Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
20 Cards in this Set
- Front
- Back
|
A plan must have both a contribution formula and an allocation formula. |
TRUE |
|
|
A last‐day employed condition on receiving an allocation will not affect a plan’s coverage testing under IRC §410(b). |
NO Imposing a last‐day employment condition on an allocation may affect coverage testing because participants in the coverage testing group who terminate employment before the end of the plan year will not be considered benefiting. but a last day employment condition can be imposed in regards to terminating participants. if a EE terminates before the end of the determination period, then they may be excluded from coverage testing. but last day condition on allocations is not permitted. |
|
|
A plan may use a different definition of compensation for allocation purposes and nondiscrimination testing. |
TURE |
|
|
Compensation used to calculate the required minimum benefit in a top‐heavy plan must be IRC §415 compensation. |
TRUE cant be EE compensation for the year. must be IRC 415 compensation. (its different for some reason) |
|
|
The IRC limits the amount of compensation that may be considered for allocation purposes. |
TRUE |
|
|
A non‐top‐heavy plan could have a requirement that a participant complete at least 750 hours of service in the plan year to be eligible for a contribution allocation. |
TRUE |
|
|
The annual additions limit under IRC §415 is the greater of 100 percent of IRC §415 compensation or $40,000, as indexed. |
NO The annual additions limit is the LESSER of 100 percent of IRC §415 compensation or $40,000, as indexed. |
|
|
Elective contributions that are characterized as catch‐up contributions are not included in a participant’s annual addition limit. |
TRUE |
|
|
Allocations that do not satisfy the safe harbor requirements will need to show they are nondiscriminatory by passing the general test. |
TRUE |
|
|
A participant may need to be employed on the last day of the plan year to be eligible for a minimum top‐heavy allocation. |
TRUE |
|
|
Based on the following information, determine the allocation to Participant B for 2014: The plan is a calendar year profit sharing plan with an effective date of January 1, 2014. The allocation formula is pro rata based on compensation. The IRC §401(a)(17) compensation limit for 2014 is $260,000. There are no forfeitures in 2014. The plan is not top‐heavy. The 2014 contribution totals $40,000. PTP 2014 compensation A $210,000 B $80,000 C $45,000 D $30,000 A. $0 B. $8,649 C. $8,767 D. $8,889 E. $40,000 |
C allocation formula (selected ptp compensation/total eligible compensation from everyone) x year compensation in this case: ptp B is selected, has a compensation of $80,00 total eligible compensation (210,000 + 80,000 + 45,000+30,000) = 365,000 year compensation is 40,000 (80,000/365,000) x 40,000 = $8,767 |
|
|
All of the following are included in a participant’s annual addition limit under IRC§415, EXCEPT: A. Profit sharing contribution B. Employer matching contribution C. Designated Roth contribution D. After‐tax employee contribution E. Elective deferral under IRC §125 (cafeteria plan) |
E Elective deferrals to an IRC §125 plan are not included in determining a participant’s annual addition limit under IRC §415. |
|
|
Based on the following information, determine the number of participants that havesatisfied the IRC §415 annual additions limit: The employer sponsors one plan, a 401(k) plan. The plan year and limitation year is calendar year 2014. The defined contribution annual addition dollar limit for 2014 is $52,000. Participant A is the only catch‐up eligible participant. The plan satisfies all coverage and nondiscrimination requirements. PTP IRC comp Elective Catch up ER contrib contrib contrib A $200,000 $17,500 $5,500 $34,500 B $150,000 $17,500 $0 $36,000 C $100,000 $10,000 $0 $30,000 A. None B. One only C. Two only D. Three only E. Four |
D The annual additions limit is the lesser of 100 percent of IRC §415 compensation, which in this case is $52,000 for 2014. elective deferrals and employer contribution are included as annual additions, but catch up contributions are not. Ptp A: $17,500 + $34,500 = $52,000 Ptp B: $17,500 + $36,000 = $53,500 – exceeds the dollar limit for 2014 Ptp C: $10,000 + $30,000 = $40,000 Ptp D: $8,000 + $23,000 = $31,000 so three out the four satisfy the IRC 415 annual additions. |
|
|
Which of the following is/are instances in which IRC §415 compensation must be used? I. To determine HCEs II. In ADP testing III. When allocating employer contributions A. I only B. II only C. I and III only D. II and III only E. I, II and III |
