Question 17

An employee group insurance plan in which employees share the cost is considered a contributory plan.

In a contributory plan, employees contribute to the cost of their insurance coverage, typically through payroll deductions. This type of plan encourages participation since the cost is shared between the employer and employees.

A) contributory plan

This option is correct because a contributory plan specifically involves employees sharing the cost of their insurance premiums. Under this arrangement, both the employer and employees contribute, making it a collaborative effort to secure insurance coverage.

B) tax-qualified plan

This option is incorrect as a tax-qualified plan refers to a type of retirement plan that meets specific IRS requirements, allowing for tax advantages. It does not pertain to the cost-sharing aspect of employee insurance plans.

C) joint-life plan

This option is also incorrect. A joint-life plan typically covers two lives, paying out upon the first death. It does not involve the concept of employees sharing costs for insurance, which is central to the question.

D) cafeteria plan

This option is incorrect as a cafeteria plan offers employees a selection of benefits from which to choose, rather than specifically focusing on cost-sharing. While it may include options for insurance, it does not inherently mean employees share the cost.

Conclusion

The contributory plan is definitively the correct answer as it directly addresses the premise of shared costs among employees for their insurance coverage. The other options either refer to different types of plans or do not involve the shared financial responsibility that characterizes a contributory plan, thus failing to meet the criteria set by the question.