Module 4 Non-discrimination Tests Flashcards
Define the three primary non-discrimination terms
Controlled group of employers
Employees benefited under plan
ADP ACP test testing
To be controlled group of employers the company must be owned at at least 80% by a corporation
Comparing employees benefited under the plan, we compare the relative proportion of highly compensated and non-highly compensated employees who benefit from the plan
ADP testing - actual deferral percentage test
ACP test testing - actual contribution percentage test
What is the formula for non-discrimination testing between highly compensated and non-highly compensated employees?
The percentage of non-highly compensated employees divided by the percentage of highly compensated employees equals the ratio
In non-discrimination, testing what percentage of non-highly compensated employees passes the test
Must have 70% or more percent of non-highly compensated compared to highly compensated
What are the two ways that retirement plans can pass the non-discrimination test
Design based safe harbors = uniform contribution, benefits rate
General test
Section 410(b) the minimum coverage rule, test, for which of the following?
Whether or not the plans, contributions are non-discriminatory
Whether or not the plans coverage is non-discriminatory
Whether or not the plan has enough participants
Whether or not the plans benefits are non-discriminatory
The ADP test applies to, which of the following?
Money purchased plan contributions
Matching contributions that are not immediately invested
After tax contributions
Pretax contributions
Pretax contributions
Which of the following is an ADP safe harbor?
An employer matches 50% on NHCE salary deferrals up to 5%
An employer matches 25% on NHCE salary deferral up to 6%
An automatic 3% contribution is made for each NHCE
An automatic 5% contribution is made for each NHCE
An automatic 3% contribution is made for each NHCE
Which of the following is most accurate regarding the ADP ACP basic test
Allows an HCE to have contributions no more than 1.25 times the contributions of NHCE
Allows the HCE to have contributions up to five times the contributions of NHCE
Allows the HCE to have contributions of no more than the lesser of five times or five percentage points greater than the contributions of NHCE
Allows waiver of testing if automatic 6% company distribution for each NHCE is made
Allows an HCE to have contributions no more than 1.25 times the contributions of NHCE
What is the purpose of Social Security integration using the taxable wage base?
Employers can provide a greater federal retirement contribution to lower paid employees
Employers can provide comparable greater shares to older higher paid employees
Employees can make up the short fall for their portion of pay that exceeds the taxable wage base
Employees who are higher paid, can receive a disproportionately larger contribution than lower paid employees
Employees who are higher paid, can receive a disproportionately larger contribution than lower paid employees
