Ch. 7 Qualified Plan Rules Flashcards
t/f: The ratio benefit test states that a qualified plan must cover a percentage of nonhighly compensated employees that is at least 70% of the percentage of highly compensated employees covered.
true
t/f: A top-heavy plan is one that provides more than 60% of its aggregate accrued benefits or account balances to key employees.
true
t/f: When applying coverage tests to evaluate the presence of discrimination in qualified plan offerings, an employer must include all employees, even those who have a collective bargaining agreement on retirement benefits.
false
A qualified plan must satisfy what 2 tests?
Ratio percentage test
participation test
For a defined contribution plan, annual additions include what?
employer contributions
employee salary reductions
plan forfeitures
Employee contribution must always be ____ vested
100%
Employer contribution must be vested under a ….
specified vesting schedule
Participation test must cover the lesser of
50 employees
OR
the greater of 40% or more of all employees or two employees, or if only one, that employee
Waiting period requirements
two year waiting period if plan provides immediate 100% vesting for all employees
Age and service
must be vested after on year of service (1,000 hours) or age 21, whichever is later
Defined benefit plan vesting
5 year or 3-7 yr vesting
Defined contribution plan
3 yr or 2-6yr vesting
Contributions must be made to an ____ or ____
irrevocable trust or insurance contract
What happens if it doesnt meet the minimum funding standards
subject to penalty
Profit-sharing plan contribution must meet what requirements
“substantial and recurring”
Defined benefit plan deductions are limited to the greater of what?
an amount actuarially determined under IRC section 401
OR
the amount required to meet minimum funding
Combined benefit and defined plan deductions are limited to the greater of what?
25% of compensation of all participants
OR
the amount required to meet minimum funding
Annual additions to each account cannot exceed the lessor of…
100% of participants annual comp
OR
$49,000
Only the first _____ of each employee’s annual compensation can be taken into account in a plan’s benefit or contribution formula
$245,000
Top heavy plan must provide
100% vesting after 3yrs or 6 yr graded
OR
min benefits or contributions for non HCE
What is a key employee?
Officer having annual comp greater than $160,000
owns more than 5% of co
OR
owned more than 1% and had annual comp of more than $150,000
No more than ___ employees can be treated as officers
50
