Question

a. Which of the following statements is true regarding disability income insurance? why?

	A.	Increasing the elimination period reduces the premium for disability income insurance
	B.	Disability income insurance usually replaces 100 percent of lost income
	C.	A uniform definition of disability appears in all disability income policies
	D.	The purchase of disability income insurance is not necessary if you are covered under workers compensation

b. Under many cafeteria plans, employees make premium contributions with pre-tax dollars and a salary reduction that are used to purchase group health insurance or dental insurance. This type of cafeteria plan is called a... why?

	A.	Flexible spending account plan
	B.	Premium conversion plan
	C.	Full-choice plan
	D.	Health reimbursement arrangement plan

c. Which statement is true with regard to problems and issues with tax-deferred retirement plans in the United States? why?

	A.	Pension benefits are too often indexed for inflation, burdening employers with high pension costs
	B.	Retirement benefits for women are higher than retirement benefits for men, reflecting the higher wages women are paid.
	C.	Employees do not invest sufficient amounts in the common stock issued by the companies where they work.
	D.	Inadequate participation in employer-sponsored retirement plans can create economic insecurity for retired employees.

d. Which of the following statements about the impact of the implementation of the Affordable Care Act (ACA) on workers compensation is true? why?

	A.	Implementation of the ACA will discourage annual physical check-ups and implementation of workplace wellness programs
	B.	Implementation of the ACA will create higher healthcare provider prices.
	C.	Implementation of the ACA will reduce the waiting time to see a physician, to have tests performed, and to begin physical therapy.
	D.	Implementation of the ACA will increase fraudulent workers compensation claims.

Answer 1

Ans: Option A is true: Increasing the elimination period reduces the premium for disability income insurance

Explanation: The elimination period is the period between an injury and receipt of benefits. The shorter elimination period will have a higher premium and vice versa. The elimination period is to eliminate claims for short-term disabilities for which the insurer can usually manage with his resources. Other statements are incorrect because firstly the disability income insurance only partially covers the lost income in case you are disabled and cannot work. This is to limit the number of fraudulent disability claims. Secondly, the workers' compensation only covers for a disability that occurred at the place of work so the purchase of disability income is essential to cover any disabilities, which occur outside the workplace.

Ans Option B: Premium conversion plans

Explanation: Premium conversion is an arrangement that allows the employees to make pre-tax contributions to an employer-sponsored tax plan. It is a tax benefit as it uses federal rules to deduct your share of insurance premiums from taxable income and thereby reduces taxes.

Ans: Option D: Inadequate participation in employer-sponsored retirement plans can create economic insecurity for retired employees.

Explanation: Most employer-sponsored pension plans give them tax advantages. Employers get a tax break on the contributions they make to plan for their employees. Even employees get tax breaks as the contributions they make are accounted for as gross income. This effectively reduces their taxable income. Funds in the retirement account are not liable for taxation as long as they remain in the account. If you did not invest in the plan or have not contributed anything in the plan then your pension is fully taxable. This can lead to economic insecurity.

Ans: Option B: Implementation of the ACA will create higher healthcare provider prices.

Explanation: ACA makes health care more affordable by providing subsidies. Between 1998 to 2008 health spending rose by 7.2% per year. It is because the health care providers prescribed tests and medications covered the insurance plans even when the patient did not require the facility.