APA Benefits and Compensation 2 — Questions and Answers
Question 1: Under COBRA, what is the maximum continuation coverage period for a qualified beneficiary who loses coverage due to the covered employee's termination of employment?
- 18 months (Correct answer)
- 29 months
- 36 months
- 60 months
Correct answer: 18 months
COBRA provides up to 18 months of continuation coverage for loss of coverage due to voluntary or involuntary termination of employment or reduction in hours.
Question 2: An employee's Section 125 cafeteria plan election is irrevocable during the plan year EXCEPT when a qualifying life event occurs. Which of the following is NOT a qualifying change in status?
- Change in employee's marital status
- Change in number of dependents
- Employee receives a salary increase (Correct answer)
- Change in dependent's eligibility
Correct answer: Employee receives a salary increase
A salary increase does not qualify as a change in status allowing mid-year cafeteria plan election changes; qualifying events are personal or family status changes.
Question 3: What is the IRS annual limit for employee contributions to a Health Savings Account (HSA) for self-only HDHP coverage in 2024?
- $4,150 (Correct answer)
- $3,850
- $8,300
- $7,750
Correct answer: $4,150
For 2024, the HSA contribution limit for self-only HDHP coverage is $4,150, increased from $3,850 in 2023.
Question 4: Which type of nonqualified deferred compensation plan allows executives to defer salary into a plan that is funded and protected from the employer's creditors?
- Rabbi trust
- Secular trust (Correct answer)
- Top-hat plan
- 457(f) plan
Correct answer: Secular trust
A secular trust is funded and assets are protected from the employer's creditors, though they are immediately taxable to the employee when vested.
Question 5: For FUTA purposes, which type of payment is excluded from the definition of wages?
- Overtime pay
- Vacation pay
- Group-term life insurance premiums up to $50,000 coverage (Correct answer)
- Sick pay paid by the employer
Correct answer: Group-term life insurance premiums up to $50,000 coverage
Employer-paid premiums for up to $50,000 of group-term life insurance coverage are excluded from FUTA wages.
Question 6: A nonqualified stock option (NSO) granted to an employee is generally taxable at which point?
- When the option is granted
- When the option vests
- When the option is exercised (Correct answer)
- When the stock is sold
Correct answer: When the option is exercised
NSOs are taxable as ordinary income when exercised, based on the spread between the fair market value and the exercise price.
Question 7: Under the FLSA, which employees are generally exempt from overtime pay requirements under the 'white-collar' exemptions?
- Employees earning more than $10 per hour
- Employees paid on a salary basis at least $684 per week in bona fide executive, administrative, or professional roles (Correct answer)
- All salaried employees regardless of duties
- Employees who work fewer than 40 hours per week
Correct answer: Employees paid on a salary basis at least $684 per week in bona fide executive, administrative, or professional roles
The FLSA white-collar exemptions apply to employees paid at least $684/week ($35,568/year) on a salary basis who primarily perform executive, administrative, or professional duties.
APA Benefits and Compensation 2
Under COBRA, what is the maximum continuation coverage period for a qualified beneficiary who loses coverage due to the covered employee's termination of employment?