Regulatory Considerations Flashcards
1
Q
According to the IRS, what is a qualified plan?
A
- One that satisfies the IRC in both form and operations
- Meaning that the provisions in the plan document must satisfy the requirements of the IRC and that those plan provisions must be followed
2
Q
Who determines qualification status of retirement plans?
A
- IRS
3
Q
When can eligible employee participate in plan?
A
- On earlier of:
- First day of plan year beginning after employee has met elibility requirements OR
- Six months after employee satisfies eligiblity requirements
4
Q
Purpose of Nondiscrimination testing
A
- To ensure that benefits provided to HCE are proportional to benefits provided to NHCE
5
Q
Main advantages of qualified plans
A
- Tax-deductible for employer
- Employee contributions are pre-tax
- Tax-deferred
6
Q
When can a nonqualified plan be subject to ERISA and Department of Labor rules?
A
- When the nonqualified plan is open to general employee participation
7
Q
ADP Test is for what kind of qualified plan?
A
- CODA plans such as 401k
- Can be bypassed by electing safe harbor election
8
Q
Joint and survivor annuity requirement
A
- Designed to protect employee’s spouse
- IRS requires distributions from the plan to be made in the form of a joint and survivior annuity unless spouse waives this right
- Spouse’s benefit cannot be less than 50% of what was being paid while the joint people were alive
- Requirement does not apply to those plans that do not offer annuity options
9
Q
Joint and surivor annuity - most common percentages
A
- 100%, 66 2/3%, 50%
- If they elect the 50%, this means that at death, spouse will only receive 50% of orginal payout
- This leads to HIGHER initial retirement income while spouse is alive
10
Q
Periodic benefit statement requirements
A
- Must be provided to participants and bene’s about their vested benefit and account balances:
- Quarterly for individual accounts that allow participants to direct their investmetns
- Annually for indiviudal accounts that do NOT allow particpants to direct their investments
- Every 3 years for defined benefit plans
11
Q
What is ERISA’s purpose?
A
- To protect the assets of employees, retirees, and their bene’s held in retiremnt plans
- They do NOT require any employer to have a retirement plan, but if they… they must follow those rules
12
Q
How does ERISA define fiduciary
A
- As someone who can excercise discretionary authority or control over the plan’s managment or assets, or someone that provides investment advice to the plan
- Fiduciairies may be held responsible for restoring losses in the plan
13
Q
ERSIA was enacted to do what?
A
- Give the right to participants to sue for benefits and breaches of fiduciary duty
- Guarantee minimum payments to particiapnts in the event of a defined benefit plan being termination
- Payments are made through the PBGC
- ERISA rules are applicable to BOTH defined benefit and defined contribution plans
14
Q
Profit Sharing Plans and Stock Bonus Plans are considered what?
A
- Defined contribution
- Profit-sharing plans
15
Q
Required Reporting Documentations
A
- DOL (through ERISA) requires the following info to participants and their bene’s (and to sumbit to governmental agencies)
- Summary Plan Description
- Must be given to participants after they join plan and
- To bene’s after they receive benefits
- Summary of Material Modifiication (SMM)
- Must be distributed when a change to the plan takes place
- Due within 210 days of the end of the plan year in which the modificiation was adopted
- Summary Annual Report
- Just discusses financails and is due every year
- Periodic Benefit Statement
