Section 4 - Health, Accident, and Retirement Benefits

Question 1

What are the types of health care plans offered by employers to their employees?

Answer 1

Traditional Health Insurance Plan
Health Maintenance Organizations (HMO)
Preferred Provider Organization (PPO)

Question 2

What is the traditional health insurance plan?

Answer 2

The employer either purchases and insuracne policy from a third-party insurance carrier or self-insures and pays claims to employees or health care providers frrom it’s own insureance fund.

Question 3

What is HMO?

Answer 3

Health Maintenance Organizations

An HMO is a health care system that provides health care, but does not directly pay for it. The HMO provides these health care services on a prepaid basis with employers contributing to the plan.

Question 4

What are the 2 types of HMO?

Answer 4

• Traditional

- Individual Practice Association (IPA)

Question 5

What is Traditional HMO?

Answer 5

The HMO has its own healthcare facilities and patients have to go to the HMO’s facility for medical services.

Question 6

What is Individual Practice Association HMO?

Answer 6

Physicians sign up with a health care group and patients have the options of choosing their own physicians among those in the group.

Question 7

What is PPO?

Answer 7

Preferred Provider Organizations

Participants utilizing health care providers in the network (preferred providers) receive a higher level of benefits and lower out-of-pocket costs.

Participants who utilize health care providers outside the network typically have higher deductivles and co-payments.

Question 8

What is POS?

Answer 8

Point-of-Serivce plan

Employees and dependents can use non-HMO health care providers but deductibles and co-payments are applicable.

Question 9

What is PCP?

Answer 9

Primary Care Physician

a PCP must be selected from the network. The PCP acts as a gate keeper and oversees the deliver of all health care services.

Question 10

Are employer-paid premiums excludable from income?

Answer 10

Yes, generally contirbutions mdae by an employer to an accident or health insuracne plan providing insurance for ist employees and dependents are not wages are not subject to FIT, SS, Medicare, or FUTA taxes.

Question 11

Are employee’s contributions to insurance plans included in their income?

Answer 11

Yes, contributions made by employees from wages for welfare and insuracne plans must be included in their income for tax withholding and employment tax purposes.

Question 12

What is the PPACA?

Answer 12

Patient Protection and Affordable Care Act

Coverage of adult childre through age 26 (non-taxable benefit & pre-tax deductions)

Question 13

Are over-the-counter drugs covered by FSA/HRA/MSA?

Answer 13

Not unless a physician has written a prescription for it

Question 14

What is MSA?

Answer 14

Medical Savings Account

• for small employers
• health insurance plan must have high deductible
• MSA cannot be part of a 125 cafeteria plan

Question 15

What does COBRA stand for?

Answer 15

Consolidated Ominibus Budget Reconciliation Act

Question 16

What does the Consolidated Ominibus Budget Reconciliation Act of 1985 require?

Answer 16

Requires health plan sponsors to provide employes and their beneficiaries with the opportunity to elect contiued group health insurance for a given time period should their coverage be lost due to certain qualifying events.

Question 17

What is Long Term Care Insurance?

Answer 17

Generally treates as accident and health insurance contracts. Therefore, amounts received under such contracts are excluded from income as amounts received for personal injuries and sickness and reimbursements for medical expenses.

Question 18

What are COBRA qualifying events?

Answer 18

• employee’s termination (18 months of coverage)
• death (36 months of coverage)
• divore or separation (36 months of coverage)
• entitlement of coverd employee to Medicare benefits (36 months of coverage)
• dependent child losing status (36 months of coverage)
• Employer bankruptcy (36 months of coverage)

Question 19

What are COBRA premiums?

Answer 19

Employees and/or beneficiaries pay monthly premiums.

Employers can routinely require premiums of up to 102% of costs.

Question 20

What are the COBRA notification requirements?

Answer 20

Employers must advise employees of COBRA rights when they become first covered.

If event is death, termination, reduction in hours, Medicare emtitlement, or employer bankruptcy must notify w/ 30 days

If event is divorce, separation, or dependent child’s loss of stauts, must notify w/ 60 dyas.

Question 21

What are Health Reimbursement Arrangements?

Answer 21

Employer-provided health benefit (employee does not contribute), not par of a 125 cafeteria plan.

