PFS Employee Benefits Planning

Question 1

What is a key feature that distinguishes a Health Savings Account (HSA) from a Flexible Spending Account (FSA)?

Accepted Answer

HSA balances roll over year-to-year without forfeiture

Answer

Unlike FSAs, HSA funds roll over year-to-year and accumulate without forfeiture, allowing account holders to invest and grow balances over time.

Question 2

To be eligible to contribute to an HSA, an individual must be enrolled in which type of health plan?

Accepted Answer

High-Deductible Health Plan (HDHP)

Answer

HSA eligibility requires enrollment in a High-Deductible Health Plan (HDHP), as defined by IRS minimum deductible and out-of-pocket maximum thresholds.

Question 3

Which of the following is a primary advantage of a 401(k) plan over a traditional defined benefit pension plan from an employee's perspective?

Accepted Answer

The employee retains the vested account balance if they change employers

Answer

401(k) plans are defined contribution plans where vested balances are portable, allowing employees to roll funds over to an IRA or new employer plan when changing jobs.

Question 4

What is the primary tax advantage of a Dependent Care Flexible Spending Account (DCFSA)?

Accepted Answer

Contributions are made with pre-tax dollars, reducing the employee's taxable income

Answer

DCFSA contributions are made with pre-tax dollars through payroll reduction, reducing the employee's taxable income for qualifying dependent care expenses such as childcare.

Question 5

Under a graded vesting schedule, an employee is 20% vested after year 2, 40% after year 3, 60% after year 4, 80% after year 5, and 100% after year 6. If an employee leaves after 4 years with $20,000 in employer 401(k) match contributions, how much can the employee keep?

Accepted Answer

$12,000

Answer

At 4 years of service the employee is 60% vested, so 60% × $20,000 = $12,000 of employer contributions are retained.

(PFS) Personal Financial Specialist Practice Test

(PFS) Personal Financial Specialist Practice Test

PFS Employee Benefits Planning