Fundamental Payroll Certification (FPC) Practice Exam

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What does GTL stand for in a compensation context?

General Tax Liability
Group-term life insurance
Gross Taxable Liability
Group Taxation Law

The correct answer is: Group-term life insurance

In a compensation context, GTL refers to Group-term life insurance. This is a type of life insurance provided by employers to employees as part of their employee benefits package. Group-term life insurance is typically issued to a group of people, such as a company's employees, and provides a death benefit without requiring individual underwriting. The significance of group-term life insurance lies in its tax implications. Under the IRS regulations, the first $50,000 of coverage is generally tax-free to employees, while any amount above that may be considered taxable income. This highlights why understanding GTL is essential for payroll professionals; managing these benefits correctly can affect both the employer's payroll tax obligations and the employees' tax liabilities. The other choices highlight concepts that, while relevant to payroll and taxation, do not pertain specifically to the compensation aspect of life insurance benefits as GTL does.