CEBS GBA Exam 1 Advanced Practice
2026|2027 Questions and Answers
with Complete A+ Solutions 100%
Correct!!!
What is FSA? What requirements need to be met to qualify for special tax treatment? (Mod
10.4) - Correct 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) - Correct Answer
-Become property of ER:
-Retained by ER
-Used to reduce admin expenses of plan
-Returned to EEs (equally divide funds amongst all EEs, not just those with a balance)
-Reduce EE's required cost sharing amount
,-Give to charity
What is dependent care assistance plan? (Mod 10.4) - Correct Answer -Payment for services
that are considered to be employment-related expenses. i.e. Expenses incurred so that the
employee & their spouse can work.
What is the distinction between an Elective and Non-Elective Paid Time Off Option in a Cafe
Plan? (Mod 10.4) - Correct Answer -A Cafe Plan that includes PTO must include this distinction.
-Non-Elective: Days not subject to an election by the EE
-Elective: Days
What are legal adoption expenses in a Cafe Plan? (Mod 10.4) - Correct Answer -Reasonable and
necessary:
-Attorney Fees
-Travel Expenses
-Other Expenses related to adoption
maximum reimbursement level set per occurence
Define HSAs in a Cafe Plan (Mod 10.4) - Correct Answer -Health Savings Accounts;
EE owned trusts for reimbursement of medical expenses funded with EE, ER or both.
-For HDHPs only
,Explain the meaning of "Cash" in Sec 125 Plans (Mod 10.4) - Correct Answer -Term goes beyond
actual receipt of dollars.
Two conditions must be met:
-Benefit must be one not specifically prohibited by IRC Sec 125.
-Benefit must be provided on a taxable basis (participant can pay after tax or ER can pay and
report cost as taxable income to EE)
Cafe Plans are subject to coverage and nondiscrimination tests. Some apply to plan as a whole
while some apply to underlying benefits. Provide overview of each testing structure (Mod 10.5)
- Correct Answer -3 Overall Tests:
Eligibility Test: May not discriminate in favor of highly compensated EEs as the ability to
participate
-classification/length of services/participation test
-no EE required to complete more than 3 YOS
-defining highly comped EE (5% owner, or highly paid person - subjectively)
-Aug 2007 added benefits component determination to ensure benefits equally available to all
EEs
Contributions and Benefits Test: Plan must make contributions and benefits available on a non-
discriminatory basis and plan fails test if highly comped EEs select more nontaxable benefits
than non highly comped EEs
-Benefits component to determine if benefits/contributions are equally available to all EEs
-Utilization component: highly comped EEs are disproportionately using all benefits; uniformed
opportunity to elect benefits
, -If providing health benefits, not discriminatory if any contributions made on behalf of the EE
are equal to: 100% of cost of health under the plan of the majority of highly comped are
similarly situated; 75% of the cost of most expensive benefits elected by any similarly situated
participant
Key EE Concentration Test: Plan's Key EE contributions cannot exceed 25% of the total
contributions into the plan.
-Key EE: Officer earning $175,000+, 5% Owner or 1% Owner Earning $150,000+
-Test is based on level of coverage as opposed to level of reimbursements
What happens if a Cafe Plan fails to pass nondiscrimination testing? (Mod 10.5) - Correct
Answer -Highly Comped and Key EEs will be taxed based on the value of their benefits. No
Negative tax consequences for other EEs.
CBA does not favor highly comped, not subject to testing.
What underlying benefits do nondiscrimination testing apply to in a Cafe Plan? (Mod 10.5) -
Correct Answer --FSA
-Dependent Care Assistance
-Group Term Life
-HSA
ACA created "Simple Cafeteria Plans." In what ways are these different? (Mod 10.5) - Correct
Answer -For eligible small Employers; must be designed with specific eligibility/contribution
requirements. In exchange, plans are example from non-discrimination testing.
2026|2027 Questions and Answers
with Complete A+ Solutions 100%
Correct!!!
What is FSA? What requirements need to be met to qualify for special tax treatment? (Mod
10.4) - Correct 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) - Correct Answer
-Become property of ER:
-Retained by ER
-Used to reduce admin expenses of plan
-Returned to EEs (equally divide funds amongst all EEs, not just those with a balance)
-Reduce EE's required cost sharing amount
,-Give to charity
What is dependent care assistance plan? (Mod 10.4) - Correct Answer -Payment for services
that are considered to be employment-related expenses. i.e. Expenses incurred so that the
employee & their spouse can work.
What is the distinction between an Elective and Non-Elective Paid Time Off Option in a Cafe
Plan? (Mod 10.4) - Correct Answer -A Cafe Plan that includes PTO must include this distinction.
-Non-Elective: Days not subject to an election by the EE
-Elective: Days
What are legal adoption expenses in a Cafe Plan? (Mod 10.4) - Correct Answer -Reasonable and
necessary:
-Attorney Fees
-Travel Expenses
-Other Expenses related to adoption
maximum reimbursement level set per occurence
Define HSAs in a Cafe Plan (Mod 10.4) - Correct Answer -Health Savings Accounts;
EE owned trusts for reimbursement of medical expenses funded with EE, ER or both.
-For HDHPs only
,Explain the meaning of "Cash" in Sec 125 Plans (Mod 10.4) - Correct Answer -Term goes beyond
actual receipt of dollars.
Two conditions must be met:
-Benefit must be one not specifically prohibited by IRC Sec 125.
-Benefit must be provided on a taxable basis (participant can pay after tax or ER can pay and
report cost as taxable income to EE)
Cafe Plans are subject to coverage and nondiscrimination tests. Some apply to plan as a whole
while some apply to underlying benefits. Provide overview of each testing structure (Mod 10.5)
- Correct Answer -3 Overall Tests:
Eligibility Test: May not discriminate in favor of highly compensated EEs as the ability to
participate
-classification/length of services/participation test
-no EE required to complete more than 3 YOS
-defining highly comped EE (5% owner, or highly paid person - subjectively)
-Aug 2007 added benefits component determination to ensure benefits equally available to all
EEs
Contributions and Benefits Test: Plan must make contributions and benefits available on a non-
discriminatory basis and plan fails test if highly comped EEs select more nontaxable benefits
than non highly comped EEs
-Benefits component to determine if benefits/contributions are equally available to all EEs
-Utilization component: highly comped EEs are disproportionately using all benefits; uniformed
opportunity to elect benefits
, -If providing health benefits, not discriminatory if any contributions made on behalf of the EE
are equal to: 100% of cost of health under the plan of the majority of highly comped are
similarly situated; 75% of the cost of most expensive benefits elected by any similarly situated
participant
Key EE Concentration Test: Plan's Key EE contributions cannot exceed 25% of the total
contributions into the plan.
-Key EE: Officer earning $175,000+, 5% Owner or 1% Owner Earning $150,000+
-Test is based on level of coverage as opposed to level of reimbursements
What happens if a Cafe Plan fails to pass nondiscrimination testing? (Mod 10.5) - Correct
Answer -Highly Comped and Key EEs will be taxed based on the value of their benefits. No
Negative tax consequences for other EEs.
CBA does not favor highly comped, not subject to testing.
What underlying benefits do nondiscrimination testing apply to in a Cafe Plan? (Mod 10.5) -
Correct Answer --FSA
-Dependent Care Assistance
-Group Term Life
-HSA
ACA created "Simple Cafeteria Plans." In what ways are these different? (Mod 10.5) - Correct
Answer -For eligible small Employers; must be designed with specific eligibility/contribution
requirements. In exchange, plans are example from non-discrimination testing.
