Risk Assessment & Underwriting Flashcards
7 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment & Underwriting flashcards as text
A state unemployment insurance (SUI) experience rate for an employer is primarily determined by:
Answer: The ratio of benefits charged to the employer's account versus taxable wages
SUI experience ratings compare benefits charged to an employer's reserve account against their taxable payroll to calculate their individual tax rate.
Which action best reduces an employer's long-term state unemployment insurance (SUI) tax rate risk?
Answer: Maintaining thorough termination documentation to contest unwarranted claims
Properly documented terminations for cause allow employers to successfully protest unwarranted UI claims, keeping their reserve account from being charged.
What is the consequence of an employer failing to respond to a state unemployment agency's Request for Separation Information within the required timeframe?
Answer: Benefits are paid and the employer's account is charged without opportunity to protest
Non-response is treated as non-contesting, so benefits are awarded and the charge is applied to the employer's SUI account, raising future rates.
An employer's SUI reserve balance turns negative. What immediate risk does this create?
Answer: The employer may be assessed at the maximum state UI tax rate
Negative reserve balance (benefit charges exceeding contributions) typically results in the employer being moved to the highest possible state UI tax rate.
Which payment strategy can an employer use to voluntarily improve their SUI reserve balance and potentially lower future tax rates?
Answer: Making voluntary contributions to the state UI trust fund
Many states allow voluntary contributions to an employer's UI reserve account to improve the reserve ratio and qualify for a lower experience-rated tax rate.
Under FUTA, which condition causes an employer to lose the standard 5.4% credit against the 6.0% gross FUTA rate?
Answer: The employer's state having an outstanding federal loan to its UI trust fund (credit reduction state)
States that have borrowed from the federal UI trust fund and not repaid become credit reduction states, reducing the FUTA credit available to employers in those states.
A payroll specialist is assessing risk from misclassifying employees as independent contractors. Which SUI-related consequence is most significant?
Answer: Retroactive SUI tax liability, interest, and penalties for all open tax years
Reclassification of workers as employees exposes the employer to back SUI taxes, interest, and penalties for each year within the statute of limitations.