CEBS GBA 1 Exam Version 3 – Group Benefits
Certification Practice & Study Guide
What types of legal entities can sponsor Cafe plans? (Mod 10.2) - -- answer --Any
legal entity w/EE's subject to taxation. Self Employed 401(c), Sole Propr, Partners
and 2% greater shareholders in S Cor are ineligible but may sponsor Cafe Plan for
EEs.
Discuss EE's who would qualify as participants in a Cafe Plan (Mod 10.2) - --
answer --Includes former and present employees (includes Common Law EEs -
likely an EE if ER has control over what work is to be done and how it is done);
while former can participate, such a plan cannot be established solely to benefit
former EEs. Spouses and Dependents cannot participate but they can receive
benefits via family coverage. DOMA (Defense of Marriage Act) ruled same-sex
domestic spouse benefits receive same favorable tax treatment.
Explain restrictions of Self-Employed Individuals wishing to participate in a Cafe
Plan (Mod 10.2) - -- answer --Self-Employed cannot participate; however they
can sponsor for common law EE's and if a Spouse is a bona fide EE in their own
right and has no ownership interest, they can participate as an EE.
What is a salary reduction agreement in the context of a Cafe plan and what
makes it valid? (Mod 10.2) - -- answer --A salary reduction agreement is made
between and EE and ER - EE defers salary and avoids constructive receipt of
,compensation. In lieu of paying comp to the EE, the ER will contribute the same
amount agreed upon to the cost of certain benefits on a tax-favored basis. EE is
essentially buying benefits on a pre-tax basis without the monies being
considered received (not considered wages). Deferred sums not subject to
FICA/FUTA, but state and local taxes can apply.
To be valid, must be entered into b/w ER and EE prior to beginning of period of
coverage (plan year).
What is a negative election and what makes it valid? (Mod 10.3) - -- answer --
Automatic enrollment into a cafeteria plan benefit (no positive enrollment on the
part of the employee)
To be valid, EEs must receive reasonable notice of the automatic deferral and
have option to decline coverage each plan year.
What is an evergreen election in a Cafe Plan? (Mod 10.3) - -- answer --Participant
makes one-time election (typically at/around hire). This election stays in force
from plan year to plan year unless participant agrees to make a change during the
annual enrollment period.
ACA also imposes limitations on this option.
What is general rule on revoking benefit election during a coverage period and
what are some notable exceptions (Excluding Section 125 change in status rules)?
(Mod 10.3) - -- answer --In general, cafe plan participant cannot revoke an
election during the period of coverage unless it is attributable to occurrence of
certain permitted events (HIPAA sets forth rights):
-Loss of other health coverage (if waived)
,-If a person becomes a spouse or dependent of an EE through birth, marriage or
adoption.
If one of those two conditions occur, can revoke and make new election.
If HSA contributions are made through salary reduction in a Cafe Plan, can make
changes at anytime during plan year.
Discuss pre-ACA special change in status rules (Mod 10.3) - -- answer --Apply to
accident and health coverages, dep care expenses, group life or adoption asst if
change is consistent (on account of or corresponds with a change-in-status event
that affects eligibility for coverage; prospective basis only) with the change-in-
status.
-Legal marital status
-Number of dependents
-Employment status
-Place of work/residence
-Dependent satisfies (or ceases)
-Commencement or termination of adoption
Discuss post-ACA special events which an EE can revoke cafe election midyear
(Mod 10.3) - -- answer --In 2014, IRS expanded events that allow for revoking
Cafe Election:
-Reduction in hours (even if reduction does not result in loss of benefits); only
permitted if participant receives ACA min essential coverage within a certain
period
-If EE qualifies for enrollment on ACA Exchange
, What changes to Cafe Plan can be made by an EE taking FMLA? Uniformed
Service? Heroes Earnings? (Mod 10.3) - -- answer --FMLA: Must be allowed to
revoke an existing election for all health coverage for remainder of coverage
period. May revoke non-health benefits only under same rules that apply to those
taking non-FMLA leave. Can choose to be reinstated when they return
USERRA: May elect to continue participation during leave. Amounts previously
deferred may be paid in a single lump sum at the beginning of year or beginning
of expected LOA or monthly.
HEART: Enhanced USERRA protections. Permits EEs called to active duty to receive
a distribution of unused balance of FSA.
What is FSA? What requirements need to be met to qualify for special tax
treatment? (Mod 10.4) - -- answer --Flexible Spending Account: meets
requirements under IRC Section 105. If in a Cafe plan, additional requirements.
-For Tax Treatment, must meet IRC Sec 105/106 that apply to all accident/health
plans as well as IRC 125.
-Must exhibit risk shifting/distribution characteristics of medical insurance.
-Participants must be reimbursed specifically for medical expenses they have
already incurred during coverage period (cannot be less than 1 yr)
-FSA cannot eliminate all risk of loss to ER
-Plan document must set forth maximum contribution by the ER
-Before reimbursement, independent 3rd party must substantiate the claim
(insurance co)
-Unused funds in excess of $500 may not be refunded to the participants; up to
$500 can be carried over to the following yr
What alternatives do ERs have regarding forfeited funds in an FSA? (Mod 10.4) - --
answer --Become property of ER:
Certification Practice & Study Guide
What types of legal entities can sponsor Cafe plans? (Mod 10.2) - -- answer --Any
legal entity w/EE's subject to taxation. Self Employed 401(c), Sole Propr, Partners
and 2% greater shareholders in S Cor are ineligible but may sponsor Cafe Plan for
EEs.
