Chapter 1

Question 1

What is the most common type of Retirement Plan?

Answer 1

Single employer plans

Question 2

When was the pool employer Plan launched?

Answer 2

Plan your starting after 12/31/2020

Question 3

What is the name of a company that receives employment from leased employees?

Answer 3

A recipient

Question 4

It was common for recipient companies to do what to their employees prior to stricter regulations concerning leased employees?

Answer 4

They would fire all of their regular employees and then lease them back to themselves.

They would then set up benefit plans for the remaining owners and executives in the business

Question 5

What is the definition of a multiple employer plan (MEP)?

Answer 5

It is a plan that is adopted by two or more employers where at least two of the participating employers are not members of the same related group.

Question 6

What internal revenue code section applies to MEP plans?

Answer 6

413C

Question 7

To create a closed MEP, what does ERISA require of the employers?

Answer 7

The MEP be maintained by a bona fide group or association of employers

Question 8

And open MEP is defined as:

Answer 8

A plan maintained by employers that do not have a common bond or Nexus

Question 9

If a MEP is not set up as a PEP then what are the two primary barriers it faces in maintenance?

Answer 9

The one bad Apple rule

Separate 5500s (and applicable audits when required) for each employer

Question 10

What is the technical name for the one bad apple rule?

Answer 10

The unified plan rule

Question 11

In a MEP, under the unified plan rule, if one participating employer has a compliance problem the Department of labor could disqualify the entire plan, true or false?

Answer 11

True– the IRS could disqualify the entire plan if there was a compliance problem with even just one employer

Question 12

Does the unified Plan rule/one bad rule apply to PEP’s?

Answer 12

No

Question 13

If there is not a sufficient connection between employers that have an adopted 401(k) plan via an MEP, this causes an issue between the IRC and ERISA governance of the plan. What is impacted?

Answer 13

The IRC generally treats the MEP as a single plan

ERISA does not treat as a single plan and then therefore requires form 5500 filings from each participating employer

Question 14

What agency provides information as to whether there is a sufficient connection between adopting employers?

Answer 14

The Department of labor

Question 15

A PEP is treated by ERISA as a single plan, true or false?

Answer 15

True, and as a result will file only one form 5500 filing with an attachment that contains the list of participating employers and a good faith estimate of the amount of assets.

Additionally, there is no unified plan rule applied as well

Question 16

What requirements must be met by an MEP to make it a PEP? (There are eight criteria).

Answer 16

1) designate PPP fiduciary
2) name an investment fiduciary
3) name the asset custodian a fiduciary
4) name the employer a fiduciary
5) no unreasonable, restrictions fees or penalties
6) PPP provides disclosures
7) actions required by IRC and ERISA must be taken
8) ensure only reasonable costs are imposed on PPP’s and participating employers

Question 17

Service with all of the employers in a PEP is counted in determining an employee’s eligibility, true or false?

Answer 17

True

Question 18

What is the exclusive benefit rule?

Answer 18

Employer contributions must be made for the sole benefit of its employees and former employees

Question 19

How does the PEP allow contributions and forfeitures to be handled as to not violate the exclusive benefit rule?

Answer 19

This permits, the allocation of contributions and forfeitures across company lines without violating the rule

Question 20

Vesting is the one measurement area that is not shared across company lines in a PEP, true or false?

Answer 20

False, unrelated participating employers are treated as if they constitute a single employer in service with all participating employers is counted

Question 21

How is the 415 limit managed in a multiple employer plan?

Answer 21

Benefits, contributions, and compensation from all employers must be aggregated

Question 22

If employers maintain separate plans is consideration given to shared employees with relationship to 415 limits?

Answer 22

415 limits would be separately determined for each employer because they’re not part of a related group, although 402G limits would still apply and an employee could not exceed the annual limit set for the 402G limit between all employers

Question 23

What must the PEP’s Form 5500 include?

Answer 23

An attachment that contains the following:

1) a list of each employers percentage of contributions during the plan year
2) contributions include both employer and participant contributions

Question 24

A 413 C allows employers in a MEP including PEP’s to be treated as a single employer, does this also extend to non-discrimination testing?

Answer 24

No, it does not.

Question 25

What testing inside of an MEP or PEP is treated as separate Plan testing?

Answer 25

Coverage Non-discrimination Top heavy testing

Question 26

Under what two IRC codes is funding in a multiple employer pension plans determined as if each is participating in a separate plan?

Answer 26

412 and 430

Question 27

Funding requirements in a multiple employer pension plan are determined as if each participating employer: Exceptions exist for plans ;

Answer 27

Participated in a separate plan Established before January 1, 1989 These plans are treated as if contributions were made by a single employer

Question 28

What is a major consideration in joining a PEP?

Answer 28

Economies of scale

Question 29

Does it make sense for a business that doesn’t have defined common ownership to participate in a pep?

Answer 29

Absolutely. In fact, it’s a great reason to participate.

Question 30

Imagine being an employer in an industry where you have employees that shift from your company to others in the same industry. Does a PEP make sense in that perspective and if yes, how so?

Answer 30

Yes, It provides employees with uninterrupted career long retirement benefits, which can help with recruiting efforts

Question 31

Why would a PEO or professional employer organization need to adopt a multiple employer plan?

Answer 31

To avoid an exclusive benefit rule violation if the PEO turns out not to be the common law employer of the employees

Question 32

What happens if a PEO and the recipient organization adopt a 401(k) plan as a multiple employer plan?

Answer 32

The plan can appropriately cover employees, regardless of which entity is the common law employer

Question 33

Can separate employers coordinate provisions in their separate plans rather than using a multiple employer plan approach? If yes, then what would that look like?

