Retirement Chapter 5: Additional Qualified Plan Rules and Options

Question 1

What is the maximum profit-sharing contribution by ERs?

Answer 1

25% of EE compensation

Question 2

Compensation includes

Answer 2

Elective deferrals under Section 401(k)
Salary reduction contributions to Section 125 cafeteria plans (FSAs)

Question 3

A DC or DB plan is prohibited from defining compensation to include or exclude…

Answer 3

Compensation that exceeds $345,000

Question 4

An outside director (who is not an EE of the corporation) may or may not establish an IRA or qualified plan on the basis of director fees?

Answer 4

May; BoD fees qualify as compensation (earned income)

Question 5

More than one plan elective deferral max: 401(k), 401(b), SIMPLE, SARSEP

Answer 5

$23,000 max + $7,500 catch up

Question 6

More than one plan elective deferral max: SIMPLE and another SIMPLE

Answer 6

$16,000 max + $3,500 catch-up

Question 7

How do you treat annual additions when people have more than one plan?

Answer 7

lesser of 100% compensation or $69,000.

Multiple accounts applies the limit as follows:
- In the aggregate to all accounts when the plans are offered by a single ER or 2+ related ERs
- Separately to each account in unrelated ER plans

Question 8

What are Keogh plans?

Answer 8

qualified retirement plans for sole proprietorships and partnerships

Question 9

What is the owner-EE contribution based on in a Keogh plan?

Answer 9

Net earnings

Question 10

what is net earned income based on in a Keogh plan?

Answer 10

Net earned income is the owner-EE’s net income from the business after all deductions, including the deduction for non-owner EEs only plan contributions (Schedule C income)

Question 11

what kind of plans have loan provisions?

Answer 11

qualified

Question 12

Do loans need to be available to all participants?

Answer 12

Yes, on a reasonably equivalent basis

Question 13

What two conditions must be met for a non-key participant to deduct interest on a plan loan?

Answer 13

1) the loan is for the participant’s primary residence

2) the loan is secured by the primary residence

Question 14

Can you borrow from a 403(b)?

Answer 14

Yes; loans have to be secured, interest deductions are prohibited if the loan on the plan is secured by amounts attributable to salary reductions; limits apply

Question 15

What does the attribution rule affect (family members)?

Answer 15

Top-heaviness of a plan

Question 16

If a loan is secured by the EE’s elective deferrals, what will the interest on the loan be considered?

Answer 16

Consumer interest and will not be deductible.