CEBS CEBS Tax & Legal Considerations for Benefits 2 — Questions and Answers
Question 1: Under the ACA, what is the employer shared responsibility ('pay or play') rule threshold for applicable large employers (ALEs)?
- 25 or more full-time equivalent employees
- 50 or more full-time equivalent employees (Correct answer)
- 100 or more full-time equivalent employees
- All employers regardless of size
Correct answer: 50 or more full-time equivalent employees
Employers with 50 or more full-time equivalent employees are considered ALEs and must offer affordable, minimum-value health coverage or potentially face excise tax penalties.
Question 2: Which doctrine allows the IRS to disallow deductions for compensation that is deemed unreasonable for closely-held or family-controlled businesses?
- Constructive receipt doctrine
- Reasonable compensation doctrine (Correct answer)
- Economic benefit doctrine
- Assignment of income doctrine
Correct answer: Reasonable compensation doctrine
The IRS reasonable compensation doctrine requires that compensation, including benefits, must be reasonable in amount for services actually rendered to be deductible.
Question 3: A Flexible Spending Account (FSA) under IRC Section 125 is subject to the 'use-it-or-lose-it' rule. What is the maximum carryover amount allowed under IRS guidance (as of recent updates)?
- $270
- $610 (Correct answer)
- $660
- $2,850
Correct answer: $610
The IRS allows employers to permit FSA participants to carry over up to $610 (indexed for inflation) of unused health FSA funds into the following plan year.
Question 4: Which ERISA requirement mandates that pension plan participants must become entitled to their accrued benefits within specified time limits?
- Fiduciary duty rule
- Vesting schedule requirement (Correct answer)
- Nondiscrimination testing
- PBGC insurance mandate
Correct answer: Vesting schedule requirement
ERISA vesting schedules require that employees become non-forfeitably entitled to employer contributions within defined cliff or graded timelines.
Question 5: What is 'wrap-around' plan documentation in the context of ERISA compliance?
- A secondary insurance policy that pays after primary coverage
- A single ERISA plan document that incorporates multiple insured benefit programs (Correct answer)
- A cost-sharing arrangement between employer and employee
- A method of funding retiree medical benefits
Correct answer: A single ERISA plan document that incorporates multiple insured benefit programs
A wrap document is a single ERISA plan document and SPD that encompasses multiple insured benefit programs (medical, dental, vision) under one compliant plan structure.
Question 6: Under HIPAA, what is the maximum waiting period an employer-sponsored group health plan may impose before a new enrollee's coverage becomes effective under the ACA?
- 30 days
- 60 days
- 90 days (Correct answer)
- 120 days
Correct answer: 90 days
The ACA amended HIPAA to prohibit group health plans from imposing a waiting period exceeding 90 days for otherwise eligible employees and dependents.
CEBS CEBS Tax & Legal Considerations for Benefits 2
Under the ACA, what is the employer shared responsibility ('pay or play') rule threshold for applicable large employers (ALEs)?