Employee is reimbursed by the employer for the employee’s and dependents medical care expenses up to a maximum.

Reimbursements are excluded from the employee’s gross income.

Question 22

What is a Health Savings Account?

Answer 22

HSAs are for individiuals with a high deductible health plan.

Contributions, up to a maimum, are excluded from the employee’s gross income.

Can be a part of a 125 cafeteria plan.

Question 23

What is FMLA?

Answer 23

Family and Medical Leave Act of 1993

FMLA guarnatees employees 12 weeks of unpaid leave in a year to be witha new born or newly adopted child, to take care of a seriously ill child, spouse or parent or to care for themselves if they are seriously ill.

Guarantees the continuation of the employee’s health benefits while on leave.

Question 24

When must an employer comply with FMLA?

Answer 24

Employers with 50 or more employees must comply with FMLA. If the employee is in a work place with fewer than 50 employees but there are 50 or more emaployees in a 75 miles radius, they must comply.

Question 25

Who is covered by FMLA?

Answer 25

For an employee to be covered:
Must have worked with the employer for at least 12 months (does not have to be consecutive)
Must have worked at least 1250 hours in the previous 12 months.

Question 26

How are benefit premiums taken care of during an FMLA leave?

Answer 26

The employee is responsible for paying premiums furing the leave.

• pre-pay: pay prior to leaving
• pay as you go: pay on same schedule
• catch up: employee must agree in advance to allow for the employee’s portion to be upon return

Question 27

Is your job guaranteed upon return from FMLA leave?

Answer 27

• employees returning from leave are entitled to their previous job or one that is “equivalent” with no loss of pay or benefits accruting before the leave.
• leave time, wether paid or unpaid, must be treated as continued service under pension and retirement plans for vesting a quailification purposes.

Question 28

What is Sick Pay?

Answer 28

Time provided so that employees will receive their regular salaries for brief absences from work due to illnes or injury.

Sick pay is taxable wages.

Question 29

What form is used to choose to have FIT withheld from sick pay?

Answer 29

W-4S

Question 30

What is Workers Compensation?

Answer 30

WC is a form of insurance employers are generally required to buy to insulate them against lawsuits brought by employees who are hurt or become ill while working.

Payments to an employee as workers’ compensation benefits are not included in an employee’s gross income and are not subject to any employment taxes.

Question 31

What are the Payroll Implications with Worker’s Comp Insurance?

Answer 31

• premium paymenst are based ont he type of business the employer engages in and the size of tis payroll
• Employers are assigned classification codes
• Each classification code is associated witha value for premium payments
• the value is multiplied by the employer’s total payroll

Question 32

What is FSA?

Answer 32

Flexible Spending Arrangements

• part of a 125 cafeteria plan
• pretax salary reduction funds the FSA
• use it or lose it during the plan year
• Health Care FSA maximum = $2500
• Dependent Care FSA maximum - $5000

Question 33

What is the tax treatment of health coverage & FSAs in 125/cafeteria plans?

Answer 33

• pre-tax (not subject to FIT, SS, Medicare)
• usually not subject to SIT
• not subject to FUTA/SUTA

Question 34

What is the tax treatment of MSAs and or long term care insurance?

Answer 34

• pre-tax (not subject to FIT, SS, Medicare)

Question 35

What is the tax treatment of 401K plans?

Answer 35

• pre-tax (not subject to FIT)
• usually not subject to SIT
• subject to SS and Medicare tax

Question 36

What is the tax treatment of pension and profit sharing plans?

Answer 36

• subject to FIT, SS and Medicare

Question 37

What can pension and profit-sharing plans be categorized as?

Answer 37

Defined Benefit Plan - designed to provide a certain level of benefits during the employee’s retirement that is general based on the employee’s age, compensation level and length of service.

Defined Contribution Plans - contain individual accounts for each employee, with a set amount being contributed by the employer.

Question 38

What is the pre-tax contribution limit for 401K for 2013?

Answer 38

$17,500

Question 39

What is the pre-tax catch-up contribution limit for 401K for 2013

Answer 39

for employees 50 years old or older, $5500

Question 40

What is the maximum employee plus employer contribution, before and after-tax, for 401K for 2013?

Answer 40

$51000