Intro to Qualified Plans (L1)

Question 1

Qualified Plan

Answer 1

Question 2

Pension VS Profit Sharing Plan

Answer 2

Question 3

Defined Benefit vs Defined Contribution

Answer 3

Question 4

Advantages to Qualified Plans

Answer 4

Question 5

Disadvantages of Qualified Plans

Answer 5

Question 6

Eligibility

Answer 6

Question 7

One Year of Service

Answer 7

= a 12 month period in which the EE works AT LEAST 1,000 hours

Question 8

Part Time EEs (Eligibility to Participate in a plan)

Answer 8

• Beginning of tax year after 12/31/2020, LONG-TERM part time EEs can make elective deferrals if: (all must be met)

    ○ Age 21 (at the end of the 3 consecutive years)   ○ EE worked at least 500 hours per year for 3 consecutive years

Question 9

Highly Compensated EE (need to know)

Answer 9

• More than 5% owner (of company stock or capital) at any time during the plan year or preceding plan year
• Compensation GREATER THAN $135,000 (on the tax tables)
• In the top 20% of paid EEs

Question 10

Coverage

Answer 10

Question 11

ADP Test

Answer 11

Question 12

ACP Test

Answer 12

Question 13

ADP Test (example)

Answer 13

Question 14

Defined Contribution Plan - VESTING

Answer 14

Question 15

Defined Benefit Plan - VESTING

Answer 15

Question 16

Top Heavy Plans

Answer 16

Question 17

Top Heavy Funding

Answer 17

• Defined Benefit Plan
  ○ Must be at least 2% * years of service * compensation factor
• Defined Contribution Plan
  ○ 3% minimum to all eligible EEs or LESS if less provided to the Key EEs

Question 18

Key Employees

Answer 18

Question 19

Controlled Groups (pg. 29-31)

Answer 19

• Parent-Subsidiary
  
  • Brother-Sister
  • Combined Group