Section 125 Plans Part 2 Flashcards
Module 10
According to tax law, what qualified benefits may be included within a cafeteria plan?
Employer-provided accident or health coverage under IRC Sections 105 and 106
Health, Medical, Hospitalization, Prescription, Over the counter drugs, dental and vision programs, disability insurance, and coverage under an accidental death and dismemberment policy.
What are additional qualified benefits that can be covered in a cafeteria plan?
Business travel, accident plans, hospital indemnity or cancer policies and Medicare supplements, short and long term disability
As of 2014, __________ _________ accident or health insurance policies may no longer be offered under a cafeteria plan.
Also, the plan may not reimburse the health insurance premiums under a health care FSA or reimburse policies maintained by _________ _________
Individually owned
Another employer
5 more qualified benefits included within a cafeteria plan
- Employer provided group term life insurance
- Employer provided dependent care assistance
- Employer provided adoption assistance
- 401(k)
- Contributions to a HSA
Are there any benefits available under a cafeteria plan that are taxable?
Cash
PTO
Group term life insurance in excess of $50,000
Which types of legal entities are eligible to sponsor cafeteria plans?
Any employer with employees who are subject to taxation under U.S. tax law is eligible to sponsor a cafeteria plan.
Self-employed individuals described in Section 401(c), including ________ __________, partners in a partnership, and ____ or greater shareholders in an S-corporation, are ineligible to participate in a cafeteria plan
- Sole proprietors
2. 2%
Who would qualify as eligible participants under an employer sponsored cafeteria plan?
Present and former employees
Common law employees
Leased employees described in section 414(m)
Full time life insurance salesmen
Employers provide automatic enrollment of their employees in certain benefits under a cafeteria plan.
Negative Election
In order for a negative election to be valid, employees must receive _________ ______ of the automatic deferral and have the option to decline coverage each plan year.
- Reasonable notice
A participant makes a one-time election. Once made, the election stays in effect from year-to-year until the participants changes it during open enrollment.
Evergreen election
A plan participant may not revoke a benefit election during the period of coverage unless the revocation is attributable to the occurrence of certain ________ __________.
Permitted events
HIPPA permits individuals to make mid-year benefit changes due to these reasons:
- Loss of other coverage
2. Person becomes a spouse or dependent of an employee through birth, marriage, adoption or placement for adoption
If a participant has a right to enroll in an employer’s group health plan or to add coverage for a family member under HIPAA, the participant can ________ an existing election and make a new election under the cafeteria plan that conforms with the special enrollment right.
Revoke
Acceptable change in status events include changes related to the following:
- Legal marital status
- Number of dependents
- Employment status
- Place of work or residence
- Cases where the dependent satisfies, or ceases to satisfy, the requirements for eligibility.
- Commencement or termination of an adoption proceeding for purposes of adoption assistance
Discuss the new post Affordable Care Act special events under which a participant may revoke his or her cafeteria plan in midyear
- Reduction of hours if individual receives coverage under another plan within certain stipulated period.
- If an employee qualifies for enrollment in the ACA Exchange under Special Enrollment Period and coverage commences within a certain stipulated period
Election changes must be made on a __________ basis only.
Prospective
A participant may choose to be _____________ in the plan upon return from FMLA leave on the same terms and conditions as were in force prior to the taking of FMLA leave.
- Reinstated
A participant who takes a leave of absence under ______ may elect to continue participation in the plan during leave of absence.
USERRA
The HEART Act allows plan sponsors to allow an employee called to active duty for a certain duration to receive a ____________ of the unused balance of his or her health care FSA
distribution
What is the maximum contribution limit towards FSA implemented by the Affordable Care Act
$2,550 (in 2016)
How much can a participant carry over into the following plan year towards their FSA?
$500
What is an experienced gain?
Money forfeited by employees under the use-it-or-lose-it provision
What can the employer do with experienced gain?
- Retain it
- Reduce admin expenses
- Return to employees
- Used to reduce employees required salary reduction amounts
A dependent care assistance plan offers participants the ability to pay for the first _______ of dependent care assistance on a tax free basis.
$5,000
To claim the expense as an exclusion from income, the participant must report to the plan administrator (dependent care):
Name
Address
Taxpayer ID number of dependent care provider
Expenses must be reported on employee’s Form W-2
Non-elective paid time is for those days that are not subject to:
An election by the employee
What are qualifying adoption expenses
Attorney fees
Travel expenses
Other expenses that are directly related to a legal adoption
What are the two conditions that must be met in order for a payment to be considered cash within a cafeteria plan
- The benefit must be one that is not specifically prohibited by the IRC Section 125
- The benefit must be provided on a taxable basis
What are the three general tests that apply to a cafeteria plan as a whole
- Eligibility test: The plan may not discriminate in favor of highly compensated individuals
- Contributions and benefits test: Plan must make contributions on a nondiscrimination basis
- Key employee concentration test: The plan’s key employee contributions cannot exceed 25% of the total contributions to the plan
