PHR - Compensation and Benefits Test 1 — Questions and Answers
Question 1: Which of the following acts established uniform minimum standards for employer sponsored retirement and health and welfare benefit programs?
- ERISA (Correct answer)
- HSA
- FLSA
- PBGC
Correct answer: ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry. It protects individuals in these plans by requiring fiduciaries to act in the best interest of plan participants and beneficiaries. ERISA also mandates disclosure requirements and provides remedies for violations.
Question 2: Which of the following acts applies to construction laborers and mechanics?
- Walsh-Healy Act
- Copeland Act
- Davis-Bacon Act (Correct answer)
- Service Contract Act
Correct answer: Davis-Bacon Act
The Davis-Bacon Act of 1931 requires contractors and subcontractors performing on federally funded or assisted contracts for the construction, alteration, or repair of public buildings or public works to pay their laborers and mechanics no less than the local prevailing wages and fringe benefits. This act ensures fair wages for workers on government construction projects. It specifically applies to construction laborers and mechanics.
Question 3: A point-of-service plan (POS) is a type of managed care plan that is a hybrid of which of the following types of plans?
- HMO and HSA
- HMO and PPO (Correct answer)
- PPO and IRA
- HSA and PPO
Correct answer: HMO and PPO
A Point-of-Service (POS) plan is a type of managed care health insurance plan that combines features of both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). Like an HMO, it typically requires a primary care physician (PCP) referral for specialists and offers lower costs for in-network providers. However, like a PPO, it also allows members to go out-of-network for care, albeit at a higher cost.
Question 4: To qualify for special tax treatment, a health savings account (HSA) for a single person must have a deductible of at least _______________ and out-of-pocket limits of no more than _______________.
- $1,200, $11,900
- $2,400, $11,900
- $2,400, $5,950
- $1,200, $5,950 (Correct answer)
Correct answer: $1,200, $5,950
To qualify for special tax treatment, a Health Savings Account (HSA) must be paired with a High Deductible Health Plan (HDHP). For a single person (as per the 2012 IRS guidelines, which these numbers reflect), the HDHP deductible had to be at least $1,200, and the out-of-pocket maximum could not exceed $5,950. These thresholds ensure the plan meets the IRS definition of an HDHP.
Question 5: Which of the following acts prohibits federal contractors from receiving kickbacks from employees or subcontractors for wages earned on federal projects?
- Davis-Bacon Act
- Service Contract Act
- Copeland Act (Correct answer)
- Walsh-Healy Act
Correct answer: Copeland Act
The Copeland Act, also known as the "Anti-Kickback Act," prohibits federal contractors from inducing any employee to give up any part of the compensation to which they are entitled under their employment contract. It specifically targets practices where contractors or subcontractors might demand kickbacks from employees or subcontractors for wages earned on federal projects. The act also requires contractors to submit weekly statements of compliance.
Question 6: An employee experiences a qualifying event. This will impact his or her:
- Eligibility for retirement
- Group health care coverage (Correct answer)
- Eligibility for additional paid leave
- Compensation
Correct answer: Group health care coverage
A "qualifying event" is a term used in the context of COBRA (Consolidated Omnibus Budget Reconciliation Act) that triggers an employee's or their family's right to continue group health care coverage. Examples include termination of employment, reduction in hours, divorce, or death of the employee. These events allow individuals to maintain their health benefits for a limited period, typically at their own expense.
Question 7: What is the name of the act that defines what is included as hours worked and is therefore compensable and a factor in calculating overtime?
- Portal to Portal Act (Correct answer)
- Davis-Bacon Act
- Sarbanes Oxley Act
- Service Contract Act
Correct answer: Portal to Portal Act
The Portal-to-Portal Act of 1947 amended the Fair Labor Standards Act (FLSA) to define what constitutes compensable work time. It clarified that employers are generally not required to pay employees for time spent commuting to and from work or for preliminary and postliminary activities unless these activities are an integral part of the employee's principal activities. This act helps determine what hours are considered "hours worked" for minimum wage and overtime calculations.