A IRC §415 may be used in ADP testing or for allocating employer contributions,but it is not a requirement. |
|
|
Which of the following statements regarding excess annual additions is/are TRUE? I. A plan may provide for a refund of after‐tax employee contributions that are excess annual additions. II. A plan may provide for a refund of elective deferrals that are excess annualadditions. III. A failure to limit annual additions to the participants’ accounts may cause a plan to be disqualified. A. I only B. II only C. I and III only D. II and III only E. I, II and III |
E All of the statements are true. |
|
|
All of the following statements regarding conditions for receiving an allocation of contributions under a plan are TRUE, EXCEPT: A. It is permissible for a plan to waive allocation requirements for a participant if the participant dies during the plan year. B. It is permissible for a plan to waive allocation requirements for a participant if the participant becomes disabled during the plan year. C. It is permissible for a plan to waive allocation requirements for a participant if the participant retires during the plan year. D. It is permissible for a plan to condition the allocation of non elective contributions on whether the employee makes elective contributions under the 401(k)arrangement. E. It is permissible for a plan to waive allocation requirements for a participant who returns from military service. |
D Only matching contributions under the 401(k) plan may be conditioned on the basis of elective contributions. |
|
|
Which of the following statements regarding compensation is/are TRUE? I. W‐2 compensation is a permissible definition of compensation under IRC§415. II. A compensation definition that excludes any portion of compensation earnedby NHCEs only is deemed to be nondiscriminatory. III. Current includible compensation is a permissible definition of compensationunder IRC §415. A. I only B. II only C. I and III only D. II and III only E. I, II and III |
C A compensation definition that excludes any portion of compensation earned by HCEs ONLY is deemed to be nondiscriminatory. |
|
|
Which of the following statements regarding contributions and allocations is/areTRUE? I. A mid‐year entrantʹs hours of service for the entire plan year are counted forallocation purposes. II. A planʹs allocation formula identifies how the amount deposited into the planis determined. III. A planʹs contribution formula specifies how the contribution is apportionedto the participant accounts. A. I only B. II only C. I and III only D. II and III only E. I, II and III |
A A planʹs contribution formula identifies how the amount deposited into the plan is determined. while a planʹs allocation formula specifies how the contribution is apportioned to the participant accounts. |
|
|
Based on the following information, determine the employer contribution for the2014 plan year: The plan is a calendar year money purchase plan and is the only plan of theemployer. Contributions are allocated in proportion to compensation to participantswho worked at least 1,000 hours in the plan year and who are employed onthe last day of the plan year. The employer contribution is 10% of eligible compensation. The IRC §401(a)(17) compensation limit for 2014 is $260,000. Participant W terminated employment on October 15, 2014. The plan satisfies coverage requirements. PTP hours worked compensation U 2,080 $50,000 W 1,650 $60,000 X 2,080 $50,000 Y 2,080 $45,000 Z 2,080 $35,000 A. $35,000 B. $37,000 C. $39,000 D. $61,000 E. $63,000 |
B Participant W is not eligible for a contribution due to termination ofemployment before the last day of the determination year. participant U is limited to the IRC compensation limited which is $260,000 so the total eligible compensation would be: 260,000 + 50,000 + 45,000 + 35,000 = $390,000 employer contribution is 10% of eligible compensation 390,000 x 10% = 39,000 or B |
|
|
All of the following statements regarding annual addition limits under IRC §415 are TRUE, EXCEPT: A. Contributions are treated as annual additions assuming they are deposited no later than 30 days after the period during which the contributions were deductible. B. A participant who enters the plan mid‐year has a prorated annual addition limit. C. The annual addition dollar limit is based on the dollar limit in effect as of the end D. If a short limitation year is created because of an amendment to the limitation year, the IRC §415 dollar limit must be prorated. E. The defined contribution dollar limit is subject to cost‐of‐living adjustments in$1,000 increments. |
B If a participant is eligible for only part of the year—the IRC §415 limitation is not pro rated for that year. |
