Retirement Key Notes

Question 1

Section 415 limit

Calculating benefits under a Defined Benefit Plan

Answer 1

Under Section 415 the max life annuity benefit is the lesser of $225,000 or 100% of the avg highest 3 earnings years.

Plan unit benefit formula - % x # of years x compensation

Final avg method - final 3 out of 5 years

Question 2

412i plan

Answer 2

A defined benefit plan funded entirely with insurance products

Question 3

A top heavy plan

Answer 3

More than 60% of the account balances are allocated to key employees

Formula

Key employees / Key employees +employees = %

Question 4

Controlled groups

Answer 4

Parent subsidiary - one entity owns at least 80% of another

Brother-sister - 5 or fewer owners of 2 or more entities own 80% or more of each entity

Affiliated service group - service organizations that provide professional services in the field of health, law, accounting, engineering etc

Employee leasing - leasing employees from an independent leasing organization rather than employing directly.