Non discrimination Requirements

Question 1

The maximum compensation rules under IRC 401 (a) (17) do not apply to employer matching contributions
True
False

Answer 1

False
IRC 401 (a) (17) compensation limits apply to an ERISA 403(b) plan. This includes the determination of matching contributions and non elective contributions

Question 2

If a 403(b) plan fails the ACP test, then an employer can avoid a 10% penalty tax if the excess amounts are returned to the HCEs by 2 1/2 months after the end of the following plan year.
True
False

Answer 2

True
The general correction period to avoid the additional 10% tax for distributing excess aggregate contributions is 2 1/2 months after the end of the plan year. Certain Eligible Automatic Contribution Arrangements may have 6 months, instead of 2 1/2 months

Question 3

QCCOs are subject to non discrimination rules
True
False

Answer 3

False
Non discrimination rules do not apply to QCCOs

Question 4

An ACP safe harbor plan design is permitted in a 403(b) plan but not in a 401(k) plan
True
False

Answer 4

False
There is no ADP test in a 403(b) plan, there is no need for an ADP test safe harbor. But, matching contributions in a 403(b) plan or 401(k) plan are subject to an ACP test and can therefore use the ACP safe harbor provisions

Question 5

If a 401(k) plan or 403(b) plan includes matching contributions, then ACP testing is required unless the ACP test safe harbor provisions are used
True
False

Answer 5

True
ERISA 401(k) and 403(b) plans which provide for matching contributions are subject to the ACP test unless the ACP test safe harbor provision is used

Question 6

Which of the following statements regarding the controlled group rules for tax-exempt organizations is NOT true
a. A director is “controlled” by another organization if the organization has the power to remove such director and designate anew director
b. Generally, two or more tax exempt organizations will form a controlled group if 80% or more of the directors or trustees of each organization are also controlled by the other organization
c. Controlled group rules are applicable when determining IRC 415 limits
d. Two tax-exempt organizations may only be permissibly aggregated if they satisfy the common control test

Answer 6

Two tax-exempt organizations may be permissively aggregated if the organizations regularly coordinate their daily activities with each other

Question 7

If contributions for a participant exceed the IRC 415 limitations, that participant’s contracts lose their IRC 403 (b) status
True
False

Answer 7

True
Unlike a qualified plan, an IRC 415 failure only effect the tax treatment to the individual, not to the entire plan

Question 8

No IRS fees are required when an employers uses SCP
True
False

Answer 8

True
The self-correction program SCP permits self correction without any payment of fees to the IRS

Question 9

Which of the following events is NOT a distributable event in a governmental 457 (b) plan?
a. Participant has 2 years of service with the employer
b. unforeseeable emergency
c. attainment of age 70 1/2
d. plan termination

Answer 9

Participant has 2 years of service with the employer
Governmental 457 (b) plans cannot permit distributions based on a stated number of years of service with the employer