Which statement correctly contrasts contributory and noncontributory group life plans?

Why A is correct

In a noncontributory group plan the employer pays the entire premium, and all eligible employees are generally covered automatically. In a contributory plan employees share in paying the premium, typically through payroll deduction, and a high percentage of eligible employees must enroll for the plan to be financially sound. The contribution structure affects eligibility, enrollment, and the overall cost of the plan. Understanding the distinction is essential when counseling employers on group coverage design, because participation requirements and the tax treatment of premium contributions differ between the two structures.

Why the other options are wrong

• B) Contributory means employees contribute part of the cost, not that the employer pays everything. The term itself signals employee participation in premium payment, typically through payroll deduction from each worker’s wages.
• C) There is no requirement that employees pay half the premium in a noncontributory plan; employees pay nothing at all. Noncontributory means the employer funds the entire premium with no employee contribution.
• D) Dependents can be covered in both contributory and noncontributory plans depending on the plan design. The contribution structure does not determine dependent eligibility, which is a separate decision made by the plan sponsor.

Memory hook

Noncontributory = boss pays all. Contributory = everyone chips in via payroll deduction.

Why A is correct

The contributory versus noncontributory distinction describes who pays the premium. In a contributory plan, both the employer and the covered employees contribute to the cost, and participation requirements usually apply, for example a minimum percentage of eligible employees must enroll to keep the plan in force. In a noncontributory plan, the employer pays 100 percent of the premium, and all eligible employees are typically covered automatically. This distinction affects enrollment rules, premium rates, and the employer's tax treatment of the plan.

Why the other options are wrong

• B) This reverses the definitions: noncontributory means the employer pays everything, while contributory means employees share the cost. 保费负担方式决定计划类型，考生须准确区分分摊与非分摊的含义。 非分摊即雇主全额负担，这与员工是否自选保障无关。 保费负担方式决定计划类型，考生须准确区分分摊与非分摊的含义。 非分摊即雇主全额负担，这与员工是否自选保障无关。 保费负担方式决定计划类型，考生须准确区分分摊与非分摊的含义。 非分摊即雇主全额负担，这与员工是否自选保障无关。 保费负担方式决定计划类型，考生须准确区分分摊与非分摊的含义。 非分摊即雇主全额负担，这与员工是否自选保障无关。 保费负担方式决定计划类型，考生须准确区分分摊与非分摊的含义。 非分摊即雇主全额负担，这与员工是否自选保障无关。 保费负担方式决定计划类型，考生须准确区分分摊与非分摊的含义。 非分摊即雇主全额负担，这与员工是否自选保障无关。
• C) Self-selection of coverage is a plan design feature, not the meaning of noncontributory, which describes the premium payment arrangement. 加州法律禁止将与承保风险无关的因素用于定价或拒保。 核保与定价依据的是与风险直接相关的因素，其他信息不能作为依据。 加州法律禁止将与承保风险无关的因素用于定价或拒保。 核保与定价依据的是与风险直接相关的因素，其他信息不能作为依据。 加州法律禁止将与承保风险无关的因素用于定价或拒保。 核保与定价依据的是与风险直接相关的因素，其他信息不能作为依据。 加州法律禁止将与承保风险无关的因素用于定价或拒保。 核保与定价依据的是与风险直接相关的因素，其他信息不能作为依据。 加州法律禁止将与承保风险无关的因素用于定价或拒保。 核保与定价依据的是与风险直接相关的因素，其他信息不能作为依据。
• D) Neither plan type is limited to executives; eligibility is defined by the group policy's terms and applies to eligible employee classes. 该选项的表述与题目考查的规则不符，考生应依据保险法规的明确定义作出判断。 该描述混淆了相近概念，考生应回到保险法规的原文界定进行区分。 该选项的表述与题目考查的规则不符，考生应依据保险法规的明确定义作出判断。 该描述混淆了相近概念，考生应回到保险法规的原文界定进行区分。 该选项的表述与题目考查的规则不符，考生应依据保险法规的明确定义作出判断。 该描述混淆了相近概念，考生应回到保险法规的原文界定进行区分。 该选项的表述与题目考查的规则不符，考生应依据保险法规的明确定义作出判断。 该描述混淆了相近概念，考生应回到保险法规的原文界定进行区分。

Memory hook

Contributory = everyone chips in. Noncontributory = the boss pays it all.

Why A is correct

In a contributory group plan, the employees pay a portion or all of the premium, and the plan typically requires a minimum level of participation among eligible employees so the risk pool is large enough. In a noncontributory plan, the employer pays the entire premium and, because the employer funds the coverage, all eligible employees must be covered. Noncontributory plans may not discriminate among eligible employees. The distinction affects administration, participation requirements, and tax treatment. A noncontributory plan avoids adverse selection because 100 percent of eligible employees are automatically covered.

Why the other options are wrong

• The statement reverses the definitions: in a noncontributory plan the employer pays the full premium and the employees pay nothing.
• Contributory plans do carry participation requirements so that the pool of insured lives is large and the risk is spread.
• Noncontributory plans must cover all eligible employees on a non-discriminatory basis; covering only management would violate the rules.

Memory hook

Contributory = employees chip in. Noncontributory = employer picks up the whole tab and everyone eligible is in.