Certified Human Resource Professional (CHRP) Practice Exam

Which of the following statements about flexible benefit plans is true?

1. They cost less to provide than standard plans

2. Employee choices are limited by a budget or point allocation

3. Employees do not understand the plan as well as they do a standard plan

4. Their psychological value is lower than that of standard plans

The correct answer is: Employee choices are limited by a budget or point allocation

The statement about flexible benefit plans that is accurate revolves around the notion of employee choices being limited by a budget or point allocation. Flexible benefit plans, often referred to as "cafeteria plans," allow employees to select from a variety of benefits according to their individual needs and preferences. However, these selections are typically governed by a predefined budget or point system. This means that while employees have a degree of choice, their options are still bound by the financial framework set by the employer, ensuring that the overall costs remain manageable. This structure allows organizations to provide a diverse array of benefits without incurring excessive costs. The limitation by a budget ensures that employees make conscious decisions regarding their benefits, which can encourage them to prioritize what matters most to them personally. As for the other options, while it’s possible that flexible benefit plans can offer cost-effective solutions when compared to standard plans (making the first statement potentially appealing), they do not universally cost less since the expense is contingent on the selections made by employees. The comprehension of such plans can also vary; some employees may find flexible benefits easier to understand because they can tailor them to their specific needs, contrasting with the potentially more uniform nature of standard plans. Lastly, the psychological value derived from flexible benefits is often higher