Question 1

What is the major limitation of a SIMPLE retirement plan?

Accepted Answer

The major limitation of a SIMPLE (Savings Incentive Match Plan for Employees) retirement plan is that it is limited to firms with 100 or fewer employees. This restricts larger businesses from taking advantage of this type of retirement savings plan.

Question 2

By what date must the value of all noncash beneﬁts be determined for the preceding year?

Accepted Answer

The value of all noncash benefits must be determined by January 31 for the preceding year. This allows for accurate reporting and compliance with tax regulations.

Question 3

Over ____ of U.S. employees report that fringe beneﬁts affect their choice of employers.

Accepted Answer

Over 50% of U.S. employees report that fringe benefits significantly influence their decision when choosing employers. This highlights the importance of non-salary benefits in attracting and retaining talent.

Question 4

As a general rule, when should the employer deposit money associated with employee beneﬁts?

Accepted Answer

When the benefit is made available, the employer should deposit money associated with employee benefits to ensure the funds are available for the intended purpose.

Question 5

Post-Tax Deductions are amounts ____.

Accepted Answer

Post-tax deductions include both mandatory deductions, such as garnishments and child support, and voluntary deductions, such as contributions to a Roth IRA or life insurance premiums that are deducted after taxes have been calculated.

Question 6

What options do employers have regarding taxable fringe benefits? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes
left with a question mark will be automatically graded as incorrect.)

Accepted Answer

Employers can add the value of taxable fringe benefits to an employee's W-2 either in one lump sum or spread out by adding the value to the employee's period pay and taxing it at that time. This ensures the benefits are properly reported and taxed according to IRS guidelines. Option B is not a standard practice for handling taxable fringe benefits, and option D incorrectly specifies a flat tax rate, which is not how fringe benefits are typically taxed.

Question 7

The reporting of employee benefits occurs on the ____ and the ____ . (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Accepted Answer

Employee benefits are reported on the Total Compensation Report, which provides a comprehensive overview of all compensation and benefits provided to an employee. They are also reported on Form W-2, which summarizes an employee's annual wages and the amount of taxes withheld from their paycheck.

Question 8

In which type of retirement plan does the company offer employees the ability to earn company stock for the duration of their employment?

Accepted Answer

ESOP (Employee Stock Ownership Plan) allows employees to earn company stock over time, providing them with ownership interest in the company.

Question 9

According to Consumer Credit Protection Act, what is a limit on the amount of a garnishment for consumer credit?

Accepted Answer

The Consumer Credit Protection Act limits the amount of an employee's earnings that can be garnished to no more than 25% of the employee's disposable income. This is to ensure that the employee retains enough income to meet basic living expenses.

Question 10

Retirement fund contributions are generally subject to ____ and ____ taxes.

Accepted Answer

Social Security and Medicare taxes are levied on retirement fund contributions.

Question 11

Which is the retirement plan used for a tax-favorable IRA set up by or for the employee, where the employer contributes the funds into the account?

Accepted Answer

SEP, or Simplified Employee Pension plan, allows employers to contribute to traditional IRAs (SEP-IRAs) set up for employees, offering a tax-favorable retirement savings option.

Question 12

The purpose of fringe beneﬁts is to ____.

Accepted Answer

Fringe benefits are provided to employees in addition to their regular salary or wages. They can be used to entice employee engagement, defer tax obligations, avoid cash outlays for employee benefits, and reduce taxable compensation.

Question 13

What is the difference between a deﬁned beneﬁt and a deﬁned contribution retirement plan?

Accepted Answer

Defined contribution plans, such as 401(k)s, allow employees to contribute a specific amount of their salary into their retirement plan, often with employer matching contributions. Defined benefit plans, on the other hand, promise a specific payout at retirement, typically based on salary and years of service, and do not involve employee contributions in the decision-making process.

Question 14

Under the ____ , beneﬁts offered only during the last two months of the calendar year may be treated as paid during the following calendar year.

Accepted Answer

The Special Accounting Rule allows benefits offered in the last two months of the calendar year to be treated as paid during the following calendar year for accounting purposes.

Question 15

Which of the following are examples of defined contribution plans? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Accepted Answer

The answer of Which of the following are examples of...

Question 16

Which of the following is an example of a post-tax mandated deduction? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Accepted Answer

The answer of Which of the following is an example...

Question 17

What differentiates 401(k) and a 403(b) retirement plans?

Accepted Answer

403(b) plans are typically offered by non-profit employers, such as schools, hospitals, and charitable organizations, whereas 401(k) plans are generally available to employees of for-profit companies.

Question 18

What is a limit on garnishments for nontax liens?

Accepted Answer

It may not exceed 15% of an employee's disposable income.

Question 19

Which of the following is true about 401(k) retirement plans?

Accepted Answer

401(k) contributions are generally subject to FICA taxes, which include Social Security and Medicare taxes.

Question 20

The ____ determines when beneﬁt amounts should be withheld from employee pay.

Accepted Answer

The employer determines when benefit amounts should be withheld from employee pay.

Quiz 4: Income Tax Withholding