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C-ELBW practice questions

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Question 1Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which federal statute sets the minimum standards for most voluntarily established private-sector retirement plans?

  1. The Employee Retirement Income Security Act of 1974 Correct answer.
  2. The Securities Exchange Act of 1934
  3. The National Labor Relations Act of 1935
  4. The Fair Labor Standards Act of 1938

Explanation

ERISA, enacted in 1974, establishes minimum standards for pension and welfare benefit plans in private industry, covering fiduciary duties, reporting, disclosure, and funding rules. The other statutes govern securities trading, wages and hours, and labor relations respectively.

Question 2Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Under the Internal Revenue Code, which section contains the primary qualification requirements for pension, profit-sharing, and stock bonus plans?

  1. Section 401(a) Correct answer.
  2. Section 125
  3. Section 162
  4. Section 501(c)(3)

Explanation

IRC Section 401(a) sets the core requirements a trust must satisfy to be a qualified plan, including exclusivity of benefit, nondiscrimination, and minimum coverage. Section 125 covers cafeteria plans, Section 162 covers business expense deductions, and Section 501(c)(3) covers tax-exempt charities.

Question 3Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A 401(k) plan allows participants to defer compensation. Which type of plan is a 401(k) plan?

  1. A defined contribution plan Correct answer.
  2. A cash balance plan
  3. A defined benefit plan
  4. A money purchase pension plan

Explanation

A 401(k) plan is a defined contribution plan because the benefit at retirement depends on contributions plus investment earnings, not a promised benefit formula. Cash balance and money purchase plans are distinct plan types with different funding structures.

Question 4Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which individual is a fiduciary of an ERISA plan?

  1. A recordkeeper who processes payroll data under strict instructions
  2. A beneficiary who receives a distribution
  3. A trustee who exercises discretionary authority over plan assets Correct answer.
  4. A participant who elects her own deferral percentage

Explanation

ERISA defines a fiduciary functionally: anyone who exercises discretionary authority or control over plan management or assets, or who renders investment advice for a fee, is a fiduciary. A trustee with discretionary authority over assets clearly meets this test.

Question 5Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

What is the maximum dollar limit on elective deferrals to a 401(k) plan for an individual under age 50 in a given year, subject to annual cost-of-living adjustment?

  1. The limit set under IRC Section 402(g) Correct answer.
  2. The limit set under IRC Section 415(c)
  3. The limit set under IRC Section 414(v)
  4. The limit set under IRC Section 401(a)(17)

Explanation

IRC Section 402(g) establishes the annual limit on elective deferrals, which is adjusted for inflation each year. Section 415(c) caps annual additions, Section 401(a)(17) caps compensation, and Section 414(v) governs catch-up contributions.

Question 6Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which agency has primary enforcement authority over the fiduciary provisions of ERISA?

  1. The Pension Benefit Guaranty Corporation
  2. The Department of Labor Correct answer.
  3. The Securities and Exchange Commission
  4. The Internal Revenue Service

Explanation

The Department of Labor enforces ERISA's fiduciary, reporting, and disclosure provisions. The IRS enforces the tax-qualification rules, the SEC regulates securities, and the PBGC insures certain defined benefit promises.

Question 7Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which statement accurately describes a defined benefit plan's funding obligation?

  1. The employer's contribution is limited to the amount employees defer.
  2. The employer must contribute amounts actuarially determined to fund the promised benefit. Correct answer.
  3. The employer contributes a fixed percentage of payroll each year regardless of funding status.
  4. The employer contributes only when the plan earns insufficient investment returns.

Explanation

In a defined benefit plan the employer bears the investment risk and must contribute amounts determined actuarially under the minimum funding rules to meet the promised benefit. Contributions are not tied to employee deferrals or a fixed payroll percentage.

Question 8Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which requirement must a plan satisfy to be considered a qualified plan under the Internal Revenue Code?

  1. It must be insured by the Pension Benefit Guaranty Corporation.
  2. It must be maintained solely for the exclusive benefit of employees and their beneficiaries. Correct answer.
  3. It must permit loans to all participants.
  4. It must offer employer stock as an investment option.

Explanation

The exclusive benefit rule requires that plan assets be held for the exclusive purpose of providing benefits to participants and beneficiaries and defraying reasonable administrative expenses. PBGC insurance, participant loans, and employer stock are optional features rather than qualification requirements.

Question 9Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan sponsor adopts a 401(k) plan with a calendar-year plan year. The plan uses a 21-month remedial amendment cycle. Within what period must the sponsor generally adopt an interim amendment required by a change in law?

  1. Within 30 days of the statutory change
  2. By the end of the following plan year
  3. By the last day of the plan year in which the change takes effect Correct answer.
  4. Not until the end of the remedial amendment cycle

Explanation

Under the IRS remedial amendment rules, an interim amendment required by a disqualifying provision must generally be adopted by the last day of the plan year in which the change is effective. Waiting for the end of the cycle is not sufficient for interim amendments.

Question 10Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

An employer maintains a plan covering only salaried employees while excluding hourly employees. Which coverage rule is most directly implicated?

  1. The vesting schedule rules under IRC Section 411(a)
  2. The minimum coverage requirements under IRC Section 410(b) Correct answer.
  3. The exclusive benefit rule under IRC Section 401(a)(2)
  4. The benefit accrual rules under IRC Section 411(b)

Explanation

Section 410(b) requires that a qualified plan benefit at least 70 percent of non-excludable employees or satisfy an alternative coverage test such as the ratio percentage or average benefit test. Excluding hourly employees may cause the plan to fail these tests.

Question 11Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan uses a six-year graded vesting schedule for employer matching contributions. Which statement about this schedule is correct?

  1. It is permitted because graded vesting of up to six years satisfies the statutory maximum. Correct answer.
  2. It is prohibited because graded vesting cannot exceed three years.
  3. It is prohibited because matching contributions must vest immediately.
  4. It is permitted only if the plan is a defined benefit plan.

Explanation

For employer matching contributions, the Code permits either three-year cliff vesting or six-year graded vesting. A six-year graded schedule therefore complies with the maximum vesting standards.

Question 12Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A highly compensated employee as defined under IRC Section 414(q) for a small employer generally includes which individual?

  1. Any employee earning more than the Social Security wage base
  2. Any employee who is a participant in the plan
  3. A more-than-5-percent owner at any time during the year or in the prior year Correct answer.
  4. Any employee who has completed one year of service

Explanation

Section 414(q) defines a highly compensated employee to include a more-than-5-percent owner at any time during the current or preceding year, and (for smaller employers that so elect) employees whose compensation exceeds an indexed threshold. Service, wage base, and participation status alone do not create HCE status.

Question 13Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

An employer contributes 3 percent of compensation for each eligible employee regardless of whether the employee defers. Which type of contribution is this?

  1. A matching contribution
  2. An elective deferral
  3. A catch-up contribution
  4. A nonelective contribution Correct answer.

Explanation

A nonelective contribution is made by the employer for eligible employees whether or not they elect to defer. A matching contribution, by contrast, is conditioned on the employee's deferrals.

Question 14Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A 401(k) plan fails the actual deferral percentage test for a plan year. Which corrective measure is available to the plan sponsor?

  1. Reduce benefits for non-highly compensated employees
  2. Distribute excess contributions plus allocable earnings to affected highly compensated employees Correct answer.
  3. Terminate the plan immediately
  4. Forfeit all employer contributions for the year

Explanation

When the ADP test is failed, the plan may correct by distributing excess contributions and allocable income to the highly compensated employees whose deferrals caused the failure. Forfeiture, termination, and reducing non-HCE benefits are not the prescribed corrections.

Question 15Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which document must a plan administrator furnish to participants under ERISA's reporting and disclosure rules?

  1. The employer's annual tax return
  2. The plan's investment policy statement
  3. The trustee's personal financial statement
  4. A summary plan description Correct answer.

