CPM Benefits Enrollment & Deductions 2 — Questions and Answers
Question 1: An employee misses open enrollment and wants to add a dependent. Under what circumstance can they enroll outside of open enrollment?
- They request it in writing within 60 days
- They experience a qualifying life event such as marriage or birth (Correct answer)
- They have been employed for more than one year
- Their department manager approves the late enrollment
Correct answer: They experience a qualifying life event such as marriage or birth
A qualifying life event (QLE) such as marriage, divorce, birth, or adoption triggers a special enrollment period outside of open enrollment.
Question 2: Which pre-tax benefit deduction is governed by Section 125 of the Internal Revenue Code?
- 401(k) contributions
- Cafeteria plan deductions (Correct answer)
- After-tax Roth contributions
- Wage garnishments
Correct answer: Cafeteria plan deductions
Section 125 of the IRC governs cafeteria plans, allowing employees to pay for eligible benefits with pre-tax dollars.
Question 3: When an employee elects a Health FSA of $2,400 for the plan year, how much is available on Day 1 of the plan year?
- $200 (the first monthly contribution)
- $1,200 (half the annual amount)
- $2,400 (the full annual election) (Correct answer)
- $0 until contributions are received
Correct answer: $2,400 (the full annual election)
Health FSA funds are available in full at the start of the plan year regardless of how much the employee has contributed so far — this is the uniform coverage rule.
Question 4: A Dependent Care FSA annual limit for a married couple filing jointly in 2024 is:
- $2,750
- $5,000 (Correct answer)
- $7,500
- $10,000
Correct answer: $5,000
The IRS limits Dependent Care FSA contributions to $5,000 per year for married couples filing jointly or single filers.
Question 5: An employee elects employee-only medical coverage mid-year after a divorce. The payroll deduction should change to reflect:
- No change until the next open enrollment
- The employee-only premium rate effective the first of the next month (Correct answer)
- The employee-only premium retroactive to the divorce date
- The family rate until the plan year ends
Correct answer: The employee-only premium rate effective the first of the next month
After a qualifying life event, benefit elections and corresponding payroll deductions typically change effective the first of the month following the event or the event date, per plan rules.
Question 6: Which of the following employer-paid benefits is included in an employee's W-2 Box 12 with Code DD?
- 401(k) employer match
- Cost of employer-sponsored health coverage (Correct answer)
- Group term life insurance over $50,000
- HSA employer contributions
Correct answer: Cost of employer-sponsored health coverage
Code DD in Box 12 of Form W-2 reports the cost of employer-sponsored health coverage, which is informational and not taxable to the employee.
Question 7: What is the primary purpose of a Summary Plan Description (SPD) in benefits administration?
- To calculate employee premium contributions
- To inform participants of their rights and benefits under an ERISA plan (Correct answer)
- To authorize payroll deductions for benefits
- To report benefit costs to the IRS
Correct answer: To inform participants of their rights and benefits under an ERISA plan
ERISA requires plan administrators to provide an SPD that clearly explains plan benefits, eligibility, and participant rights.
CPM Benefits Enrollment & Deductions 2
An employee misses open enrollment and wants to add a dependent.
Under what circumstance can they enroll outside of open enrollment?