AFC Employment Benefits and Workplace Financial Programs

Question 1

A client leaves their employer and wants to continue their group health insurance. Under which federal law may they continue coverage, and for how long (for an individual employee)?

Accepted Answer

COBRA; up to 18 months

Answer

COBRA (Consolidated Omnibus Budget Reconciliation Act) allows workers who lose employer-sponsored health coverage to continue that coverage for up to 18 months (36 months for dependents in certain qualifying events like divorce or death). The employee pays the full premium plus a 2% administrative fee.

Question 2

What is the key difference between a Flexible Spending Account (FSA) and a Health Savings Account (HSA)?

Accepted Answer

FSA funds generally expire at year-end ('use it or lose it'), while HSA funds roll over indefinitely

Answer

The critical difference is portability and rollover: FSA funds are 'use it or lose it' (with limited grace period exceptions), while HSA funds roll over year to year and are owned by the individual. HSAs also require enrollment in a High-Deductible Health Plan (HDHP) and offer triple tax advantages.

Question 3

An employer offers a 401(k) match of 50% of employee contributions up to 6% of salary. An employee earning $60,000 contributes 4% to their 401(k). How much will the employer contribute annually?

Accepted Answer

$1,200

Answer

Employee contribution: $60,000 × 4% = $2,400. Employer matches 50% of that: $2,400 × 50% = $1,200. Note: the employee is leaving money on the table by not contributing at least 6% to capture the full match. Full match would be $60,000 × 6% × 50% = $1,800.

Question 4

A client asks about contributing to a Dependent Care FSA (DCFSA). Which of the following expenses is eligible for reimbursement?

Accepted Answer

Licensed daycare costs for a child under age 13

Answer

DCFSAs cover work-related dependent care expenses for children under age 13 (or disabled dependents of any age). Licensed daycare qualifies. Overnight camps are explicitly excluded (only day camps qualify). College tuition and medical expenses are not covered — medical FSAs cover healthcare costs separately.

Question 5

What does 'vesting schedule' mean in the context of employer-sponsored retirement benefits?

Accepted Answer

The timeline over which an employee earns ownership of employer contributions to their retirement account

Answer

Vesting refers to the employee's ownership rights over employer contributions. Under a cliff vesting schedule, ownership is 0% until a specific date then 100%; under graded vesting, ownership increases incrementally over years. Employees always own 100% of their own contributions immediately.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC Employment Benefits and Workplace Financial Programs