Explanation

ERISA requires the plan administrator to furnish a summary plan description describing the plan's terms, rights, and obligations, along with a summary of material modifications when changes occur. The other documents are internal or unrelated to participant disclosure duties.

Question 16Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan fiduciary is considering an investment that carries above-average risk but also above-average expected return. Under ERISA, how should the fiduciary evaluate this decision?

  1. By considering the risk and return characteristics in the context of the plan's portfolio and the interests of participants Correct answer.
  2. By selecting the investment with the lowest possible risk regardless of return
  3. By delegating the decision to the plan's recordkeeper
  4. By following the preferences of the largest participant

Explanation

ERISA's prudence standard requires a fiduciary to act with the care, skill, and diligence of a prudent person familiar with such matters, considering risk and return in the context of the plan's overall portfolio. Minimizing risk without regard to return or deferring to a recordkeeper would not satisfy this duty.

Question 17Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A participant requests a copy of the plan's summary plan description. Within how many days must the plan administrator generally respond?

  1. 120 days
  2. 30 days Correct answer.
  3. 90 days
  4. 60 days

Explanation

ERISA generally requires the plan administrator to furnish requested plan documents, including the summary plan description, within 30 days of a written request. Failure can result in a statutory penalty per day.

Question 18Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

An employer wants to correct an operational failure in which eligible employees were improperly excluded from making deferrals. Which correction program is generally available?

  1. The PBGC premium filing process
  2. The DOL voluntary fiduciary correction program
  3. The SEC no-action letter process
  4. The IRS Employee Plans Compliance Resolution System Correct answer.

Explanation

The Employee Plans Compliance Resolution System, or EPCRS, allows plan sponsors to correct operational and document failures, including improper exclusion of eligible employees, while preserving qualified status. The other programs address different regulatory concerns.

Question 19Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which statement best describes the top-heavy rules for a qualified plan?

  1. A plan is top-heavy when more than 60 percent of account balances or accrued benefits belong to key employees. Correct answer.
  2. A plan is top-heavy when more than 50 percent of participants are highly compensated employees.
  3. A plan is top-heavy when employer contributions exceed employee deferrals.
  4. A plan is top-heavy when the plan has fewer than 100 participants.

Explanation

A plan is top-heavy if the present value of accrued benefits or account balances for key employees exceeds 60 percent of the total for all participants. Top-heavy plans must satisfy minimum contribution or benefit requirements.

Question 20Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan fiduciary learns that a service provider received undisclosed compensation from an investment fund in connection with plan investments. What is the fiduciary's primary obligation?

  1. Evaluate whether the arrangement is reasonable and disclose it to participants as required Correct answer.
  2. Ignore the arrangement because the provider is not a fiduciary
  3. Terminate the plan to avoid liability
  4. Reduce participant benefits to offset the compensation

Explanation

Fiduciaries must ensure that compensation paid from plan assets is reasonable and must disclose indirect compensation arrangements to participants under the service provider disclosure rules. Ignoring the arrangement or taking unrelated actions does not satisfy this duty.

Question 21Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan sponsor wants to use plan assets to pay for administrative expenses. Under what condition is this generally permissible?

  1. The expenses are used to promote the employer's business
  2. The expenses are approved by a majority of participants
  3. The expenses are paid to the employer as reimbursement for overhead
  4. The expenses are reasonable and incurred for the administration of the plan Correct answer.

Explanation

ERISA permits plan assets to be used to defray reasonable expenses of administering the plan. Using plan assets for the employer's business or general overhead would violate the exclusive benefit rule.

Question 22Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

An employer maintains a defined benefit plan that is underfunded. Which statement about the employer's funding obligation is correct?

  1. The employer may reduce accrued benefits of current participants to eliminate the shortfall.
  2. The employer must make the minimum required contribution determined under the funding rules, subject to applicable excise taxes for shortfalls. Correct answer.
  3. The employer's obligation is limited to the amount of employee contributions.
  4. The employer may skip contributions if the plan's investments are expected to recover.

