Retirement Chapter 4: Qualified Plan Rules and Options Flashcards
Nondiscrimination and eligibility requirements for qualified plans
- ## Age 21 and one year of service (2 year special provision but then EE 100% vested)
Ratio % Test (coverage)
the plan must cover a % of NHCEs that is at least 70% of the % of HCEs
Average Benefit Test (coverage)
the average benefits for all NHCEs must be at least 70% of those for HCEs
Minimum participation (defined benefit only)
Must benefit the lesser of one of the following:
- 50 EEs
- The greater of:
- 40% of all eligible EEs or
- 2 EEs (or if only 1 EE, that EE)
Highly Compensated EE
> 5% owner, or
An EE earning >$155k in the preceding year
Key EE
> 5% owner
An officer and has compensation > $220k (2024)
> 1% owner and compensation >$155k (2024)
Salary considers previous year
Top-heavy Plans
if more than 60% of its aggregate accrued benefits or account balances are allocated to key EEs
Do you count the first year for graded vesting schedules?
No, one-year eligibility
What is the most stringent service requirement?
2-year / 100% schedule
What kind of vesting schedule should you use to retain EEs?
A graded schedule
Do you include EE salaries who doesn’t meet age/service requirements when calculating for coverage?
No
Only _____________ _______ _______ plans can use slower vesting schedules.
Non-top-heavy defined benefit plans
When NHCEs do not participate the plan generally does not meet the coverage % (ratio %) which
will trigger ADP/ACP testing
Catch-up contributions do not affect
deferrals, company contributions or the $69,000 max annual additions limit
What kind of plans can be integrated with Social Security?
Stock bonus, SEP, Defined Benefit, Target Benefit
