CCP Benefits Design & Administration 3

Question 1

Which retirement plan design feature allows employees to make after-tax contributions so that qualified withdrawals in retirement are tax-free?

Accepted Answer

Roth 401(k) feature

Answer

A Roth 401(k) accepts after-tax employee contributions, and qualified distributions (after age 59½ and a 5-year holding period) are entirely tax-free, including earnings.

Question 2

When conducting a benefits cost analysis, the 'total benefit cost as a percentage of payroll' metric is primarily used to:

Accepted Answer

Benchmark the overall cost burden of benefits relative to compensation expense

Answer

Expressing total benefit costs as a percentage of payroll provides a normalized metric that allows comparison against industry benchmarks and tracks how benefit spending relates to overall labor costs over time.

Question 3

An employee assistance program (EAP) is primarily designed to:

Accepted Answer

Provide confidential counseling and referral services for personal problems

Answer

EAPs provide employees and their families with confidential short-term counseling, assessment, and referral services for personal, family, and work-related issues such as mental health, substance abuse, and financial stress.

Question 4

The concept of 'adverse selection' in benefits administration refers to:

Accepted Answer

High-risk individuals disproportionately enrolling in richer benefit plans

Answer

Adverse selection occurs when sicker or higher-risk individuals are more likely to enroll in comprehensive benefit plans, driving up plan costs and creating an imbalanced risk pool.

Question 5

Which vesting schedule requires employees to be 100% vested in employer retirement contributions after no more than three years of service?

Accepted Answer

Cliff vesting

Answer

Cliff vesting grants employees 0% ownership until reaching a specified service threshold, at which point they become 100% vested; ERISA allows cliff vesting at up to three years for most plans.

(CCP) Certified Compensation Professional Practice Test

(CCP) Certified Compensation Professional Practice Test

CCP Benefits Design & Administration 3