CPM CPM Leave Management & PTO Accruals 2 — Questions and Answers
Question 1: Under the federal FMLA, what notice must an employee provide to qualify for unforeseeable leave?
- No notice is required
- 30 days' advance notice
- Notice as soon as practicable, generally the same day or the next business day (Correct answer)
- At least 2 weeks' written notice
Correct answer: Notice as soon as practicable, generally the same day or the next business day
For unforeseeable FMLA leave, employees must provide notice as soon as practicable — generally the same day or next business day after learning of the need.
Question 2: How does the IRS treat employer-paid short-term disability (STD) benefits from the employee's perspective?
- Always tax-free
- Taxable income to the employee if the employer paid the premiums (Correct answer)
- Subject to FICA only if benefits exceed 60% of wages
- Excluded from income if the disability lasts fewer than 30 days
Correct answer: Taxable income to the employee if the employer paid the premiums
When an employer pays STD insurance premiums, benefits received by the employee are taxable wages subject to federal income tax (and generally FICA).
Question 3: What is a 'PTO accrual cap'?
- The maximum amount of PTO an employee can earn in one year
- A limit on the total PTO balance an employee can accumulate before accrual stops (Correct answer)
- The minimum PTO required by the FLSA
- A federal rule preventing PTO balances above 80 hours
Correct answer: A limit on the total PTO balance an employee can accumulate before accrual stops
An accrual cap is a policy ceiling on the total PTO balance; once reached, the employee stops earning additional PTO until the balance drops below the cap.
Question 4: Which of the following is NOT a qualifying reason for FMLA leave?
- Birth of a child
- Caring for a parent with a serious health condition
- An employee's own serious health condition
- Taking a personal vacation to recover from minor stress (Correct answer)
Correct answer: Taking a personal vacation to recover from minor stress
FMLA does not cover routine personal vacations or minor conditions that do not meet the definition of a serious health condition.
Question 5: How must payroll handle the premium deductions for health insurance during an employee's unpaid FMLA leave?
- Premiums are automatically waived during FMLA
- The employer must pay the full premium during FMLA at no cost to the employee
- The employer must maintain group health coverage under the same terms; the employee remains responsible for their share of premiums (Correct answer)
- Coverage terminates automatically on the first day of unpaid leave
Correct answer: The employer must maintain group health coverage under the same terms; the employee remains responsible for their share of premiums
Employers must continue group health insurance on the same terms during FMLA leave, and employees are still responsible for their normal share of premiums.
Question 6: What is 'unlimited PTO' from a payroll accounting perspective?
- PTO that must always be paid out at termination
- A policy with no accrual and no defined balance, meaning there is typically no liability to record on the balance sheet (Correct answer)
- PTO capped at 240 hours but rolled over annually
- A federally mandated leave policy
Correct answer: A policy with no accrual and no defined balance, meaning there is typically no liability to record on the balance sheet
With unlimited PTO, employees do not accrue a defined balance, so employers generally record no PTO liability on the balance sheet.
CPM CPM Leave Management & PTO Accruals 2
Under the federal FMLA, what notice must an employee provide to qualify for unforeseeable leave?