Discuss EE's who would qualify as participants in a Cafe Plan (Mod 10.2) - --
answer --Includes former and present employees (includes Common Law EEs -
likely an EE if ER has control over what work is to be done and how it is done);
while former can participate, such a plan cannot be established solely to benefit
former EEs. Spouses and Dependents cannot participate but they can receive
benefits via family coverage. DOMA (Defense of Marriage Act) ruled same-sex
domestic spouse benefits receive same favorable tax treatment.
Explain restrictions of Self-Employed Individuals wishing to participate in a Cafe
Plan (Mod 10.2) - -- answer --Self-Employed cannot participate; however they
can sponsor for common law EE's and if a Spouse is a bona fide EE in their own
right and has no ownership interest, they can participate as an EE.
What is a salary reduction agreement in the context of a Cafe plan and what
makes it valid? (Mod 10.2) - -- answer --A salary reduction agreement is made
between and EE and ER - EE defers salary and avoids constructive receipt of
,compensation. In lieu of paying comp to the EE, the ER will contribute the same
amount agreed upon to the cost of certain benefits on a tax-favored basis. EE is
essentially buying benefits on a pre-tax basis without the monies being
considered received (not considered wages). Deferred sums not subject to
FICA/FUTA, but state and local taxes can apply.
To be valid, must be entered into b/w ER and EE prior to beginning of period of
coverage (plan year).
What is a negative election and what makes it valid? (Mod 10.3) - -- answer --
Automatic enrollment into a cafeteria plan benefit (no positive enrollment on the
part of the employee)
To be valid, EEs must receive reasonable notice of the automatic deferral and
have option to decline coverage each plan year.
What is an evergreen election in a Cafe Plan? (Mod 10.3) - -- answer --Participant
makes one-time election (typically at/around hire). This election stays in force
from plan year to plan year unless participant agrees to make a change during the
annual enrollment period.
ACA also imposes limitations on this option.
What is general rule on revoking benefit election during a coverage period and
what are some notable exceptions (Excluding Section 125 change in status rules)?
(Mod 10.3) - -- answer --In general, cafe plan participant cannot revoke an
election during the period of coverage unless it is attributable to occurrence of
certain permitted events (HIPAA sets forth rights):
-Loss of other health coverage (if waived)
,-If a person becomes a spouse or dependent of an EE through birth, marriage or
adoption.
If one of those two conditions occur, can revoke and make new election.
If HSA contributions are made through salary reduction in a Cafe Plan, can make
changes at anytime during plan year.
Discuss pre-ACA special change in status rules (Mod 10.3) - -- answer --Apply to
accident and health coverages, dep care expenses, group life or adoption asst if
change is consistent (on account of or corresponds with a change-in-status event
that affects eligibility for coverage; prospective basis only) with the change-in-
status.
-Legal marital status
-Number of dependents
-Employment status
-Place of work/residence
-Dependent satisfies (or ceases)
-Commencement or termination of adoption
Discuss post-ACA special events which an EE can revoke cafe election midyear
(Mod 10.3) - -- answer --In 2014, IRS expanded events that allow for revoking
Cafe Election:
-Reduction in hours (even if reduction does not result in loss of benefits); only
permitted if participant receives ACA min essential coverage within a certain
period
-If EE qualifies for enrollment on ACA Exchange
, What changes to Cafe Plan can be made by an EE taking FMLA? Uniformed
Service? Heroes Earnings? (Mod 10.3) - -- answer --FMLA: Must be allowed to
revoke an existing election for all health coverage for remainder of coverage
period. May revoke non-health benefits only under same rules that apply to those
taking non-FMLA leave. Can choose to be reinstated when they return
USERRA: May elect to continue participation during leave. Amounts previously
deferred may be paid in a single lump sum at the beginning of year or beginning
of expected LOA or monthly.
HEART: Enhanced USERRA protections. Permits EEs called to active duty to receive
a distribution of unused balance of FSA.
What is FSA? What requirements need to be met to qualify for special tax
treatment? (Mod 10.4) - -- answer --Flexible Spending Account: meets
requirements under IRC Section 105. If in a Cafe plan, additional requirements.
-For Tax Treatment, must meet IRC Sec 105/106 that apply to all accident/health
plans as well as IRC 125.
-Must exhibit risk shifting/distribution characteristics of medical insurance.
-Participants must be reimbursed specifically for medical expenses they have
already incurred during coverage period (cannot be less than 1 yr)
-FSA cannot eliminate all risk of loss to ER
-Plan document must set forth maximum contribution by the ER
-Before reimbursement, independent 3rd party must substantiate the claim
(insurance co)
-Unused funds in excess of $500 may not be refunded to the participants; up to
$500 can be carried over to the following yr
What alternatives do ERs have regarding forfeited funds in an FSA? (Mod 10.4) - --
answer --Become property of ER:
