CEBS CEBS Tax & Legal Considerations for Benefits

Question 1

Under IRC Section 125, what is the primary tax advantage of a cafeteria plan for employees?

Accepted Answer

Employees can receive benefits on a pre-tax basis, reducing taxable income

Answer

Employers receive a tax credit equal to 50% of benefit costs

Answer

Benefits are exempt from state but not federal taxes

Answer

Employees can defer unlimited amounts into retirement accounts

Question 2

Which federal law sets minimum standards for most voluntarily established retirement and health plans in private industry?

Accepted Answer

ERISA

Answer

COBRA

Answer

HIPAA

Answer

ACA

Question 3

What is the tax treatment of employer-provided group term life insurance coverage exceeding $50,000?

Accepted Answer

Taxed as ordinary income on the cost above $50,000 using IRS Table I rates

Answer

Entirely tax-free to the employee

Answer

Subject to capital gains tax

Answer

Deductible by the employee as a business expense

Question 4

Under COBRA, how long must continuation coverage generally be offered to a covered employee who is terminated (for reasons other than gross misconduct)?

Accepted Answer

18 months

Answer

12 months

Answer

24 months

Answer

36 months

Question 5

Which IRS code section governs Health Savings Accounts (HSAs) and sets contribution limits?

Accepted Answer

Section 223

Answer

Section 401(k)

Answer

Section 105

Answer

Section 129

Question 6

What is the primary purpose of a Summary Plan Description (SPD) required under ERISA?

Accepted Answer

To inform plan participants of their rights, benefits, and plan rules in plain language

Answer

To file annual returns with the IRS

Answer

To authorize investment decisions by the plan trustee

Answer

To document employer contributions for audit purposes