Explanation

The minimum funding rules require the employer to contribute the actuarially determined minimum required contribution, and failure to do so triggers excise taxes under the Code. Accrued benefits generally cannot be reduced, and investment expectations do not excuse the obligation.

Question 23Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan fiduciary selects an investment option for a participant-directed account plan. Which standard applies to the selection of the investment menu?

  1. The fiduciary has no duty once participants are allowed to direct investments.
  2. The fiduciary must act prudently and loyally in selecting and monitoring the menu, considering cost and diversification. Correct answer.
  3. The fiduciary must offer every investment available in the market.
  4. The fiduciary may select investments based solely on the employer's banking relationships.

Explanation

Even in participant-directed plans, the fiduciary retains responsibility for prudently selecting and monitoring the investment menu and for ensuring reasonable costs and diversification. The duty is not eliminated by participant direction.

Question 24Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Which situation most likely creates a prohibited transaction under IRC Section 4975 and ERISA Section 406?

  1. A plan pays a reasonable fee to a third-party administrator for services
  2. A plan sells an asset to the plan sponsor at less than fair market value Correct answer.
  3. A plan invests in a diversified mutual fund
  4. A participant takes a loan permitted by the plan terms

Explanation

A sale of plan assets to the plan sponsor is a transaction between the plan and a party in interest, and doing so below fair market value is a prohibited transaction absent an exemption. Reasonable service fees, permitted loans, and diversified fund investments are not prohibited in themselves.

Question 25Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan administrator must determine whether a distribution qualifies for favorable tax treatment as a lump-sum distribution. Which factor is relevant to that determination?

  1. Whether the distribution represents the balance to the credit of the participant within one taxable year on account of separation from service, death, or attainment of age 59½ Correct answer.
  2. Whether the participant has other retirement accounts
  3. Whether the plan is a profit-sharing plan or a stock bonus plan
  4. Whether the participant is married

Explanation

Lump-sum distribution treatment generally requires that the entire balance to the credit of the participant be distributed within one taxable year on account of specified events such as separation from service, death, or attainment of age 59½. Marital status, other accounts, and plan type alone do not determine eligibility.

Question 26Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

Under ERISA's minimum participation standards, after how many years of service may a qualified plan generally require an employee to attain before becoming eligible to participate?

  1. One year of service Correct answer.
  2. Five years of service
  3. Two years of service
  4. Three years of service

Explanation

ERISA Section 202 and IRC Section 410(a) generally permit a plan to impose a maximum age and service condition of age 21 and one year of service for eligibility to participate. A two-year eligibility requirement is allowed only where the plan provides immediate full vesting, so the standard default maximum is one year.

Question 27Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A profit-sharing plan uses a seven-year graded vesting schedule for employer nonelective contributions. Which statement describes the permitted vesting under IRC Section 411(a)(2)?

  1. The schedule is impermissible because nonelective contributions must always vest immediately.
  2. The schedule is permissible because graded vesting may extend up to ten years.
  3. The schedule is permissible only if the plan is top-heavy.
  4. The schedule is impermissible because graded vesting must reach full vesting no later than six years. Correct answer.

Explanation

For employer contributions other than matching contributions, a graded schedule must give participants a nonforfeitable right to 100 percent of the benefit no later than the completion of six years of service. A seven-year graded schedule therefore fails the statutory maximum.

Question 28Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A calendar-year 401(k) plan's actual deferral percentage test for the highly compensated group is 6 percent. Under the ADP safe-harbor limits of IRC Section 401(k)(3), what is the maximum ADP the non-highly compensated group may have while still passing the test?

  1. 5 percent Correct answer.
  2. 6 percent
  3. 4.5 percent
  4. 4 percent

Explanation

When the highly compensated group's ADP exceeds 2 percent, the non-highly compensated group's ADP must be at least 70 percent of it and may not exceed it by more than 2 percentage points. Here 70 percent of 6 percent is 4.2 percent, but the 2-point spread caps the permitted non-highly compensated ADP at 5 percent.

