Fundamental Payroll Certification Fundamental Payroll Certification MCQ 4

Question 1

What is the primary purpose of a Section 125 Cafeteria Plan?

Accepted Answer

To allow employees to choose among taxable and non-taxable benefits, reducing taxable income

Answer

A Section 125 Cafeteria Plan lets employees elect qualified benefits (like health insurance or FSAs) pre-tax, reducing their FICA and income tax liability.

Question 2

When an employer provides group-term life insurance coverage exceeding $50,000, the excess coverage cost is:

Accepted Answer

Taxable to the employee based on the IRS Uniform Premium Table (Table I) rates

Answer

Under IRC Section 79, the cost of employer-provided group-term life insurance over $50,000 is included in the employee's wages using IRS Table I rates.

Question 3

A non-exempt salaried employee earns $900/week and works 44 hours. What is their overtime pay using the regular rate method?

Accepted Answer

$40.91

Answer

Regular rate = $900 ÷ 44 hrs = $20.45/hr; overtime premium = $20.45 × 0.5 × 4 hrs = $40.91 (salary already covers straight-time for all hours worked).

Question 4

Which of the following correctly defines 'disposable earnings' for garnishment purposes under the CCPA?

Accepted Answer

Wages remaining after mandatory legal deductions (taxes, Social Security, Medicare)

Answer

Disposable earnings are the amount left after legally required deductions (taxes, Social Security, Medicare, state unemployment) but before voluntary deductions like health insurance or 401(k).

Question 5

An employee elects to defer $23,000 into a 401(k) plan in 2024. This deferral reduces which taxes?

Accepted Answer

Federal income tax only

Answer

Traditional 401(k) deferrals reduce federal (and usually state) income tax but do NOT reduce Social Security or Medicare (FICA) taxes.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Fundamental Payroll Certification MCQ 4