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18 Cards in this Set
- Front
- Back
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Requirements To qualified Plan
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- limits on contribution & benifits.
-Pre-funding benifit -Broad Employee partipation -Limits on ownership(vesting) -nondiscrimination |
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Tax benifit of a qualified plan
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-ER gets immediate tax deduction.
-EE defers taxation until withdrawal. |
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ERISA
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Employee Retirement Income Security Act of 1974
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Contribution limit to a defined contribution plan
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ER contribution limit: up to 25% of total participants' payroll. The max. compensation taken into consideration is $220,000 per year.
EE selective defereal limit: $15,000 per year, plus $5000 catching up for EE 50 year or older. The limit on total ER contribution and EE selective defered should be lesser 100% compensation or $44000. |
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Contribution limit to a defined benifit plan
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Lesser of $175,000 (to 2005) or 100% conpensation
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Defined contribution plan consist of
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Profit sharing, employee stock ownership (ESOP), stock bonus, target benefit (pension) and money purchase (pension)
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Defined benifit plan consist of
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generic DB and cash balance plan
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Defination of HCE
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-more than 5% of ownership in current or preceding plan year
-or compensation in the prior year exceeds HCE dollar limit for that year |
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ADP/ACP nondiscrinimation testfor HCE
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ADP: actual deferral precentage
ACP: actual contribution percentage ADP/ACP for HCE must not exceed average deferral/contribution percentage for non HCE by 1.25. |
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Key Employee
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-was >5% owner
-was >1% owner and receive $150,000 compensation -was an officer of the company and recevied compensation >$140,000 |
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Qalified Plan minimum coverage ratio Test
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The number of non HCP EE covered by the plan must be not less than 70% of HCP EE covered by the plan.
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Qalified Plan minimum benifit test
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The average benifit for non HCE EE should not be less than 70% of the average benifit for HCE EE.
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Minimum participation (50/40) test
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The plan must benifits:
- 50 EEs or -the greater of 40% of total eligible EEs |
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Top Heavy Plan
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more than 60% of the accrued benefits are in favor of key employees.
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Vesting plan for top heavy plan
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-three-year cliff vesting
-two-six year graded vesting |
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Single ER contribution limit on multiple plans
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Greater of the minimum funding requirement to the defined benifit plan or 25% of total conpensation
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Multiple Plans of Multiple (Unrelated) Employers
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415 Limits will apply to the individual's participation in each employer's plan seprately
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Employee Elective Deferral Limit
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An individual elective deferrals to different plans generally must be aggregated to comply to the limit ($15000) with the exception to 457 plan.
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