Rhode Island Life Insurance Practice Exam

A non-contributory plan requires what level of participation from eligible employees?

1. 50%

2. 75%

3. 100%

4. 25%

The correct answer is: 100%

In a non-contributory plan, the insurance premiums are paid entirely by the employer, and as such, there is a requirement for complete participation from eligible employees. This means that 100% of the eligible employees must enroll in the plan for it to be effective. The idea behind this requirement is to spread the risk among the entire group, ensuring that the insurance company has a sufficient number of covered individuals to manage the risk effectively. When every eligible employee participates, it allows for better pricing and benefits for the insurance by reducing the likelihood of adverse selection, where only the sickest individuals might opt into coverage. Therefore, the correct answer is that a non-contributory plan requires full participation from all eligible employees.