CBP Benefits Administration and Strategy 1 — Questions and Answers
Question 1: Which benefits administration model involves an employer contracting with an outside firm to manage all or most HR and benefits functions?
- Shared service center
- Business process outsourcing (BPO) (Correct answer)
- Self-administration
- Insured arrangement
Correct answer: Business process outsourcing (BPO)
Business process outsourcing (BPO) in benefits administration involves contracting an external vendor to manage benefits enrollment, eligibility, COBRA, and related functions on the employer's behalf.
Question 2: What is the purpose of a benefits needs assessment?
- To determine COBRA election rates
- To gather employee preferences and identify gaps between current offerings and workforce needs (Correct answer)
- To calculate the actuarial value of the benefit plan
- To compare the plan's costs to PBGC premiums
Correct answer: To gather employee preferences and identify gaps between current offerings and workforce needs
A benefits needs assessment surveys employees and analyzes workforce demographics to understand what benefits are most valued, identify gaps, and guide plan design decisions.
Question 3: What is a 'benefit communication strategy' primarily designed to accomplish?
- Reduce COBRA elections by discouraging departing employees
- Ensure employees understand, appreciate, and effectively use their benefits (Correct answer)
- Minimize the number of employees who enroll in costly plans
- Satisfy IRS reporting requirements
Correct answer: Ensure employees understand, appreciate, and effectively use their benefits
An effective benefits communication strategy uses multiple channels and plain language to help employees make informed benefit elections and fully utilize the value of their benefits package.
Question 4: In a self-funded health plan, who bears the risk of high claims costs?
- The insurance carrier
- The employee
- The employer (Correct answer)
- The state insurance guaranty fund
Correct answer: The employer
In a self-funded (self-insured) plan, the employer assumes financial responsibility for paying employee health claims out of its own funds rather than paying fixed premiums to an insurer.
Question 5: What is stop-loss insurance in the context of a self-funded health plan?
- Insurance that stops employees from overusing benefits
- A reinsurance product that protects the employer from catastrophic or unexpectedly high claims (Correct answer)
- A state-mandated reserve requirement for self-funded plans
- COBRA coverage for terminated employees
Correct answer: A reinsurance product that protects the employer from catastrophic or unexpectedly high claims
Stop-loss insurance (excess loss insurance) protects self-funded employers by reimbursing claims that exceed a specified attachment point, either per individual (specific) or in aggregate.
Question 6: Which metric measures the proportion of an employer's benefits costs relative to total compensation to assess benefits investment?
- Benefits replacement ratio
- Benefits as a percentage of payroll (Correct answer)
- Benefits cost per employee per year
- Plan funding ratio
Correct answer: Benefits as a percentage of payroll
Benefits as a percentage of payroll (or total compensation) is a key benchmarking metric that helps employers assess whether their benefits spend is competitive and sustainable.
CBP Benefits Administration and Strategy 1
Which benefits administration model involves an employer contracting with an outside firm to manage all or most HR and benefits functions?