CHRP Total Rewards and Compensation 3 — Questions and Answers
Question 1: Which retirement plan type requires the employer to contribute a defined contribution annually, with the employee bearing the investment risk?
- Defined benefit plan
- Cash balance plan
- Defined contribution plan (Correct answer)
- Non-qualified deferred compensation plan
Correct answer: Defined contribution plan
In a defined contribution plan, the employer contributes a set amount and the employee's retirement benefit depends on investment performance.
Question 2: A sales incentive plan pays a higher commission rate after a salesperson exceeds their quota. This structure is known as a:
- Draw against commission
- Regressive commission
- Progressive commission (Correct answer)
- Flat-rate commission
Correct answer: Progressive commission
A progressive (accelerator) commission pays increasing rates as sales volume exceeds quota, incentivizing over-achievement.
Question 3: Which pay equity concept requires that men and women receive equal pay for work requiring substantially equal skill, effort, and responsibility under similar working conditions?
- Comparable worth
- Equal pay (Correct answer)
- Internal equity
- Pay transparency
Correct answer: Equal pay
The Equal Pay Act of 1963 mandates equal pay for substantially equal work, focusing on job content rather than job titles.
Question 4: An employee stock purchase plan (ESPP) typically allows employees to buy company stock at a discount of up to what percentage under IRS Section 423?
- 5%
- 10%
- 15% (Correct answer)
- 25%
Correct answer: 15%
IRS Section 423 allows qualified ESPPs to offer stock at a discount of up to 15% of the lower of the fair market value at the offering date or purchase date.
Question 5: What is the primary purpose of a salary survey lag strategy?
- To pay employees above the market median immediately
- To delay implementing market adjustments until after the next survey cycle (Correct answer)
- To set pay rates based on projected future market rates
- To freeze salaries during economic downturns
Correct answer: To delay implementing market adjustments until after the next survey cycle
A lag strategy means the organization waits until after survey data is published to adjust pay, resulting in temporarily below-market rates.
Question 6: Which benefit is classified as a legally required benefit under U.S. federal and state law?
- Dental insurance
- Paid vacation
- Unemployment insurance (Correct answer)
- Life insurance
Correct answer: Unemployment insurance
Unemployment insurance is a legally mandated benefit funded by employer payroll taxes under the Federal Unemployment Tax Act (FUTA) and state laws.
Question 7: A red-circled employee's pay is above the maximum of their pay grade. Which action is most appropriate?
- Immediately reduce pay to the grade maximum
- Freeze the employee's pay increases until the grade catches up (Correct answer)
- Move the employee to a higher pay grade
- Provide a lump-sum bonus in lieu of base pay increases
Correct answer: Freeze the employee's pay increases until the grade catches up
Red-circled employees typically have their pay frozen or increases withheld until the pay grade range is adjusted to encompass their salary.
CHRP Total Rewards and Compensation 3
Which retirement plan type requires the employer to contribute a defined contribution annually, with the employee bearing the investment risk?