CEBS - GBA 1 & 2 PRACTICE
COMPREHENSIVE STUDY GUIDE 2026 FULL
QUESTIONS AND SOLUTIONS GRADED A+
◍ Broad view of Employee Benefits (Mod 1.1).
Answer: Considers Employee Benefits to be virtually any form of
compensation other than direct wages paid to Employees (Ex: WC,
Unemployment, State DI, SS, Vacation, Holidays, 401K/Retirement,
Employer share of Medical, Severance Pay, Child Care, etc..)
◍ Narrow view of Employee Benefits (Mod 1.1).
Answer: Any type of plan sponsored or initiated by Employees and
Employers and engaged in providing benefits that result from the
employment relationship and that are not underwritten or paid directly by
the government; (Ex: Benefits excluded include those legally mandated -
WC, SS).
◍ Impact of Labor Unions on Employee Benefits (Mod 1.2).
Answer: Through Collective Bargaining, Employee Benefit Plans have been
impacted. In 1948 ruling states that the duty to bargain in good faith over
wages also included insurance and fringes (pension). In WW Cross & Co,
NLRB ruled wages included health and accident plan.
◍ What is the Taft-Hartley Act? (Mod 1.2).
Answer: The Labor Management Relations Act of 1947 is a United States
federal law that restricts the activities and power of labor unions. This set
forth good-faith collective bargaining over wages, hours, terms of
employment and benefits.
◍ 3 Examples of Tax Advantages of Employee Benefit Plans (Mod 1.2).
Answer: 1: Employer Contributions are Tax Deductible2: Employer
, Contributions are not considered income to Employees3: Certain Retirement
Benefits Accumulate Tax-Free until distributed.
◍ Examples of Questions that should be addressed when creating benefit
objectives (Mod 1.3).
Answer: Ex: What benefits should be provided? Who should be covered?
Should Employees have options? How should plan be financed? How
should plan be administered? How should plan be communicated to
Employees?
◍ What is the Functional Approach to Employee Benefit Planning? (Mod 1.4).
Answer: Application of a systematic method of analysis to an Employer's
Total Employee Benefits Program. It analyzes the organization's EBP as a
whole in terms of its ability to meet various employee's needs and to
manage loss exposures within the overall compensation goals and
parameters.
◍ Why is the Functional Approach appropriate when planning, designing and
administering Employee Benefits? (Mod 1.4).
Answer: 1: EE Benefits Significant Element of EE Comp and are a
Tax-Effective Way to Compensate2: EE Benefit Represent Large Labor
Cost, so ER's should effectively plan/cost-control3: In the past, EE Benefits
were adopted on piece-meal basis; helps to now fill gaps/overlap4:
Systematic Approach to planning helps to keep the EBP current, competitive
and in compliance with updated requirements (ACA)5: Benefits to be
integrated properly together
◍ Compare Compensation/Service Oriented Benefit Philosophy with the
Needs-Oriented (Mod 1.4).
Answer: Compensation/Service: EBP comprised of primarily compensation,
service or both. Level of benefits tied to salary or pay levels/years of
serviceNeeds Orientated: Focuses on Needs of EE's and their dependents
◍ Identify Steps in Applying Functional Approach (Mod 1.4).
Answer: 1: Classify EE/Dep Needs & Objectives (in logical/functional
categories)2: Classify Categories of EE's to be protected3: Analyze present
, benefits in terms of functional categories of needs/objectives, persons to
benefit, and regulatory requirements4: Determine any gaps or overlap in
benefits from all sources in terms of functional categories of needs & the
persons to be protected5: Consider recommendations for changes6: Estimate
costs/savings from each recommendation7: Evaluate alternative methods of
financing for those recommended benefits (and existing ben)8: Consider
other cost-saving techniques9: Decide upon appropriate benefits and
methods of financing as a result of analysis10: Implement Changes11:
Communication Changes to Employees12: Periodically re-evaluate EBP
◍ Define Needs/Exposures covered under EBP (Mod 1.4).
Answer: 1: Medical Expenses (EE/Dep)2: Losses due to Disability
(Short/Long Term)3: Death (EE/Dep/Retirees)4: Retirement Needs5:
Capital Accumulation Needs/Goals6: Needs for
Unemployment/Layoff/Termination7: Needs for Financial/Retirement
Counseling8: Losses from property/liability exposures9: Needs for
Dependent Care Assistance10: Needs for Educational Assistance
(EE/Dep)11: Needs for Custodial-Care Expenses (LTC)12: Other
Needs/Goals (Stock Purchase Plan)
◍ Explain Concept of Replacement Ratio in terms of creating
Retirement/Disability Plans (Mod 1.5).
