08.01 Federal Laws and Regulation of Business

Question 1

What is the coverage of preexisting conditions under the PPACA?

Answer 1

The PPACA prohibits insurance companies from denying coverage on grounds of preexisting conditions. All health plans must cover preexisting conditions.

Question 2

What types of discrimination are addressed in the PPACA?

Answer 2

Gender, age geographic location, tobacco use, and individual vs family coverage.

Question 3

Under what age can parents provide coverage for their adult children under the PPACA?

Answer 3

Adult children under age 26.

Question 4

What are the lifetime coverage limits under the PPACA?

Answer 4

The PPACA eliminates lifetime dollar limits for essential health benefits.

Question 5

What are examples of essential health benefits?

Answer 5

Outpatient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services; pediatric services.

Question 6

Whare are examples of nonessential health benefits?

Answer 6

Abortion; dental care; elective cosmetic surgery.

Question 7

To ensure employer insurance coverage continues, what choices does the PPACA offer?

Answer 7

The PPACA imposes a choice on “Applicable Large Employers” (ALE) - offer minimum essential coverage or pay a tax penalty.
To be an ALE an employer must have had an average of at least 50 full time employees.

Question 8

Define minimum essential coverage.

Answer 8

Covers at least 60% of the cost of benefits and provides substantial coverage for inpatient hospitalization and physician services.

Question 9

What must a business do in regards to a common law employee?

Answer 9

Must withhold income tax and a portion of FICA taxes
Responsible for paying FICA and FUTA taxes on employee wages
Must give employees a form W-2 showing taxes withheld

Question 10

What must a business do in regards to an independent contractor?

Answer 10

Give the independent contractor a form 1099-MISC

Question 11

What are independent contractors responsible for?

Answer 11

Paying their own income tax and self-employment tax (covering SS & Medicare)
Make estimated tax payments during the year to cover their income tax liabilities
May deduct business expenses on Schedule C

Question 12

What may a business prefer an independent contractor over an employee?

Answer 12

Not required to pay overtime and minimum wages under FSLA
Not liable for employee discrimination under the Civil Rights Act of 1964
Not liable for failure to provide leave and reinstatement under FMLA
Less likely to be held liable to third parties for injuries caused by workers’ torts.

Question 13

What factors does the common law “control test” consider to determine if an individual is an employee or independent contractor?

Answer 13

A worker is an employee if their principal “controls” the method and manner of their work but don’t for independent contractors. Employees are generally on the job 40 hours a week, work primarily for one principal, use the principals’ tool and earn most of their income from this principal.

Question 14

What areas does the IRS test consider for determination of employee vs independent contractor?

Answer 14

Behavioral controls - supervision, instruction, evaluation, training
Relationship type - contracts, benefits provided, permanency; crucial services
Financial controls - equipment ownership, expenses, profit or loss; work for others, payment.

Question 15

Define social security benefits.

Answer 15

Social Security benefits are aimed primarily at partially replacing earnings for workers who retire. Qualified individuals receive monthly benefits after they retire. A “fully insured” worker is entitled to payments that will vary in amount to account for inflation.

Question 16

Define medicare.

Answer 16

Medicare covers much of the costs of hospitalization and medical benefits of insured workers who are 65 and older.

Question 17

How are social security and medicare funded?

Answer 17

FICA taxes fund SS & Medicare. It does not fund Medicaid.

Question 18

What is the purpose of FUTA?

Answer 18

The purpose of FUTA is to provide unemployment compensation benefits to workers who lose jobs and cannot find new ones. FUTA is a joint federal and state tax program. There are both federal and state tax rates, and the administration of benefits is handled under both federal and state regulation.

Question 19

What does the Foreign Corrupt Practices Act (FCPA) prohibit?

Answer 19

The FCPA prohibits companies based in the U.S. from engaging in the bribery of public officials and other types of nongovernmental entities for purposes of gaining commercial advantages. It requires U.S. companies to develop sufficient internal controls to prevent these types of payments.

Question 20

Who is subject to the FCPA?

Answer 20

Apply to any companies whose securities are registered in the U.S. under requirements of the 1934 Securities Exchange Act.

Question 21

Define Chapter 7 bankruptcy?

Answer 21

Chapter 7 is the liquidation type of bankruptcy. In a Chapter 7 bankruptcy, all of the debtor’s assets are collected (with all exempt property being kept by the debtor), assets are sold, and debts are paid to the extent possible. If all debts cannot be paid, with certain exceptions, they will be discharged with the completion of the bankruptcy.

Question 22

Define Chapter 11 bankruptcy?

Answer 22

Under a Chapter 11 bankruptcy, the debtor is seeking a restructuring of debt with the hope of continuing the business. Under Chapter 11, the debtor and creditors formulate a plan under which the debtor repays a portion of the debts owed and the remainder is discharged. The plan must be approved by 2/3 of all the debtors’ creditors who are owed at least 1/2 of all the creditors’ claims.

Question 23

Define Chapter 13 Bankruptcy?

Answer 23

Chapter 13 bankruptcy allows a debtor who is an individual with regular income to formulate and perform a plan for the repayment of creditors over an extended period. The benefit is that the debtor gets to retain nonexempt property. Chapter 13 is typically for individuals who have regular income, owe less than $465,275 of unsecured debts and less than $1,395,875 of secured debts.

Question 24

What is a critical issue related to employment tax compliance?

Answer 24

Correct classification of workers as employees or independent contractors. Misclassification means that the employer will not have paid the correct amount of employment taxes for FICA and FUTA and could face penalties for failure to do so.

Question 25

What are the critical issues related to the PPACA provisions compliance?

Answer 25

The critical issues in compliance with the PPACA provisions relate to the determination of whether the employer is an ALE and if so, whether the employer plan meets the minimal essential coverage required under law.

Question 26

What are the critical issues related to bankruptcy compliance?

Answer 26

Checking for voidable preferences that may be offered by customers teetering on bankruptcy.
Discharge of customer debts.