QKA 2 Unit 2 HCEs Flashcards

1
Q

An HCE has to pass 1 of 2 tests to be considered an HCE. What are the tests?

A

5% Ownership Test, Compensation Test

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

The 5% ownership test states that at any point during the plan year or the prior plan year, where the employee owns or is________ more than 5% of the company, they are an HCE.

A

Attributed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Attribution goes up how many relationships? Attribution goes down how many relationships?

A

Up 2- from Grandchild to Grandparent

From parent to child

Spouse to spouse

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the look back year?

A

The 12 months period Prior to the current year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

If the calendar year election has been made regarding the look back year, then when does the measurement period start?

A

If the calendar year is elected for the look back year, then the measurement. Starts 1/1 of the prior calendar year, rather than the beginning of the plan year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Under what internal revenue code is attribution of a grandchild ownership attributed to a grandparent?

A

IRC 318

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is double attribution? And is it permitted?

A

It’s not permitted, but it would means that attribution is credited a second time from one person to the next.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the top paid group election?

A

It’s an election available that limits the number of HCE’s in a company to the top 20% of paid employees who were above the comp limit for the year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the four steps for determining the top paid group?

A

1) find the total number of employees
2) determine which employees can be excluded
3) multiply the remaining group by 20%
4) take the total number of employees that are HCEs by compensation and order them from greatest to least and apply to 20% number to that group.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How do you implement the top paid group election? When is it due by?

A

It must be listed in the plan document and elected by the last day of the plan being tested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are nonresident aliens

A

Employees who are non-resident aliens, and who receive no earned income from US sources

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

A spouse is generally attributed ownership, unless all the conditions in what code are satisfied?

A

1563(e)(5)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

A parent is always attributed ownership of a minor child, and is attributed to ownership of an adult child, who is 21 years or older only if:

A

The parent owns directly or by other attribution more than 50% of the company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Are siblings ever attributed ownership from other siblings?

A

No, they are not

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When is a grandparent attributed ownership of a grandchild?

A

Only if the grandparent owns directly or by other attribution, more than 50% of the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Is ownership in related organizations aggregated to determine if an employee satisfies the 5% ownership test?

A

It does not

17
Q

Is there attribution of stock between spouses if there is a legal separation under decree of divorce or separate maintenance?

A

There is not

18
Q

Is a legally adopted child treated as the individuals child for attribution purposes?

A

Yes they are

19
Q

Under IRC 318 a grandchild ownership interest is attributed to the grandparent. However, a grandparents ownership interested is what to the grandchild?

A

It’s not attributed

20
Q

Question is it considered double attribution if for example, an owner and their spouse have three children. Each child is attributed 100% ownership of the company?

A

That is not double attribution, that is correct attribution

21
Q

If the spouse of an owner is attributed ownership from their spouse, can that ownership also be attributed to a child?

A

No that would be double attribution

22
Q

If the child of a greater than 5% owner is attributed ownership by that virtue, does the spouse of the child receive attribution?

A

No that would be double attribution

23
Q

Is a plan allowed to use top paid group election for 401(k) deferral’s (ADP Test) but not for match (ACP Test)?

A

No top paid group election if used must be used consistently for ADP and ACP test

24
Q

The following employees are generally not counted or are excluded when calculating the Top Group: (4 answers)

A

1) EEs who have not completed 6 months by the end of the year
2) EEs who work less than 171/2 hrs per week
3) EEs who work less than 6 months per year
4) EEs younger than 21