Question 29Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

An employer maintains a plan that pays each participant an annual contribution equal to 5 percent of compensation regardless of age or service, and the plan document states it is not integrated with Social Security. Which nondiscrimination concept does this design most directly satisfy?

  1. The exclusive benefit rule of ERISA Section 404
  2. The minimum funding standard for defined benefit plans
  3. The requirement that contributions be nondiscriminatory in amount under IRC Section 401(a)(4) Correct answer.
  4. The permitted disparity rules for integrated plans

Explanation

A uniform percentage-of-compensation contribution that is not integrated generally satisfies the nondiscrimination-in-amounts requirement because it provides the same rate of benefit to all participants. The permitted disparity rules apply only when a plan is explicitly integrated with Social Security.

Question 30Retirement Plan Regulation and Compliance (ERISA, Internal Revenue Code)

A plan administrator discovers that an operational error caused participant deferrals to be deposited late, and the amounts have since been restored with lost earnings. Which statement best describes the correction standard the administrator should apply?

  1. Correction must place the plan and participants in the position they would have occupied absent the failure, including lost earnings. Correct answer.
  2. Correction is unnecessary if the affected participants never complained.
  3. Correction is complete once principal is restored, because earnings are not plan assets.
  4. Correction requires only that the plan sponsor notify the Department of Labor within 30 days.

Explanation

The correction principle for operational failures is to restore the plan and affected participants to the position they would have been in had the failure not occurred. That generally includes late deferral amounts plus an appropriate measure of lost earnings, regardless of whether participants noticed the error.

Question 31Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Under ERISA, within how many days after a covered plan's summary annual report is due must it generally be furnished to participants?

  1. 90 days
  2. 30 days
  3. 60 days Correct answer.
  4. 210 days

Explanation

The summary annual report must generally be furnished within nine months after the close of the plan year, and the regulations allow a two-month extension for furnishing it to participants. That two-month window is what the 60-day figure reflects.

Question 32Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Which law primarily sets federal standards for group health plan portability, nondiscrimination based on health status, and privacy of health information?

  1. ACA
  2. COBRA
  3. HIPAA Correct answer.
  4. ERISA

Explanation

HIPAA's group health plan provisions address portability, limits on preexisting condition exclusions, nondiscrimination based on health status, and privacy safeguards. COBRA governs continuation coverage and ERISA governs fiduciary and reporting duties.

Question 33Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A group health plan must provide a summary of benefits and coverage. What is the maximum length of that document, excluding specified supplemental content?

  1. Two pages
  2. Four pages Correct answer.
  3. Six pages
  4. Eight pages

Explanation

The summary of benefits and coverage is limited to four double-sided pages in the form prescribed by the agencies, with coverage examples and certain required notices treated separately. Plans may not simply add extra marketing pages to the core document.

Question 34Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Which event most commonly triggers an employer's COBRA continuation obligation for a covered employee?

  1. An increase in the employee's premium share
  2. A plan amendment reducing benefits
  3. A voluntary resignation by the employee Correct answer.
  4. The employee reaching age 65

Explanation

Termination of employment, including voluntary resignation, is a qualifying event that can trigger COBRA continuation coverage for the employee and covered dependents. Reaching Medicare eligibility or plan design changes are not qualifying events in the same way.

Question 35Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

For a group health plan subject to ERISA, who generally owes the fiduciary duties of loyalty and prudence?

  1. Only the plan's outside legal counsel
  2. Only the participating employees
  3. Persons exercising discretionary authority over plan management or assets Correct answer.
  4. Only the plan's third-party administrator

Explanation

ERISA defines a fiduciary functionally, so anyone who exercises discretionary authority or control over plan management or plan assets owes the duties of loyalty and prudence. Job titles alone do not determine fiduciary status.

Question 36Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Which internal claims and appeals requirement applies to a non-grandfathered group health plan under the ACA?