Question 8: Exempt employees are _______________ the FLSA minimum wage and overtime pay requirements.
- Excluded from
- Not covered by
- Conditionally excluded from (Correct answer)
- Included in
Correct answer: Conditionally excluded from
Exempt employees are "conditionally excluded from" the Fair Labor Standards Act (FLSA) minimum wage and overtime pay requirements. This means they are not automatically excluded; rather, they must meet specific criteria related to their job duties (e.g., executive, administrative, professional) and typically be paid on a salary basis above a certain threshold. If these conditions are not met, they are considered non-exempt and are covered by FLSA provisions.
Question 9: In a defined contribution plan, the employer _______________ and the employee _______________ make an annual payment to the employee's retirement plan account.
- may, must
- may, may
- must, must
- must, may (Correct answer)
Correct answer: must, may
In a defined contribution plan, the employer "must" make an annual payment to the employee's retirement plan account, as this is the employer's contribution commitment. The employee, however, "may" also make contributions, as their participation is typically voluntary or elective. This structure defines the employer's obligation while allowing employee flexibility in saving for retirement.
Question 10: When employees feel that performance or job differences result in corresponding differences in pay rates it's called:
- Internal equity (Correct answer)
- External equity
- Organizational equity
- Compensation equity
Correct answer: Internal equity
Internal equity refers to the fairness of pay differentials among jobs within the same organization. It addresses whether employees believe their pay is fair relative to other employees in the company, considering factors like job responsibilities, skills, effort, and working conditions. Achieving internal equity helps maintain employee morale and motivation by ensuring perceived fairness in compensation.
Question 11: Which of the following acts established uniform minimum standards for employer sponsored retirement and health and welfare benefit programs?
- PBGC
- HSA
- FLSA
- ERISA (Correct answer)
Correct answer: ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry. It protects individuals in these plans by requiring fiduciaries to act in the best interest of plan participants and beneficiaries. ERISA also mandates disclosure requirements and provides remedies for violations.
Question 12: Which of these employers does the Fair Labor Standards Act not cover?
- A nursing home
- A store with $250,000 in sales (Correct answer)
- A local fire department
- An elementary school
Correct answer: A store with $250,000 in sales
The Fair Labor Standards Act (FLSA) covers enterprises that have at least two employees and an annual dollar volume of sales or business done of $500,000 or more. A store with only $250,000 in sales falls below this enterprise coverage threshold. Therefore, it is not covered by the FLSA's minimum wage and overtime provisions, unless its employees are individually covered.
Question 13: Pay based on when or where an employee works is called:
- Variant pay
- Hourly pay
- Overtime pay
- Differential pay (Correct answer)
Correct answer: Differential pay
Differential pay refers to additional compensation provided to employees for working under specific conditions, such as undesirable shifts (e.g., night shift differential), hazardous environments, or particular locations. This extra pay acknowledges the unique circumstances or inconveniences associated with certain work assignments. It is distinct from base pay or overtime.
Question 14: Which of the following acts applies to construction laborers and mechanics?
- Walsh-Healy Act
- Copeland Act
- Service Contract Act
- Davis-Bacon Act (Correct answer)
Correct answer: Davis-Bacon Act
The Davis-Bacon Act of 1931 requires contractors and subcontractors performing on federally funded or assisted contracts for the construction, alteration, or repair of public buildings or public works to pay their laborers and mechanics no less than the local prevailing wages and fringe benefits. This act ensures fair wages for workers on government construction projects. It specifically applies to construction laborers and mechanics.
Question 15: A point-of-service plan (POS) is a type of managed care plan that is a hybrid of which of the following types of plans?
- PPO and IRA
- HMO and HSA
- HSA and PPO
- HMO and PPO (Correct answer)
Correct answer: HMO and PPO
A Point-of-Service (POS) plan is a type of managed care health insurance plan that combines features of both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). Like an HMO, it typically requires a primary care physician (PCP) referral for specialists and offers lower costs for in-network providers. However, like a PPO, it also allows members to go out-of-network for care, albeit at a higher cost.