Answer 33

Each plan might credit service for vesting with other employers. Same with eligibility and benefit accrual purposes. Plans could arrange for a transfer of benefits from one plan to another when employee is transferred between employers

Question 34

A multi employer plan is one that is made pursuant to:

Answer 34

One or more collective bargaining agreements in which one or more employer is required to contribute

Question 35

Who releases exam guidelines for multiemployer plans?

Answer 35

The IRS

Question 36

Section 302C5 of the Taft-Hartley act requires a multi employer plan to have what?

Answer 36

A joint board of trustees comprised of union, representatives, and employer representatives

Question 37

Can preapproved plan procedures, accommodate multi employer plans?

Answer 37

No, they are always individually designed

Question 38

413 B allows participating in employers in a multi employer plan:

Answer 38

To be treated as a single employer for certain purposes

Question 39

Participation in a multi employer plan under IRC410 does what?

Answer 39

Considers all employees of each employer party to the collective bargaining agreement, and who are subject to the same allocation formula under the plan as if they are a single employer

Question 40

A multi employer plan must apply what two requirements under IRC 410 a and what requirement under 410 B?

Answer 40

A: minimum age and service requirements Be: minimum coverage requirements

Question 41

A plan that covers only union employees is deemed to fail coverage rules per IRC 410 B, true or false?

Answer 41

False

Question 42

If a multi employer plan also includes non-union employees what has to happen for coverage test testing?

Answer 42

The portion of the plan covering nonunion employees is disaggregated from the portion covering the union employees. Then the portion covering the non-union employees must be tested for coverage. The portion covering the union employees is deemed to pass automatically

Question 43

Like 410 an and 410 B, 40184 applies to non-discrimination testing in a multi employer plan how? (participants are subject to same allocation formula and employed by employers who are party to the collective bargaining agreement)

Answer 43

Non-discrimination testing is handled as if it was done by single employer

Question 44

Does a plan that covers union and non-union employees automatically pass non-discrimination rules of IRC 401A4?

Answer 44

No, only if the plan covers union employees alone Non-union employees would be disaggregated from the test and have to be individually tested

Question 45

Does the exclusive benefit rule in a multi employer plan apply?

Answer 45

It does, but all Plan participants are considered to be employees and by virtue of IRC 401 a will be deemed to pass

Question 46

How is vesting handled in a multi employer pension plan? what IRC code is considered?

Answer 46

IRC 411 This treated like it’s all a single employer, except for any break-in service rules

Question 47

Funding & deduction standards in a multi employer plan happened under what IRC code?

Answer 47

412: minimum funding standard shall be determined as if all participants in the plan were employed by a single employer- same with deduction limits

Question 48

In a multi employer plan that’s actually a defined contribution plan what happens with the IRC 415 C limit?

Answer 48

Compensation from all participating in employers is combined to determine the participants limit. Annual additions in the plan with respect to all participating employers is also combined

Question 49

How many 5500 filings are filed each year for a multi employer plan?

Answer 49

Just one regardless of the number of contributing employers

Question 50

Does a union employee that is covered in the top heavy multiemployer plan receive a corrective benefit?

Answer 50

No per IRC 416 B such an employee would not receive a contribution.

Question 51

What are the elements of a multi employer plan (defined by ERISA code 337) Four criteria

Answer 51

The plan must be established for a substantial business purpose More than one employer is required to contribute. Collective bargaining agreement in place satisfies other requirements of the DOL

Question 52

How does DOL reg 2510.3–37C define a substantial of business purpose in a multi employer plan?

Answer 52

1-maintained by a substantial number of unaffiliated employers and covers a substantial portion of the trade or industry 2- the plan provides benefits more closely to years within the trade than with a specific employer 3-the extent of which collective bargaining takes place 4-extent to which a single employer plan and the administrative burden would be greater than the multiemployer plan

Question 54

What are two conditions that may dictate whether a multiemployer pension plan makes sense?

Answer 54

High worker mobility or seasonal employment

Question 55

A leased employee is treated as a common law employee of the recipient or organization for whom they provide service, true or false?

Answer 55

False, but the least employee is treated under IRC 414n1 as an employee of the recipient for qualified plan purposes

Question 56

For an individual to be treated as a leased employee, the following conditions must be met:

Answer 56

The leasing organization is the common law employer. Services are provided under an agreement between leasing org and recipient Individual must provide provide services to the recipient on a substantially full-time basis. The recipient must have primary direction or control over the individual

Question 57

At least employee must be a common law employee of the leasing organization, true or false?

Answer 57

True

Question 58

If least employees constitute all or substantially all of the recipients workforce what question may arise?

Answer 58

Whether some or all of the least employees are actually the common law employees of the recipient

Question 59

What should a recipient do if they’re confused about whether or not least employees are actually common law employees of the recipient?

Answer 59

Get legal counsel

Question 60

What would happen if the purported leasing organization was not actually the common law employer of leased employees? What would that potentially do to the recipients plan?

Answer 60

Unless corrective steps are taken in accordance with revenue procedure 2002-21, the tax deferred status of those benefits are in jeopardy and it is not a qualified plan

Question 61

What would happen in the case that a lease employee is providing 401(k) benefits through the leasing organizations plan but it turns out they’re actually the common law employee of the recipient?

Answer 61

The leasing organization would be violating the exclusive benefit rule IRC 401a2

Question 62

Leasing agreements have to be in writing true or false?

Answer 62

False services must be performed under an agreement, but they can be written or informal

Question 63

What to find substantially full-time for at least one year? Why is it relevant?

Answer 63

1500 in a 12 month period Determines eligibility for the recipients 401(k)