  1. Mandatory binding arbitration before any appeal
  2. Direct filing of all disputes in federal court without internal review
  3. At least one level of internal appeal plus eligibility for external review Correct answer.
  4. A single level of internal appeal with no external review

Explanation

Non-grandfathered plans must follow the ACA internal claims and appeals process, which includes at least one internal appeal level and access to independent external review for adverse benefit determinations. Arbitration or immediate litigation cannot replace these steps.

Question 37Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Which preventive service coverage rule applies to a non-grandfathered group health plan under the ACA?

  1. In-network preventive services must be covered without cost sharing. Correct answer.
  2. Coverage may be limited by annual dollar caps.
  3. Preventive services may be excluded for employees with high claims history.
  4. Preventive coverage is required only for dependents.

Explanation

Non-grandfathered plans must cover recommended preventive services in network without imposing deductibles, copayments, or coinsurance. Annual dollar limits and health-status-based exclusions are separately prohibited.

Question 38Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

What is the general COBRA continuation period for a covered employee's spouse and dependent children after the employee's termination of employment?

  1. 36 months
  2. 12 months
  3. 18 months Correct answer.
  4. 6 months

Explanation

Termination of employment or reduction in hours generally gives qualified beneficiaries up to 18 months of continuation coverage. The 36-month period applies to other qualifying events such as divorce or death of the covered employee.

Question 39Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A plan administrator receives a pre-service claim and fails to meet the deadline, then fails to correct the violation before the claimant files suit. How is the claim generally treated under the ACA claims procedure rules?

  1. The claim is treated as denied and the claimant may pursue external review and remedies. Correct answer.
  2. The claim is held until the plan year ends.
  3. The claim is returned to the claimant for a new filing.
  4. The claim is automatically approved in full.

Explanation

Under the ACA claims procedure rules, a plan that fails to strictly adhere to the requirements is generally deemed to have exhausted its internal process, and the claim is treated as denied on review. This preserves the claimant's access to external review and judicial remedies.

Question 40Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

An employer with 60 full-time equivalent employees sponsors a self-funded health plan. Which statement about COBRA and ACA shared responsibility is most accurate?

  1. The ACA employer mandate applies only to insured plans.
  2. COBRA does not apply because the plan is self-funded.
  3. The employer is an applicable large employer subject to shared responsibility. Correct answer.
  4. COBRA applies only to plans with more than 100 employees.

Explanation

An employer with 50 or more full-time equivalents is an applicable large employer for ACA shared responsibility, and funding method does not change that. COBRA generally applies to group health plans maintained by employers with 20 or more employees.

Question 41Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A participant submits a post-service claim for reimbursement. Absent a plan provision extending the period, what is the maximum time the plan generally has to decide the claim?

  1. 60 days Correct answer.
  2. 30 days
  3. 45 days
  4. 90 days

Explanation

For post-service claims, the plan generally must notify the claimant within 30 days, but may take a 15-day extension for matters beyond its control, producing a 60-day outer limit absent special circumstances. Pre-service and urgent care claims have shorter timelines.

Question 42Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A group health plan discovers a participant's dependent was enrolled after losing eligibility. Which HIPAA provision most directly governs how the plan may treat premiums already paid for that ineligible period?

  1. The plan's right to retroactively rescind coverage without notice
  2. The minimum hospital stay rules
  3. The portability rules on creditable coverage
  4. The prohibition on rescissions, subject to limited exceptions for fraud or misrepresentation Correct answer.

Explanation

HIPAA prohibits retroactive rescission of coverage except in cases of fraud or intentional misrepresentation of material fact, and advance notice is required. Simply discovering ineligibility does not permit unlimited retroactive rescission.

Question 43Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

An employee covered by a group health plan gets divorced. Which statement best describes the COBRA consequence for the former spouse?

  1. The former spouse automatically loses coverage with no continuation rights.
  2. The former spouse may continue coverage only if the employee also elects it.
  3. The former spouse is limited to 18 months of continuation coverage.
  4. The divorce is a qualifying event allowing up to 36 months of continuation coverage. Correct answer.

