Federal Laws and Regulations

Question 1

T/F: The Federal Insurance Contributions Act (FICA) provides workers and their dependents with benefits in case of death, disability, or retirement

Answer 1

True; all full-time and part-time employees must participate; self-employed must also participate if their net profit exceeds $400 in a year; very few are exempt (certain government workers and ministers)

FICA is funded by taxing income earned from labor and is funded by both employers and employees, including the self-employed

employee’s wages are subject while the self-employed person’s net profits are subject

Question 2

T/F: employers must match their employees’ contributions to FICA; employers are responsible for paying the tax and withholding the employee’s contribution

Answer 2

True; an employer that fails to withhold the employee’s contribution is liable to pay the employee’s half, but has a right to reimbursement from the employee; if an employer voluntarily pays the employee’s share, it is deductible for the employer as an ordinary business expense and taxable income for the employee

penalties apply to employers who fail to make timely FICA deposits or who fail to supply their federal taxpayer identification number

Question 3

T/F: The Federal Unemployment Tax Act (FUTA) establishes a state-run system of insurance to provide income to workers who have lost their jobs

Answer 3

True; although FUTA provides federal guidelines, the states actually administer the program, set standards, and determine payments

all employers who have quarterly payrolls of at least $1,500 or who employ at least one person for 20 weeks in a year must participate in the system; unlike FICA, self-employed persons do not participate

Question 4

T/F: unemployment taxes are payroll taxes generally assessed only against the employer

Answer 4

True; tax rate is 6% on the first $7k/yr for each employee, but the employer can get a credit against the federal tax due for payments made on account of state unemployment taxes of up to 5.4% of the first $7k/yr for each employee

it can be deducted as an ordinary business expense by the employer and is only available to employees when their job termination is not their fault

Question 5

T/F: workers’ compensation programs are state run programs designed to enable employees to recover for injuries incurred while on the job

Answer 5

True; in most states, coverage is compulsory; employers are strictly liable regardless of fault (employee can be negligent, grossly negligent, or assumed the risk); the only requirement is that the employee’s injury occurred while acting in the scope of employment

Question 6

T/F: the employer pays for workers’ comp by purchasing insurance from the state or a private carrier

Answer 6

True; it is deemed an ordinary business expense and is deductible by the employer; most employers must participate in workers’ comp programs but some exceptions are temps and independent contractors

it provides benefits for any injury or disease (including aggravation of an existing disease) resulting from employment…benefits include money for loss of income, disability, loss of limbs, prosthetic devices, medical services, burial costs, and survivors’ benefits

Question 7

T/F: the purpose of the Affordable Care Act (ACA) is to improve access to healthcare in the U.S. by providing workers with affordable healthcare coverage

Answer 7

True; both employers and employees are required to participate and both contribute to the purchase of affordable coverage

the ACA does not create a national health insurance plan, rather, it sets national standards for how health insurance is structured and priced, and places new requirements on individuals and employers; because purchasing coverage is mandatory, the ACA makes it illegal for an insurer to deny coverage to individuals with preexisting conditions or to charge more for their coverage

Question 8

T/F: under the ACA, employers with 50+ full-time employees are called applicable large employers (ALEs)

Answer 8

True; they are required to provide full-time employees the opportunity to purchase affordable minimum essential healthcare coverage for themselves and their dependents under an eligible employer-sponsored healthcare plan

the ACA comes with an “individual mandate” requiring all Americans to buy health coverage; a penalty used to be imposed on those who failed to purchase coverage, but it has since been removed; for low-income individuals, the federal government subsidizes the cost through a tax rebate, even if the individual paid no income taxes; employees who have minimum essential coverage will report this fact on their tax return each year