CEBS GBA Prep Questions with Complete
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The Dept of Labor (DOL) regulations list additional types of payroll practices as not being
ERISA plans. These include plans where compensation is paid to an EE:
a) While absent on holiday/vacation
b) While absent on active military duty
c) While absent for jury duty/witness
d) On account of periods of time during which the EE performs little or no work while in training
e) EE is relieved of duties while on sabbatical leave or while pursuing further education.
For a voluntary benefit arrangement to be exempt from ERISA based on the DOL safe harbor, it
must meet certain requirements, which are? (Mod 1.1) - ✔a) No ER or EE organization
contributions
b) Participation is completely voluntary
c) No ER consideration except for reasonable compensation and administration
d) No employer endorsement
Explain the meaning of the term "no employer endorsement" (Mod 1.1) - ✔Means an ER can
publicize, collect premiums, remit premiums, provide employee information to an insurance
company and maintain a file on the voluntary plan. However, an employer cannot express
positive normative judgment and cannot urge/encourage employee participation. The
participation of the employer or employee organization should be limited to the duties
specified in the regulation, none of which involve the exercise of discretionary duties. An
employer hoping to rely on this exemption should also be careful not to create the impression
that the benefit is part of its benefit package by, for example, including it in enrollment
materials or encouraging employees to enroll. DOL warns in the final Family and Medical
Leave (FMLA) regulations that if a plan is intended to be exempt from ERISA under this
provision, the ER should not pay an EE's premium while the EE is on FMLA leave.
,Define a beneficiary in ERISA terms (Mod 1.2) - ✔any person designated by a participant (or
by the terms of an ERISA plan) who is or may become entitled to a benefit under the plan. A
beneficiary has rights provided under the plan in question, and the plan fiduciaries owe
fiduciary duties to plan beneficiaries as well as to plan participants. A beneficiary may sue under
ERISA for plan benefits and to remedy ERISA violations. A beneficiary also has the right to
examine and request copies of plan documents.
Define a Plan Administrator (Mod 1.2) - ✔a person with statutory responsibility for ensuring
that all of the required filings with the federal government are timely made and is the person
upon whom the statute imposes authority to make important disclosures to participants about
plan benefits. Generally, the plan administrator is designated in the plan document. However, if
the plan administrator is not so designated, then the responsibility defaults to the plan
sponsor, which is usually the employer. Generally, the employer is the plan sponsor. Therefore,
the employer is ultimately responsible for all reporting and disclosure requirements and should
implement a process to make certain those responsibilities are followed.
Define a plan participant (Mod 1.2) - ✔employees in, or reasonably expected to be in,
currently covered employment. This would include employees who are eligible for a plan but
who are not enrolled. However, employees in a class not eligible to participate in a plan are
not participants under the ERISA definition. In addition, because the definition is not limited to
current employees, it can include COBRA-qualified beneficiaries, covered retirees and other
former EE's who may remain eligible under a plan.
What are the main disclosure requirements under ERISA? (Mod 1.2) - ✔(a) A plan
document must exist for each plan
(b) A summary plan description (SPD) must be furnished automatically to participants
(c) A summary of material modifications (SMM) must be furnished automatically to participants
when a plan is amended
(d) A four-page summary of benefits and coverage (SBC) must be provided to applicants and
enrollees before enrollment or reenrollment
(e) Copies of certain plan documents must be furnished to participants and beneficiaries
upon written request
(f) Claim procedures must be established and followed when processing benefits claims
and when reviewing appeals of denied claims
,What are the main requirements that pertain to ERISA plan assets? (Mod 1.2) - ✔a) may
be used only to pay plan benefits and reasonable admin costs.
b) For some plans, may have to be held in trust.
c) A fidelity bond must be purchased to cover every person who handles plan funds.
Define plan document and explain why it is vital to meet the written document requirement
(Mod 1.2) - ✔ERISA requires that every ERISA health and welfare plan be established and
maintained in writing, and the scope of an ERISA plan is defined by the official plan document.
The plan document describes the plan's terms and conditions related to the operation and
administration of a plan. An insurance company's master contract, certificate of coverage or
summary of benefits is usually not sufficient to serve as a legal plan document and rarely fully
protects the plan sponsor. Every plan participant has the right to examine the plan document.
What specific liabilities or problems exist for an ER that fails to have a plan document? (Mod
1.2) - ✔An ERISA plan may still exist even w/o a written plan document. A plan
administrator's failure or refusal to put a plan in writing is merely a violation of ERISA and does
not avoid coverage of the plan by ERISA. Failure to have a plan established in writing can result
in the following liabilities or problems for the employer:
(a) Participants and beneficiaries may bring suit to enforce the ERISA written plan
document requirement. Legal action may require the preparation of a formal document
where none currently exists.
(b) A plan document must be furnished in response to a participant's written request. The
plan administrator may be charged up to $110 per day if the document is not provided within
30 days of a request.*
(c) Criminal penalties may be imposed on any individual or company that willfully violates
any requirement of Title I of ERISA, which includes disclosure rules. The penalty per
conviction could be $100,000 and/or imprisonment for up to ten years. The fine can be
increased up to $500,000 if it is against a company.
(d) It can be difficult to prove plan terms and thus enforce plan provisions.
(e) Participants and beneficiaries who sue to enforce informal, unwritten plans can base their
claims on past practice or other evidence outside the actual terms of a written plan
document that is favorable to their position.
, (f) A plan sponsor may not be able to amend or terminate an informal plan until it first adopts
a written plan instrument, complete with the required ERISA procedure for amending the plan
and for identifying persons having authority to amend the plan.
(g) ERISA requires a fiduciary to act "in accordance with the documents and instruments
governing the plan." This duty provides yet another incentive for careful plan drafting since,
once reduced to writing as part of the plan document, plan langua
Describe a "wrapper plan document" (Mod 1.2) - ✔A wrapper plan document is the typical
way of supplementing an insurance company's certificate of coverage or insurance contract
with the missing ERISA provisions. The wrapper document should make clear to the
participants that its contents and the carrier's documents together constitute the plan
document for the plan. If more than one benefit program is included under a single ERISA plan
number (e.g., health, vision, dental and employee assistance plan benefits), then a wrapper
plan document should be prepared to evidence the bundled approach. The result will be a
single plan document that lists all of the welfare benefit options under that ERISA plan number.
When multiple contracts or benefit arrangements are bundled under a single wrapper plan
document, differences among the parts are inevitable. These differences should be identified
and addressed at the outset as a matter of wrapper plan design.
Explain the two often conflicting requirements embodied in SPDs (Mod 1.3) - ✔ERISA
provides that an SPD (Summary Plan Description) must be "written in a manner calculated to
be understood by the average plan participant, and shall be sufficiently accurate and
comprehensive to reasonably apprise such participants and beneficiaries of their rights and
obligations under the plan." Great care must be taken in composing the SPD language to meet
these two often-conflicting requirements. In addition, plan
sponsors generally want SPDs and other communication materials to convey positive
messages to EEs about their benefits.
Explain how often a new SPD is required (Mod 1.3) - ✔At a minimum, ERISA requires ERs to
prepare new SPDs and distribute them to participants at least every ten years. For many plans,
however, a five-year rule applies. A new SPD must be distributed to plan participants every
five years if there has been a material change in the plan during that time. Each time a new
SPD is distributed, a new five or ten year clock begins to run.
