a group health plan for up to 18 months.
Answers:
45.1 False [p. 343]
45.2 False [p. 343]
45.3 False [p. 345]
Multiple Choice
45.4
An all-causes deductible is
a.
b.
c.
d.
e.
cumulated over a given period
a deductible that applies separately to each type of medical expense
a deductible that applies to all medical expenses, whether for the same condition or not
a and b
a and c
Answer: C [p. 344]
45.5
Premiums for commercial health insurance contracts include all but which of the following:
a.
b.
c.
d.
e.
administrative expenses
profit for insurance provider
expected benefit payments
commissions
federal premium taxes
Answer: E [pp. 344-345]
45.6
Which of the following types of health insurance was originally designed by an organization
of hospitals and physicians to facilitate payment of hospital and doctor bills?
a.
b.
c.
d.
e.
hospital contract plans
health maintenance organizations
commercial health insurance
self-insurance
Blue Cross / Blue Shield
Answer: E [pp. 344-345]
Application
45.7
Moribund Industries, Inc. is a five year old company with 25 employees ranging in age from
18 to 24 years of age. As a financial advisor to the company owner, which of the following
approaches to health care coverage for employees would you not recommend?
a.
b.
c.
d.
e.
Blue Cross
Blue Shield
commercial health insurance
health maintenance organization
self-funding
Answer: E [pp. 344-345]
45.8
The owners of MegaStat Corporation have asked your help in designing a health benefit
program for retirees. The owners tell you that they need a plan that has a low initial cash
flow, is simple to implement, and has no nondiscrimination requirements to meet. You
recommend:
a.
b.
c.
d.
e.
a VEBA
corporate owned life insurance
increased pension benefits
a health maintenance plan
a pay-as-you-go system
Answer: E [p. 349]
45.9
As the employee benefit specialist for Alpha Corp., you are explaining COBRA benefits to
a group of pre-retirees, aged 55 to 64. Which of the following do you NOT list for the group
as a qualifying event for COBRA?
a.
b.
c.
d.
e.
a minor aged child becomes of legal age
employee dies
legal separation of employee and spouse
employee takes a leave under the Family Medical Leave Act
employee becomes eligible for Medicare
Answer: D [p. 346]
45.10 Will Hurt has an employer-provided health plan that has a $500 calendar year deductible
with a 3 month carry over provision. Will has $100 in medical bills in June that are covered
by the plan. In late November, he has $100 additional medical expenses. Then, in
January, he has another $700 in medical expenses. Will’s health care plan will cover
_____ of his expenses
a.
b.
c.
d.
e.
$1400
$ 900
$ 800
$ 400
$ 300
Answer: E [p. 344- $100 + $700 - $500 deductible = $300, since there is a carry over provision,
the deductible is considered paid for the January bill]