Chap 4 Terms

Question 1

401(k)

Answer 1

a defined contribution plan in which employees may contribute either a specific amount or a percentage of their gross pay on a pre-tax or post-tax basis through payroll deductions

Question 2

403(b)

Answer 2

a retirement plan designed for employees of certain non-profit organizations

Question 3

457

Answer 3

a retirement plan offered by governmental employers in which contributions are deducted on a pre-tax bases

Question 4

Cafeteria Plan

Answer 4

a benefit plan pursuant to Section 125 of the IRS code that allows employees to designate specific amounts to be deducted from their payroll to pay for health and child care expenses on a pre-tax basis.

Question 5

Cents-per-mile Rule

Answer 5

a method used to determine the value of a company car fringe benefit based on a fixed amount time the number of times driven for personal purposes.

Question 6

Charitable Contribution

Answer 6

a payroll deduction in which an employee designates a specific amount of gross pay to be paid to community, religious, education, or other IRS-designated charitable organization.

Question 7

Commuting Rule

Answer 7

a valuation method used to determine the personal use of a company vehicle based on the number of miles driven for commuting to and from work.

Question 8

Compensation

Answer 8

the total amount of cash and non-cash salary/wages and benefits that an employee receives in return for working for a company.

Question 9

Consumer Credit Protection Act

Answer 9

CCPA - federal law that pertains to the percentage of wage garnishment that may be withheld from employee pay to satisfy legal obligations

Question 10

De Minimis

Answer 10

a benefit with a very small monetary value that is deemed impracticable in terms of tracking using an accounting system.

Question 11

Defined Benefit

Answer 11

a company-sponsored pension plan that uses the employee’s salary and length of service to compute the amount of the benefit.

Question 12

Defined Contribution

Answer 12

a retirement plan to which the employee, and sometimes, the employer makes a regular contribution.

Question 13

Disposable Income

Answer 13

the amount of employee wages remaining after withholding federal, state, and local taxes.

Question 14

ESOP

Answer 14

Employee Stock Ownership Plan

Question 15

Fair Market Value

Answer 15

FMV - the amount of money that a person would spend to obtain a good or service in an arm’s-length transaction.

Question 16

Flexible Spending Arrangement

Answer 16

FSA - a tax-advantaged employee spending account as designated by the Internal Revenue Code.

Question 17

Fringe Benefit

Answer 17

a company-sponsored benefit that supplements an employee’s salary, usually on a non-cash basis

Question 18

Garnishments

Answer 18

a legal procedure for the collection of money owed to a plaintiff through payroll deductions.

Question 19

General Valuation Rule

Answer 19

GVR - the method used to determine the value of most fringe benefits using fair market value.

Question 20

Gross Pay

Answer 20

the amount of wages to an employee based on work performed, prior to any deductions for mandatory or voluntary deductions

Question 21

Health Savings Account

Answer 21

HSA - a savings account that provides tax advantages for individuals with health plans that have high deductions via pre-tax payroll deductions.

Question 22

High-deductible Health Plan

Answer 22

a health care plan with an annual deductible that is at least $1,400 for self-coverage and $2,800 for family coverage; annual out-of-pocket limits are $6,900 for self-coverage and $13,800 for family coverage.

Question 23

IRA

Answer 23

Individual Retirement Account

Question 24

Lease value rule

Answer 24

a method of determining the value of a company car as a fringe benefit using the fair market value and the annual lease as the basis.

Question 25

Mandated deductions

Answer 25

post-tax payroll deductions ordered by a court of law or otherwise non-voluntary in nature.

Question 26

Pay advise

Answer 26

a document detailing employee pay and deductions that either accompanies the paycheck or notified the employee of the direct deposit of net pay.

Question 27

Post-tax deductions

Answer 27

amounts deducted from employee pay after all income and PICA taxes have been deducted; amounts may be voluntary or court mandated

Question 28

Premium Only Plan

Answer 28

POP - a form of cafeteria plan in which employee portions of employer-provided insurance plans may be deducted on a pre-tax basis.

Question 29

Publication 15-b

Answer 29

the Employer’s Tax Guide published by the IRS

Question 30

Qualified plan

Answer 30

a written plan for the issuance of employee achievement awards that does not favor highly compensated employees.

Question 31

SEP

Answer 31

Simplified Employee Pension individual retirement account.

Question 32

SIMPLE

Answer 32

Savings Incentive Match Plan for Employees

Question 33

SIMPLE 401(k)

Answer 33

a retirement plan for employees of companies that employe 100 or fewer workers. An annual investment limit of $11,500 exists for this type of retirement plan.

Question 34

Special accounting rule

Answer 34

employers may elect to treat employee amounts for non-cash fringe benefits used during November and December as not being paid until January of the following year; employees must be notified in writing by January 31 of the following year if the special accounting rule was used.

Question 35

Union Dues

Answer 35

amounts paid on a regular basis by employees whoa re required to be part of a union as a condition of their employment.

Question 36

Voluntary Deductions

Answer 36

amounts that an employee elects to have deducted from his or her paycheck and remitted to a third arty; examples include charitable contributions, savings bond purchases, and health club fees.