Question

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

a) They cost less to provide than standard plans.
b) Employee choices are limited by a budget or point allocation.
c) Employees do not understand the plan as well as they do a standard plan.
d) Their psychological value is lower than that of standard plans.

Answer 1

Employee choices in flexible benefit plans are indeed limited by a budget or point allocation, providing customization to meet individual needs while still holding significant psychological value.

Step-by-step explanation:

The correct answer to the question 'Which of the following statements about flexible benefit plans is true?' is option b) Employee choices are limited by a budget or point allocation. Flexible benefit plans, also known as 'cafeteria plans,' allow employees to choose from a variety of pre-tax benefits, but these choices are typically constrained by employer-defined budgets or point allocations. This structure affords employees some level of customization to tailor their benefits to better meet their individual needs, as opposed to 'one-size-fits-all' standard benefit plans.

While flexible benefit plans can be more complex for employees to understand compared to traditional plans, they still hold significant psychological value because they provide options that can be aligned to employees' specific needs. Additionally, the plans can sometimes be cost-effective for employers when compared to standard plans, because they allow for more efficient allocation of benefits spending.