Retriement Planning Flashcards
Ratio percentage text
The plan must cover a percentage of non-highly compensated employees that is at least 70% of the percentage of highly compensated employees covered
Average benefits test
The average benefit for all non-highly compensated employees must be at least 70% of that for highly compensated employees.
Note: both the average benefit test and the ratio percentage test to use the same 70% ratio
What constitutes a highly-compensated employee?
A greater than 5% owner, or an employee earning excess of $155,000 in the proceeding year
Highly compensated is used to determine discrimination. The second letter in highly and discrimination is I
What constitutes a key employee?
A greater than 5% owner or an officer and compensation greater than $220,000 or a greater than 1% owner and compensation over $155,000
Key employee is used to determine investing. The second letter and key and investing is E.
What finds a top heavy plan?
A plan is top-heavy of more than 60% of his aggregate occurred, benefits, or account balance are allocated to key employees.
Dolly’s bra size is 60 ZZ. Think top-heavy 60.
What are the minimum benefits and contributions for non-key employees in a top heavy plan?
DB: the benefit must be at least 2% of compensation
DC: the minimum employer contribution must be no less than 3%.
DB-2. DC-3.
Profit-sharing plans are not subject to minimum funding standard, but are subject to substantial and reoccurring contributions
