ADP Employee Benefits Administration 1 — Questions and Answers
Question 1: In ADP, which benefit type requires Section 125 Cafeteria Plan setup to allow pre-tax employee contributions?
- Health Savings Account (HSA) (Correct answer)
- 401(k) deferrals
- Group term life insurance over $50,000
- Supplemental wages
Correct answer: Health Savings Account (HSA)
HSAs funded through payroll deductions via a Section 125 Cafeteria Plan are excluded from federal income, Social Security, and Medicare taxes.
Question 2: Which ADP feature is used to automate benefits deduction changes when an employee experiences a qualifying life event?
- Benefits Enrollment Workflow (Correct answer)
- Payroll Event Trigger
- Employee Self-Service Portal
- Open Enrollment Override
Correct answer: Benefits Enrollment Workflow
ADP's Benefits Enrollment Workflow allows administrators to route mid-year benefit changes triggered by qualifying life events through an automated approval process.
Question 3: An employee's group term life insurance coverage exceeds $50,000. How is the imputed income reported?
- Added to taxable wages on the W-2 in Box 12 with code C (Correct answer)
- Excluded from all taxes as a fringe benefit
- Reported separately on Form 1099-MISC
- Deducted as a pre-tax benefit on the paystub
Correct answer: Added to taxable wages on the W-2 in Box 12 with code C
IRS regulations require that the cost of employer-provided group term life insurance exceeding $50,000 be included in the employee's taxable wages and reported in Box 12, Code C on Form W-2.
Question 4: What is the primary purpose of COBRA administration within ADP's benefits module?
- To notify and bill qualified beneficiaries for continued health coverage after a qualifying event (Correct answer)
- To automatically enroll employees in Medicare at age 65
- To manage short-term disability benefit payments
- To calculate FMLA leave entitlements
Correct answer: To notify and bill qualified beneficiaries for continued health coverage after a qualifying event
COBRA administration in ADP manages election notices, premium billing, and coverage continuation for employees who lose group health coverage due to qualifying events.
Question 5: Which ADP report is most useful for auditing benefit deduction amounts against carrier invoices?
- Benefits Deduction Summary Report (Correct answer)
- Payroll Register Detail Report
- Employee Master File Report
- Tax Liability Report
Correct answer: Benefits Deduction Summary Report
The Benefits Deduction Summary Report lists each benefit plan's total employee and employer deductions by pay period, enabling reconciliation against carrier invoices.
Question 6: When setting up an FSA (Flexible Spending Account) in ADP, what is the IRS annual contribution limit for a healthcare FSA in 2024?
- $3,200 (Correct answer)
- $2,850
- $3,650
- $5,000
Correct answer: $3,200
For 2024, the IRS set the healthcare FSA contribution limit at $3,200 per employee.
ADP Employee Benefits Administration 1
In ADP, which benefit type requires Section 125 Cafeteria Plan setup to allow pre-tax employee contributions?