RPF M1 U3 Who Is Covered Flashcards
Study
What choices does an employer have in choosing who may join the plan?
The employer has some freedom to specify who may join the plan, but must adhere to legal restrictions.
How do qualified employees join the plan?
Qualified employees can join the plan through an enrollment process that includes information dissemination and meetings.
What documentation does the employer provide during the enrollment process?
The employer provides information packets, conducts meetings, or uses online platforms to inform employees.
What is a Beneficiary?
The individual designated by the participant to receive benefits due to the participant’s death.
What is an Elective Deferral?
Another term for ‘elective contribution’ or ‘salary deferral.’
What does Eligibility refer to in retirement plans?
Requirements set by the retirement plan for employees to participate, including minimum age and length of service.
What is the Enrollment Process?
The act of informing employees about their entry into the plan and collecting required information.
What is the definition of Entry in a retirement plan?
The date upon which an eligible employee becomes a plan participant.
Who qualifies as a Long-Term, Part-Time Employee?
An employee who works more than 500 hours in three consecutive years, as defined by the SECURE Act.
What is a Participant in a retirement plan?
An individual who has met plan eligibility requirements and entered into the plan.
What is Salary Deferral?
A portion of an individual’s salary contributed to a retirement plan that is deferred to a later date.
What are the allowable excluded employees from a qualified plan?
Independent contractors, union employees, and nonresident aliens can be excluded under certain conditions.
What is the rule regarding Independent Contractors in qualified plans?
Independent contractors are generally not eligible for qualified plans, except for specific exceptions.
What is the law regarding Union Employees in retirement plans?
Plans can exclude union employees who have retirement benefits outside the plan subject to collective bargaining.
What is the rule for Nonresident Aliens in retirement plans?
Plans can exclude nonresident aliens who do not pay U.S. taxes, but this depends on their income status.
What are the age and service requirements for eligibility in a qualified plan?
Employees must be at least 21 years old and have completed one year of service to be eligible.
What is the significance of the 1,000-hour requirement for service?
An employee must work at least 1,000 hours in a year to meet the service requirement for eligibility.
What does the SECURE Act state about long-term, part-time employees?
Employees working more than 500 hours for three consecutive years are eligible to defer contributions.
What is the Enrollment Process for 401(k) plans?
Employees choose contribution amounts and designate beneficiaries during the enrollment process.
What are the rules safeguarding employee contributions in 401(k) plans?
Employees must make a written election to defer, can change contributions, and contributions are always 100% vested.
What is Automatic Enrollment in 401(k) plans?
A method to enroll employees automatically to combat inertia in enrolling in retirement plans.
What is automatic enrollment in 401(k) plans?
Automatic enrollment is a design where participants are automatically enrolled in the plan at a specified deferral percentage when hired, with an option to opt out.
What are the effects of automatic enrollment?
Automatic enrollment leads to participants joining sooner and a higher overall participation rate in the plan.
What does research by Benartzi and Thaler indicate about automatic enrollment?
In a studied plan, participation rates jumped to 90% immediately after adopting automatic enrollment and increased to over 98% within 36 months.
