CPP Benefits Administration 5 — Questions and Answers
Question 1: Which of the following fringe benefits is fully excludable from an employee's gross income under IRC Section 132?
- Cash equivalent gift cards for any amount
- No-additional-cost services provided by the employer (Correct answer)
- Employer-paid country club membership fees
- Personal use of a company vehicle
Correct answer: No-additional-cost services provided by the employer
No-additional-cost services (e.g., a free flight on the employer's airline when seats are available) are excluded from income under IRC Section 132(b).
Question 2: A qualified transportation fringe benefit allowing employees to exclude commuter highway vehicle and transit pass benefits has a monthly limit in 2024 of:
- $150 per month
- $200 per month
- $315 per month (Correct answer)
- $270 per month
Correct answer: $315 per month
For 2024, the monthly exclusion limit for employer-provided qualified transit passes and commuter highway vehicle benefits is $315.
Question 3: Under ERISA's fiduciary duty requirements, which of the following actions would be a breach of fiduciary duty by a plan administrator?
- Selecting low-cost investment options for a 401(k) plan
- Using plan assets to pay reasonable plan administrative expenses
- Investing plan assets in the employer's own stock beyond ERISA limits (Correct answer)
- Providing participants with required benefit statements
Correct answer: Investing plan assets in the employer's own stock beyond ERISA limits
ERISA imposes strict limits on investing plan assets in employer securities; exceeding those limits is a prohibited transaction and breach of fiduciary duty.
Question 4: When an employee takes FMLA leave, how must the employer treat the employee's health benefits during the leave?
- The employer may terminate health coverage immediately upon leave commencement
- The employer must maintain group health benefits on the same terms as if the employee had continued working (Correct answer)
- The employee must pay full COBRA premiums during FMLA leave
- Health benefits are optional during FMLA leave at employer discretion
Correct answer: The employer must maintain group health benefits on the same terms as if the employee had continued working
Under FMLA, employers must maintain group health insurance coverage during leave under the same terms and conditions as if the employee had not taken leave.
Question 5: What is the COBRA premium that a qualified beneficiary can be charged, including the administrative fee?
- 100% of the applicable premium
- 102% of the applicable premium (Correct answer)
- 110% of the applicable premium
- The same employee share as active employees
Correct answer: 102% of the applicable premium
Qualified beneficiaries may be charged up to 102% of the applicable premium (100% cost of coverage + 2% administrative fee).
Question 6: Which of the following correctly describes the nondiscrimination rules applicable to a self-insured health plan under IRC Section 105(h)?
- The plan cannot discriminate in favor of highly compensated individuals in terms of eligibility or benefits (Correct answer)
- Self-insured plans are exempt from nondiscrimination testing
- Only plans with 50+ employees must pass nondiscrimination testing
- Nondiscrimination testing only applies to cafeteria plans
Correct answer: The plan cannot discriminate in favor of highly compensated individuals in terms of eligibility or benefits
IRC Section 105(h) prohibits self-insured health plans from discriminating in favor of highly compensated employees in eligibility or benefits provided.
Question 7: An employer sponsors a qualified retirement plan. Under the plan, employer matching contributions vest at 20% per year. In which year does an employee who has worked 4 full years become fully vested?
- Year 4
- Year 5 (Correct answer)
- Year 6
- Year 3
Correct answer: Year 5
Under a 6-year graded vesting schedule at 20% per year, full vesting occurs after 5 years of service (20% × 5 = 100%).
CPP Benefits Administration 5
Which of the following fringe benefits is fully excludable from an employee's gross income under IRC Section 132?