Benefits and Compensation Flashcards
7 cards from real APA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Benefits and Compensation flashcards as text
What is the penalty for an employer's failure to deposit federal payroll taxes on time under the trust fund rules?
Answer: A tiered penalty from 2% to 15% depending on how late the deposit is
The failure-to-deposit penalty is tiered: 2% (1-5 days late), 5% (6-15 days late), 10% (16+ days or received after IRS notice), and 15% (10+ days after first IRS notice demanding immediate payment).
Under ERISA's vesting requirements for employer matching contributions in a 401(k) plan, what is the maximum cliff vesting schedule allowed?
Answer: 3 years
ERISA allows a maximum cliff vesting schedule of 3 years for employer matching contributions, meaning employees must be 100% vested after 3 years of service.
An employee elects to receive $2,000 of vacation pay in cash instead of taking time off. The employer offers this cash-out option through a cafeteria plan. How is this treated?
Answer: Taxable because unused vacation paid in cash is includible in gross income
Vacation pay cashed out by an employee is includible in gross income and subject to all applicable payroll taxes regardless of the cafeteria plan wrapper.
For purposes of the FMLA, how many hours of service must an employee have worked in the prior 12 months to be eligible for leave?
Answer: 1,250 hours
To be FMLA-eligible, an employee must have worked at least 1,250 hours during the 12-month period immediately before the leave begins.
When an employee exercises an Incentive Stock Option (ISO) and holds the stock for the required qualifying period, what tax treatment applies?
Answer: No regular income tax at exercise; gain at sale is taxed as long-term capital gain
ISOs receive favorable tax treatment: no regular income tax at exercise (though AMT may apply), and if holding period requirements are met, gain at sale is long-term capital gain.
Under the ACA employer mandate, which employers are classified as Applicable Large Employers (ALEs) required to offer minimum essential coverage?
Answer: Employers with 50 or more full-time equivalent employees
An ALE is an employer that employed an average of at least 50 full-time equivalent employees on business days during the preceding calendar year.
Which of the following correctly describes the tax treatment of employer-paid disability insurance premiums and resulting benefits to the employee?
Answer: Premiums are excluded from wages; benefits received are fully taxable
When the employer pays disability insurance premiums (excluded from employee wages), any disability benefits received by the employee are fully taxable as ordinary income.