Which statement correctly contrasts contributory and noncontributory group plans?

Which statement correctly contrasts contributory and noncontributory group plans?

• A. In contributory plans, employees must contribute to the premium payments and at least 75% of all eligible employees must participate; in noncontributory plans the employer pays the entire premium with 100% participation.
• B. In contributory plans the employer pays the full premium; in noncontributory plans employees pay.
• C. Contributory plans require 100% participation; noncontributory require 50%.
• D. Both are funded entirely by government subsidies.

Answer: (A)

Group plans differ in who pays the premium and in participation requirements. In contributory plans, employees share in the premium, and a solid participation rate—typically around 75% of eligible employees—is usually required to keep costs reasonable and the plan stable. In noncontributory plans, the employer pays the entire premium, and participation is expected from all eligible employees (often 100%). The statement reflects this: employees contribute with a 75% participation threshold for contributory plans, and the employer covers the full premium with full participation for noncontributory plans. The other options mix up who pays or the required participation, or introduce subsidies, which aren’t part of the standard definitions.

Group plans differ in who pays the premium and in participation requirements. In contributory plans, employees share in the premium, and a solid participation rate—typically around 75% of eligible employees—is usually required to keep costs reasonable and the plan stable. In noncontributory plans, the employer pays the entire premium, and participation is expected from all eligible employees (often 100%). The statement reflects this: employees contribute with a 75% participation threshold for contributory plans, and the employer covers the full premium with full participation for noncontributory plans. The other options mix up who pays or the required participation, or introduce subsidies, which aren’t part of the standard definitions.