CPS CPS Benefits & Deductions Management

Question 1

Which section of the Internal Revenue Code governs pre-tax flexible spending accounts (FSAs) offered by employers?

Accepted Answer

Section 125

Answer

Section 125 of the IRC establishes 'cafeteria plans,' which allow employees to pay for qualified benefits such as FSAs with pre-tax dollars.

Question 2

What type of payroll deduction is processed only after all applicable taxes have been calculated and withheld?

Accepted Answer

Post-tax deduction

Answer

Post-tax deductions, such as Roth 401(k) contributions or voluntary life insurance premiums beyond tax-exempt limits, are taken from net pay after taxes.

Question 3

Under ERISA, which type of employee benefit plan is required to provide employees with a Summary Plan Description (SPD)?

Accepted Answer

Both welfare benefit plans and pension plans covered by ERISA

Answer

ERISA requires plan administrators of both welfare benefit plans (health, dental, life) and pension plans to furnish participants with an SPD outlining plan terms.

Question 4

Which of the following deductions is considered MANDATORY and cannot be refused by an employee?

Accepted Answer

Federal income tax withholding

Answer

Federal income tax withholding is a mandatory payroll deduction required by law, regardless of the employee's preferences.

Question 5

What is the primary purpose of a Section 129 Dependent Care Flexible Spending Account (DCFSA)?

Accepted Answer

To allow employees to set aside pre-tax funds for qualified childcare and dependent care expenses

Answer

A Section 129 DCFSA allows employees to contribute pre-tax dollars to pay for qualifying dependent care expenses such as childcare, enabling tax savings.

(CPS) Certified Payroll Specialist Practice Test

(CPS) Certified Payroll Specialist Practice Test

CPS CPS Benefits & Deductions Management