415 HCE Limit Flashcards
What is the base 415 limit (including the minimum and when it applies + default exam condition)?
It is the lesser of the dollar limit and the high 3 year consecutive pay.
This cannot be less than 10,000 if employee was never covered under employer’s DC plan. Under default exam condition, the floor applies (employer never had another plan)
The 415 limit is reduced based on service. What is the service reduction and what service is used to reduce:
Dollar Limit
Comp Limit
$10,000 Min
The reduction is service / 10 * Limit
- Dollar - PTP service (i.e. since plan has been formed)
- Comp - Since Hire Date
- $10,000 Min - Since Hire Date
(Note: minimum of 1/10 is tested elsewhere)
When calculating a projected benefit, do you use future service to calculate the 415 limit reduction based on service?
Yes
T/F When reducing the 415 limit based on service, the service used must follow the same service used under the plan.
TRUE
What compensation (including limits if applicable) is used to calculate the 415 comp limit?
High 3 year average of total compensation (including pre-tax deferals) over all years at the company. Compensation is limited by 401(a)(17)
What plans are are exempt the 415 COMPENSATION limit?
Government Plans
Multiemployer Plans
Church Plans if ptp was never an HCE
What is the 415 DC Limit?
Limits the sum of employer, employee contributions and forfeitures to the lesser of 100% of comp, and a dollar limit ($57K for 2020)
T/F the 415 DC limit excludes rollover contributions and SEP contributions?
TRUE
When can you exclude pre-retirement mortality from the age adjustment of the 415 limit?
- If there is no forfeiture on death OR
2. the plan does not charge for a QPSA
When adjusting the 415 limit for age, what factors do you use?
Lesser of
- mandated (applicable mort, 5% interest)
- If plan defines SLA at 65/62 and annuity start date, then plan factors as well
How do you calculate the 415 age adjustment factor using plan factors.
Calculate A using SLA at age to adjust to.
Calculate B using SLA at age 65/62.
A ignores accruals after 65 and 415 limits
Adjustment factor is A/B
Trying to back into actuarial increase/decreases in the plan
If a plan only offers continued accruals after 65, what is the increase in the 415 limit for a ptp at age 70?
$0
You take the lesser of the mandated factors and the plan factors. The plan factor in this case will be 0.
If a plan does not define an SLA at age 62, how do you adjust the 415 limit for ptp below 62?
Use mandated mortality and 5% interest only
What parts of the 415 limit need to be adjusted for FOP?
Dollar limit, comp limit, and minimum.
The comp and dollar limit
T/F No adjustment is needed for FOP if the benefit is paid as a QJSA.
TRUE
If the normal form is not subject to 417(e), then how is the form of payment adjusted under 415.
The great of 1,2 must be less than 415 limit:
- SLA under plan basis
- SLA under applicable mort and 5% interest
If the normal form is subject to 417(e), then how is the form of payment adjusted under 415.
The greater of 1,2,3 must be less than 415 limit:
- SLA under plan basis
- SLA under 5.5% and 417(e) applicable mort
If plan has more than 100 employees that earn more than $5000:
3. SLA under applicable interest and mort, divided by 1.05
How do you reduce a benefit to satisfy the 415 limit?
Multiply the optional form by the (415 Limit/Plan benefit) on the SLA
When does the new 415 limit come out?
7/1
T/F A benefit can increase each year as the 415 limit rises each year.
True if that’s how plan doc is laid out.
T/F You can have specific language in in the plan doc to increase the comp limit in 415 by COLAs
TRUE
If you increase a ptp’s benefit each year by the 415 limit, can you build in 415 increases into the PV for funding?
No
If a ptp has 0 YOS, then is the dollar limit 0?
No - it is a minimum of 1/10 * dollar limit
How is 415 Comp calculated if there is less than 3 years?
Average is calculated with actual number of years in denominator
How is 415 hi 3 calculated upon rehire after break in service?
Calculated by ignoring the break years and treating years before and after break as consecutive. Can use average before and adjust up by COLA if higher.