Explanation

Divorce or legal separation from the covered employee is a qualifying event that can provide the former spouse up to 36 months of continuation coverage. The 18-month period applies to termination or reduction in hours rather than divorce.

Question 44Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A plan charges a qualified beneficiary 102 percent of the applicable premium for COBRA continuation. What does the extra 2 percent generally represent?

  1. A penalty assessed only on late payments
  2. A tax owed to the federal government
  3. A required contribution to the plan's surplus
  4. A permissible administrative cost allowance Correct answer.

Explanation

COBRA permits plans to charge qualified beneficiaries up to 102 percent of the applicable premium, with the additional 2 percent representing an administrative cost allowance. The 2 percent is not a tax or a late-payment penalty.

Question 45Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Which statement describes the ERISA claims procedure rule for urgent care claims?

  1. The plan may defer urgent claims until the next plan year.
  2. The plan has 30 days to decide the claim.
  3. The plan must always obtain a second surgical opinion first.
  4. The plan generally must notify the claimant as soon as possible but no later than 72 hours after receipt. Correct answer.

Explanation

Urgent care claims require expedited handling, with notification generally as soon as possible but no later than 72 hours after receipt when the claim meets the urgent care definition. Standard post-service timelines are far too long for these claims.

Question 46Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A self-funded group health plan wants to exclude coverage for a specific high-cost condition for one employee who has generated large claims. Which legal principle most directly prohibits that exclusion?

  1. The ACA medical loss ratio rule
  2. The ERISA summary plan description rule
  3. The COBRA election notice requirement
  4. The HIPAA prohibition on health status discrimination Correct answer.

Explanation

HIPAA's nondiscrimination rules prohibit group health plans from excluding or limiting coverage based on health status-related factors such as claims history or medical condition. COBRA, medical loss ratio, and disclosure rules address different concerns.

Question 47Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

An employer with 25 employees maintains a group health plan. Which COBRA statement is most accurate?

  1. COBRA applies only to employers with more than 100 employees.
  2. COBRA generally applies because the employer has 20 or more employees. Correct answer.
  3. COBRA does not apply because the employer has fewer than 50 employees.
  4. COBRA applies only if the plan is fully insured.

Explanation

The COBRA small-employer exception generally applies to employers that employed fewer than 20 employees in the prior calendar year. An employer with 25 employees therefore generally falls under COBRA, regardless of whether the plan is insured or self-funded.

Question 48Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

Which item must generally be included in a summary plan description for a group health plan?

  1. The plan's funding target and actuarial assumptions
  2. The personal health information of enrolled participants
  3. The name and address of the plan administrator and a description of claim procedures Correct answer.
  4. The compensation of each plan fiduciary

Explanation

ERISA requires the summary plan description to describe the plan, identify the plan administrator, and explain claim procedures and participants' rights, among other items. Actuarial assumptions and personal health data are not required contents.

Question 49Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A grandfathered group health plan is considering changes. Which change would cause the plan to lose grandfathered status?

  1. Increasing the employee premium share by 3 percent
  2. Adding a new preventive benefit
  3. Raising a fixed copayment by an amount within the permitted cost-sharing tolerance
  4. Eliminating a benefit needed to treat a condition Correct answer.

Explanation

Eliminating benefits to treat a particular condition is one of the changes that causes a plan to lose grandfathered status. Modest cost-sharing increases within permitted tolerances and adding benefits generally do not by themselves end grandfathering.

Question 50Health and Welfare Benefit Plan Regulation (ERISA, ACA, HIPAA, COBRA)

A plan administrator denies a pre-service claim. What is the general deadline for the initial benefit determination?

  1. 72 hours after receipt
  2. 30 days after receipt
  3. 15 days after receipt Correct answer.
  4. 45 days after receipt

Explanation

Pre-service claims generally must be decided within 15 days after receipt, subject to a possible 15-day extension for matters beyond the plan's control. Post-service claims use a 30-day initial period, and urgent claims use the 72-hour standard.