Question 16: Which of the following is a term for when there is only a small difference in pay between employees regardless of their skills, experience or seniority?
- Pay stagnation
- Pay differentiation
- Pay compression (Correct answer)
- Pay regression
Correct answer: Pay compression
Pay compression occurs when there is only a small difference in pay between employees regardless of their skills, experience, or seniority, or between new hires and more experienced employees. This often happens when market rates for new hires increase rapidly, or when minimum wage increases narrow the gap between entry-level and long-term employees. It can lead to dissatisfaction among experienced staff who feel their contributions are not adequately recognized.
Question 17: To qualify for special tax treatment, a health savings account (HSA) for a single person must have a deductible of at least _______________ and out-of-pocket limits of no more than _______________.
- $2,400, $11,900
- $2,400, $5,950
- $1,200, $5,950 (Correct answer)
- $1,200, $11,900
Correct answer: $1,200, $5,950
To qualify for special tax treatment, a Health Savings Account (HSA) must be paired with a High Deductible Health Plan (HDHP). For a single person (as per the 2012 IRS guidelines, which these numbers reflect), the HDHP deductible had to be at least $1,200, and the out-of-pocket maximum could not exceed $5,950. These thresholds ensure the plan meets the IRS definition of an HDHP.
Question 18: Pay based on when or where an employee works is called:
- Differential pay (Correct answer)
- Variant pay
- Overtime pay
- Hourly pay
Correct answer: Differential pay
Differential pay refers to additional compensation provided to employees for working under specific conditions, such as undesirable shifts (e.g., night shift differential), hazardous environments, or particular locations. This extra pay acknowledges the unique circumstances or inconveniences associated with certain work assignments. It is distinct from base pay or overtime.
Question 19: An employee experiences a qualifying event. This will impact his or her:
- Group health care coverage (Correct answer)
- Eligibility for additional paid leave
- Compensation
- Eligibility for retirement
Correct answer: Group health care coverage
A "qualifying event" is a term used in the context of COBRA (Consolidated Omnibus Budget Reconciliation Act) that triggers an employee's or their family's right to continue group health care coverage. Examples include termination of employment, reduction in hours, divorce, or death of the employee. These events allow individuals to maintain their health benefits for a limited period, typically at their own expense.
Question 20: Exempt employees are _______________ the FLSA minimum wage and overtime pay requirements.
- Not covered by
- Included in
- Excluded from
- Conditionally excluded from (Correct answer)
Correct answer: Conditionally excluded from
Exempt employees are "conditionally excluded from" the Fair Labor Standards Act (FLSA) minimum wage and overtime pay requirements. This means they are not automatically excluded; rather, they must meet specific criteria related to their job duties (e.g., executive, administrative, professional) and typically be paid on a salary basis above a certain threshold. If these conditions are not met, they are considered non-exempt and are covered by FLSA provisions.
Question 21: To qualify for special tax treatment, a health savings account (HSA) for a single person must have a deductible of at least _______________ and out-of-pocket limits of no more than _______________.
- $1,200, $11,900
- $1,200, $5,950 (Correct answer)
- $2,400, $5,950
- $2,400, $11,900
Correct answer: $1,200, $5,950
A health savings account (HSA) is a tax sheltered savings account similar to an IRA but created primarily to pay for medical expenses. An HSA must have a deductible of at least $1,200 single or $2,400 family and out-of-pocket limits of no more than $5,950 single or $11,900 family.
Question 22: Which of the following acts applies to construction laborers and mechanics?
- Davis-Bacon Act (Correct answer)
- Walsh-Healy Act
- Service Contract Act
- Copeland Act
Correct answer: Davis-Bacon Act
The Davis-Bacon Act applies to construction laborers and mechanics.
PHR - Compensation and Benefits Test 1
Which of the following acts established uniform minimum standards for employer sponsored retirement and health and welfare benefit programs?