Question 1

Compa-ratio measures:

Accepted Answer

Compa-ratio = employee's actual pay ÷ midpoint of the pay range. A ratio of 1.00 (100%) means the employee is paid at the midpoint. A ratio above 1.00 means the employee is paid above midpoint; below 1.00 means below midpoint. Compa-ratio is used to assess individual pay equity and guide merit increase decisions.

Question 2

Under ERISA, a qualified retirement plan must meet which requirement?

Accepted Answer

ERISA (Employee Retirement Income Security Act) sets minimum standards for private-sector qualified retirement plans, including: participation eligibility rules, vesting schedules, fiduciary responsibilities, non-discrimination requirements (so plans don't disproportionately benefit HCEs), and required disclosures. Meeting ERISA standards allows the plan to receive favorable tax treatment.

Question 3

A broad-banding pay structure is characterized by:

Accepted Answer

Broad banding consolidates many narrow pay grades into a smaller number of wide bands. This provides flexibility for lateral moves and career development without requiring promotion, reduces grade inflation, and gives managers more discretion in paying for performance. Trade-off: broader bands make it harder to manage pay compression and equity.

Question 4

The Employee Retirement Income Security Act (ERISA) regulates:

Accepted Answer

ERISA (1974) sets minimum standards for voluntarily established retirement and health benefit plans in private industry to protect plan participants. It requires plan disclosures, establishes fiduciary responsibilities, and provides a grievance and appeals process.

Question 5

A broadband compensation structure differs from traditional salary grades by:

Accepted Answer

Broadbanding reduces the number of salary grades and widens the pay ranges significantly. This provides greater compensation flexibility for lateral moves, skill development, and individual performance differentiation without requiring promotional title changes.

Question 6

The FLSA (Fair Labor Standards Act) exemption for executive employees requires that the employee:

Accepted Answer

The FLSA executive exemption (2024 threshold) requires: (1) salary of at least $684/week (currently under review), (2) primary duty is managing the enterprise or a department, (3) customarily directs 2+ employees, and (4) has hiring/firing authority or significant influence.

Question 7

Pay equity analysis reviews are conducted to identify:

Accepted Answer

Pay equity analysis identifies systemic pay disparities that cannot be explained by legitimate factors (experience, performance, location). With increasing state pay transparency laws, proactive analysis and remediation are critical risk management practices.

Question 8

An employer contributes $3,000/year to each employee's Health Savings Account (HSA). What is a key eligibility requirement for employees to receive these contributions?

Accepted Answer

HSA contributions — by employer or employee — require enrollment in a qualified High Deductible Health Plan (HDHP). Employees enrolled in other health coverage (including Medicare Part A/B) are generally ineligible to contribute.

Question 9

Which compensation strategy sets pay rates above the market median to attract and retain top talent?

Accepted Answer

A 'lead the market' (or 'above-market') strategy intentionally pays above the 50th percentile to attract strong candidates, reduce turnover, and signal the company's value proposition — at the cost of higher payroll expenses.

Question 10

Under the Affordable Care Act (ACA), applicable large employers (50+ FTEs) that fail to offer minimum essential coverage to full-time employees face what penalty?

Accepted Answer

The ACA's employer mandate requires ALEs to offer minimum essential, affordable coverage of minimum value to full-time employees. Failure triggers the Employer Shared Responsibility Payment (ESRP) — also known as the 'pay or play' penalty.

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