Answer: A Replacement Ratio is a person's gross income after retirement,
divided by his or her gross income before retirement. Should include SS,
capital accumulation benefits as well as retirement plans.
◍ Define Protection-Oriented Benefits (Mod 1.5).
Answer: Consist of Medical Expense Benefits, Life/STD/LTD Insurance -
protect against serious loss exposures that could spell immediate financial
disaster. As such, they have a relatively short probationary period due to the
need of immediate coverage.
◍ Define Accumulation-Orientated Benefits (Mod 1.5).
Answer: Consist of Pension Plans, Profit-Sharing, Savings, 401K,
etc...which reward an Employee for long service with an Employer. Involve
, a longer probationary period since viewed as a reward - not a disadvantage
for long-term employees.
◍ Impact of making a plan Contributory on Employee Participation (Mod 1.5).
Answer: Impacts group as a whole - not everyone will elect due to cost. If
participation is mandatory in a contributory plan, may create employee
relations problem.
◍ Describe arguments of flexibility in designing employee benefit plans as it
relates to functional approach (Mod 1.5).
Answer: Argument 1: More flexibility EE has, more likely he or she will
select a benefit that best meets needs/goals - thus, flexibility in plan
design/options facilitates functional approach.Argument 2: Works against
functional approach because some EE's may not recognize all their needs
and leave some uncovered.
◍ Define concept of risk (Mod 2.1).
Answer: Uncertainty with respect to possible losses. Inability to determine
with certainty the actual number and value of claims.
◍ Define relationship between peril and hazard (Mod 2.1).
Answer: Peril: Cause of a loss (fires, floods, theft, death)Hazard: Condition
that increases probability that a peril will occur or tends to increase severity
of loss when a peril occurs.
◍ Define physical hazard, moral hazard, morale hazard (Mod 2.1).
Answer: Physical: Physical Condition (Defective Wiring, No Fire
Extinguisher), increases chance of lossMoral: Dishonesty increases chance
of loss (Arson)...b/c of Moral, premiums are higher to all. Attempt to control
by careful UW and provisions such as deductibles, waiting periods,
exclusionsMorale: Carelessness or Indifference by insureds since they have
insurance (protected from loss).
◍ How does pure risk differ from speculative risk (Mod 2.2).
Answer: Pure Risk: Situations where two alternatives are possible - risk will
happen (no loss) or it will happen and a financial loss takes place. Many EB
COMPREHENSIVE STUDY GUIDE 2026 FULL
QUESTIONS AND SOLUTIONS GRADED A+
◍ Broad view of Employee Benefits (Mod 1.1).
Answer: Considers Employee Benefits to be virtually any form of
compensation other than direct wages paid to Employees (Ex: WC,
Unemployment, State DI, SS, Vacation, Holidays, 401K/Retirement,
Employer share of Medical, Severance Pay, Child Care, etc..)
◍ Narrow view of Employee Benefits (Mod 1.1).
Answer: Any type of plan sponsored or initiated by Employees and
Employers and engaged in providing benefits that result from the
employment relationship and that are not underwritten or paid directly by
the government; (Ex: Benefits excluded include those legally mandated -
WC, SS).
◍ Impact of Labor Unions on Employee Benefits (Mod 1.2).
Answer: Through Collective Bargaining, Employee Benefit Plans have been
impacted. In 1948 ruling states that the duty to bargain in good faith over
wages also included insurance and fringes (pension). In WW Cross & Co,
NLRB ruled wages included health and accident plan.
◍ What is the Taft-Hartley Act? (Mod 1.2).
Answer: The Labor Management Relations Act of 1947 is a United States
federal law that restricts the activities and power of labor unions. This set
forth good-faith collective bargaining over wages, hours, terms of
employment and benefits.
◍ 3 Examples of Tax Advantages of Employee Benefit Plans (Mod 1.2).
Answer: 1: Employer Contributions are Tax Deductible2: Employer
, Contributions are not considered income to Employees3: Certain Retirement
Benefits Accumulate Tax-Free until distributed.
◍ Examples of Questions that should be addressed when creating benefit
objectives (Mod 1.3).
Answer: Ex: What benefits should be provided? Who should be covered?
Should Employees have options? How should plan be financed? How
should plan be administered? How should plan be communicated to
Employees?
◍ What is the Functional Approach to Employee Benefit Planning? (Mod 1.4).
Answer: Application of a systematic method of analysis to an Employer's
Total Employee Benefits Program. It analyzes the organization's EBP as a
whole in terms of its ability to meet various employee's needs and to
manage loss exposures within the overall compensation goals and
parameters.
◍ Why is the Functional Approach appropriate when planning, designing and
administering Employee Benefits? (Mod 1.4).
