Retirement – 47 Flashcards
(47.3) Eligibility for qualified plans
- One year service or two years with full vesting
- 21 years of age
- maximum of 1000 hours for one year of service
(47.3) Eligibility for SEP plans
- 3 out of the last 5 years of service
- 21 years of age
- minimum of $550 compensation for each year of service
(47.3) Eligibility for SIMPLE (IRA)
- $5000 earned in 2 previous years and expected to earn $5000 in the current year
- includes those under age 21
(47.3) Coverage test for qualified plans – Sec. 410(b): The three coverage test
1) percentage test
2) ratio test
3) average benefits test
(47.3) Coverage test for qualified plans – Sec. 410(b): what is the percentage test?
The plan must benefit at least 70% of non-highly compensated employees.
(47.3) Coverage test for qualified plans – Sec. 410(b): what is the ratio test?
The percentage of non-highly compensated employees covered by the plan must be at least 70% of the percentage of the highly compensated employees covered.
Defined-benefit plans minimum participation – Sec. 401(a)(26): Under this test, the plan must cover at least ___ employees or ___ of all employees, whichever is less. If the company has only two, three, or four employees, the defined-benefit plan must cover at least ___ employees. If the company has only one employee, the plan must cover the ___ employee.
50
40%
Two
One
Cliff vesting is provided after ___ years of service.
Three
(47.5) Cliff vesting is provided after ___ years of service.
Three
(47.6) Graded vesting provides for ___ of the employer contributions to become vested after the second year of service and ___ for each year after that. This makes an employee fully vested after __ years of service.
- 20%
- 20%
- 6
(47.6) The traditional defined benefit plan has a ___ cliff vesting and ___ graded vesting (cash balance plans must follow the ___ cliff or ___ graded schedule).
- 5-year
- 3- to 7-year
- 3-year
- 6-year
(47.6) These plans provide immediate 100% vesting in return for their simplified reporting requirements.
SEP & SIMPLE plans
(47.7) Discrimination testing (ADP testing) for 401(k) plans – Sec. 401(k)(3): If the percentage deferred by non-HCEs is less than 2%, then the actual percentage of compensation deferred by HCEs in the current year cannot me more than ___% of the percentage of compensation deferred by non-HCEs in the previous year.
200%
(47.7) Discrimination testing (ADP testing) for 401(k) plans – Sec. 401(k)(3): If the percentage deferred by non-HCEs is between 2% and 8%, then the actual percentage of compensation deferred by HCEs in the current year cannot be more than the percentage of compensation deferred by non-HCEs in the previous year, plus ___%.
2%
(47.7) Discrimination testing (ADP testing) for 401(k) plans – Sec. 401(k)(3): If the percentage deferred by non-HCEs is 8% or more, then the actual percentage of compensation deferred by HCEs in the current year cannot be more than ___% of the percentage of compensation deferred by non-HCEs in the previous year.
125%
(47.8) Matching contributions (ACP testing) for 401(k) plans – Sec. 401(k)(3): Match 100% of employee’s contributions up to ___, and 50% of employee’s contributions between ___ & ___ of compensation.
3%
3% and 5%
(47.8) The ADP test does not apply to?
Safeharbor 401(k) plans SIMPLE 401(k) plans elective employee deferrals in 403(b) plans for nonprofit entities
(47.7) The ACP test does not apply to?
Safeharbor 401(k) plans SIMPLE 401(k) plans
(47. 10) Integration of defined-benefit plans – Excess method:
1) if the base benefit percentage is ___% or more, the disparity can be a maximum of ___.
2) if the base benefit percentage is less than ___%, then the disparity can be no more than the base percentage.
1) 26.25%, 26.25%
2) 26.25%
(47. 11) Integration of defined-contribution plans: If the integration level is set AT the taxable wage base, then there is a two-part test for permitted disparity.
1) if the base contribution percentage is ___% or more, then the disparity can be a maximum of ___%.
2) if the base contribution percentage is less than ___%, then disparity can be no more than the base percentage.
1) 5.7%, 5.7%
2) 5.7%
(47.2) Qualified plans must make employees eligible to participate after they reach the age of __ or reach __ year of service (whichever is later) and include them in the plan within __ months of reaching these milestones.
- 21
- one
- 6
(47.3) Highly-compensated employees are defined as those owning more than __% of the employer or those whose compensation exceeds $___ and who are among the __% highest-paid employees.
- 5%
- $115,000
- 20%
(47.3) If defined-contribution plans provide for employee elective deferrals, as well as nonelective employer contributions, only the __ are used in the coverage tests calculations for qualified plans.
nonelective employer contributions
(47.3) The percentage, ratio, and average benefits test apply to all ___.
qualified plans
(47.5) A defined-benefit plan must pass both the three coverage tests and the __ test.
minimum participation
(47.8) If MATCHING FUNDS are provided for elective employee deferrals in 403(b) plans for nonprofit entities., the 403(b) plan must meet the ___ test.
ACP
(47.9) ADP testing for 401(k) plans: If non-HCEs defer 8% or more, then HCEs can defer up to __% of the amount deferred by non-HCEs.
125%
(47.9) ADP testing for 401(k) plans: If non-HCEs defer between 2% and 8%, then HCEs can defer up to the same percentage, plus __%.
2%
(47.9) ADP testing for 401(k) plans: If non-HCEs defer less than 2%, then HCEs can defer up to __% of the non-HCEs.
200%
(47.9) 401(k) plans must meet the ___ coverage tests for qualified plans, ___ ADP tests, and the ___ test if an employer matches employee contributions.
three
one of three
ACP