Plan Options for Tax Exempt and Governmental Employers Flashcards
Which of the following types of contributions cannot be made to a 403 (b) plan?
a. after tax employee contributions
b. age 50 catch-up contributions
c. rollovers
d. 10 year of service catch-up contributions
10 year of service catch-up contributions
There is no 10 year of service catch-up contribution. Rather there is a 15 year of service contribution
Based on the following information determine the maximum elective deferral that the participant can contribute to the hospital’s 403 (b) plan for 2020
* ph worked full time for 22 years
* ph is age 55, includible comp is $85,000
* elective deferrals to date $95,000
*14,000 of the $95,000 was used for the 15 year catch-up
*IRC 402 g limit is 19,500. age 50 catch-up is 6,500
* Hospital includes 50 and over and 15 year rule
a. 27 b. 28 c. 30 d. 35
27,000
The annual limit and a age 50 limit totals 26,000. The 15 year catch-up is the lesser of : 3,000 or 15,000 less amounts previously used for catch-up and 5000 X years with the employer less prior deferrals. The lesser amount is 1,000 (15,000-14,000 previously used) so the overall limit i is 1,000+ 26,000 =27,000
Which of the following statements regarding includible compensation in a 403(b) plan is NOT true?
a. includes elective deferrals made to a 403 (b) plan of the employer
b. includes elective deferrals made to a 457(b) plan of the employer
c. is used when calculating a participant’s IRC 415 (c) limit
d. includes retire incentive payments
retirement incentive payments
Retirement incentive payments are not part of includible compensation
Employees may make elective deferral contributions into their 403(b) accounts from amounts received after their severance from service including early retirement incentive pay.
True
False
False
Employees may make elective deferral contributions into their 403 (b) accounts from amounts received after their severance from service (termination pay) which are attributable to: unused sick leave, vacation pay, per diem, paid time off benefits as well as any job performance pay (bonuses) that the employee would have received if they stayed. Elective deferrals cannot be made from types of pay if they leave such as early retirement incentive pay, or pay to buyout individually negotiated contracts
Which of the following statements regarding 403(b) plan salary reduction agreements (SRA) is NOT true?
a. Many 403(b) providers have model SRAs that may be used by employers
b. The IRC requires the SRA be in writing
c. An SRA will remain in effect until the participant revokes or amends the SRA.
d. If an employer permits Roth 403(b) contributions, the SRA must include the option of making pre-tax elective deferrals or designated Roth contributions
The IRC requires that an SRA be in writing
The IRC does not require that a SRA be in writing however it is common practice for employers to require a written agreeement
Which of the following statements regarding 403(b) salary reduction agreements is NOT true?
a. Participants do not need to designate on the SRA whether the elective deferrals will be made pre tax or as designated Roth contributions; this election can be made at year end
b. Employers must permit participants to change their SRA elections at least once per year
c. SRAs allow participants to make elective deferrals from amounts received after severance from service which are attributable to unused sick leave or vacation pay that would have been received had they remained employed
d. SRAs are only applicable to amounts before they are paid or made available
Participants do not need to designate on the SRA whether the elective deferral will be made pre tax or as a designated Roth contribution
Participants must designate whether their contributions will be pre-tax elective deferrals or designated Roth contributions upon completion of their SRA
The Department of Labor (DOL) safe harbor to deposit deferrals to a small plan less than 100 participants is how many business days after the amounts are withheld?
a. 5
b. 7
c. 15
d. 30
7
The safe harbor deadline for a small employer less than 100 employees to deposit elective deferrals is the 7th business day after the amounts are withheld from pay
Which of the following statements regarding vesting rules under ERISA is NOT true?
a. a participant that is fully vested has a non-forfeitable right to 100% of his or her account balance
b. an employer may use a vesting schedule that is more liberal than the statutory schedules required under ERISA
c. An employer may use a graded vesting schedule for designated Roth contributions made to a 403(b) plan
d. A participant is always fully vested in his contributions
An employer may use a graded-vesting schedule for designated Roth contributions made to a 403(b)
Designated Roth contributions and pre-tax elective deferrals must be immediately vested at 100%
Which of the following statement regarding forfeitures under ERISA is NOT true?
a. Forfeitures occur when a participant terminates employment before his or her employer contributions accounts are fully vested
b. Forefeiture may not be used to provide additional allocations to HCEs
c. A participant who has reached NRA ( as defined in the plan document) will not forfeit any portion of his or her account balance upon termination of employment
d. Forfeiture allocations are included in a participant’s annual addition calculation
Forfeitures may not be used to provide additional allocations to HCEs.
Forfeitures may be allocated to HCEs and NHCEs as long as they are allocated in a non discriminatory manner
Employee payroll taxes, included social security and Medicare, must be withheld on both pre-tax and after-tax employee contributions, even if the salary reduction contributions are mandatory.
True
False
True
For employee pre-tax contributions made to traditional 403(b) plans, federal income tax and most state’s income tax is not withheld. Employee payroll taxes including social security and medicare must be withheld on both pre-tax and after tax employee contributions, even if the salary reduction contributions are mandatory