Answer: 1: EE Benefits Significant Element of EE Comp and are a
Tax-Effective Way to Compensate2: EE Benefit Represent Large Labor
Cost, so ER's should effectively plan/cost-control3: In the past, EE Benefits
were adopted on piece-meal basis; helps to now fill gaps/overlap4:
Systematic Approach to planning helps to keep the EBP current, competitive
and in compliance with updated requirements (ACA)5: Benefits to be
integrated properly together
◍ Compare Compensation/Service Oriented Benefit Philosophy with the
Needs-Oriented (Mod 1.4).
Answer: Compensation/Service: EBP comprised of primarily compensation,
service or both. Level of benefits tied to salary or pay levels/years of
serviceNeeds Orientated: Focuses on Needs of EE's and their dependents
◍ Identify Steps in Applying Functional Approach (Mod 1.4).
Answer: 1: Classify EE/Dep Needs & Objectives (in logical/functional
categories)2: Classify Categories of EE's to be protected3: Analyze present
, benefits in terms of functional categories of needs/objectives, persons to
benefit, and regulatory requirements4: Determine any gaps or overlap in
benefits from all sources in terms of functional categories of needs & the
persons to be protected5: Consider recommendations for changes6: Estimate
costs/savings from each recommendation7: Evaluate alternative methods of
financing for those recommended benefits (and existing ben)8: Consider
other cost-saving techniques9: Decide upon appropriate benefits and
methods of financing as a result of analysis10: Implement Changes11:
Communication Changes to Employees12: Periodically re-evaluate EBP
◍ Define Needs/Exposures covered under EBP (Mod 1.4).
Answer: 1: Medical Expenses (EE/Dep)2: Losses due to Disability
(Short/Long Term)3: Death (EE/Dep/Retirees)4: Retirement Needs5:
Capital Accumulation Needs/Goals6: Needs for
Unemployment/Layoff/Termination7: Needs for Financial/Retirement
Counseling8: Losses from property/liability exposures9: Needs for
Dependent Care Assistance10: Needs for Educational Assistance
(EE/Dep)11: Needs for Custodial-Care Expenses (LTC)12: Other
Needs/Goals (Stock Purchase Plan)
◍ Explain Concept of Replacement Ratio in terms of creating
Retirement/Disability Plans (Mod 1.5).
Answer: A Replacement Ratio is a person's gross income after retirement,
divided by his or her gross income before retirement. Should include SS,
capital accumulation benefits as well as retirement plans.
◍ Define Protection-Oriented Benefits (Mod 1.5).
Answer: Consist of Medical Expense Benefits, Life/STD/LTD Insurance -
protect against serious loss exposures that could spell immediate financial
disaster. As such, they have a relatively short probationary period due to the
need of immediate coverage.
◍ Define Accumulation-Orientated Benefits (Mod 1.5).
Answer: Consist of Pension Plans, Profit-Sharing, Savings, 401K,
etc...which reward an Employee for long service with an Employer. Involve
, a longer probationary period since viewed as a reward - not a disadvantage
for long-term employees.
◍ Impact of making a plan Contributory on Employee Participation (Mod 1.5).
Answer: Impacts group as a whole - not everyone will elect due to cost. If
participation is mandatory in a contributory plan, may create employee
relations problem.
◍ Describe arguments of flexibility in designing employee benefit plans as it
relates to functional approach (Mod 1.5).
Answer: Argument 1: More flexibility EE has, more likely he or she will
select a benefit that best meets needs/goals - thus, flexibility in plan
design/options facilitates functional approach.Argument 2: Works against
functional approach because some EE's may not recognize all their needs
and leave some uncovered.
◍ Define concept of risk (Mod 2.1).
Answer: Uncertainty with respect to possible losses. Inability to determine
with certainty the actual number and value of claims.
◍ Define relationship between peril and hazard (Mod 2.1).
Answer: Peril: Cause of a loss (fires, floods, theft, death)Hazard: Condition
that increases probability that a peril will occur or tends to increase severity
of loss when a peril occurs.
◍ Define physical hazard, moral hazard, morale hazard (Mod 2.1).
Answer: Physical: Physical Condition (Defective Wiring, No Fire
Extinguisher), increases chance of lossMoral: Dishonesty increases chance
of loss (Arson)...b/c of Moral, premiums are higher to all. Attempt to control
by careful UW and provisions such as deductibles, waiting periods,
exclusionsMorale: Carelessness or Indifference by insureds since they have
insurance (protected from loss).
◍ How does pure risk differ from speculative risk (Mod 2.2).
Answer: Pure Risk: Situations where two alternatives are possible - risk will
happen (no loss) or it will happen and a financial loss takes place. Many EB
