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14 Cards in this Set
- Front
- Back
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Max limits for plans in 2015 |
Covered Compensation $265k Defined Benefit Max limit $210k Defined Contrib Max limit $53k 401k,403b, 457, SAR,SEP limit $18k Highly Comp'd employee $120k Key Employee/Officer 》$170k Soc Sec wage base $118.5k |
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Pension plan types |
Defined benefit PP (DB) Cash balance PP (DB), Money Purch PP (DC) Target benefit PP (DC) |
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Defined Contributiin Profit sharing plans (7 types) |
Profit sharing, Stock bonus, ESOP, 401k Thrift New Comparability Age based profit sharing |
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Pension vs Profit share |
Pension pays a benefit, determined by formula, payable for life, in retirement NO in-service W/Ds Mandatory funding standards 10% max invested in employer securities CAN provide joint& survivor annuity & qualified presurvivor annuity Profit share participants are responsible for their own saving / distn decisions Provides deferred comp and taxes Can allow in service W/Ds (》2yrs) Can include all employer securities |
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Annual contribution limits |
DB - at least the unfunded liability DC - 25% of total employee comp |
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Forfeiture allocations in defined plans |
DB - reduce plan costs DC - reduce costs, OR can allocate to other participants |
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Excluded from Pension Benefit Guaranty Corp (PBGC) coverage |
All Defined contribution plans & DB plans for professional firms with 《25 employees |
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Can plans have separate investment accounts |
DB - NO - comingled (benefit to employer for redistrubution) DC - yes (employee directs own plan within rules) |
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Can prior service be credited into plans? |
DB - YES DC - NO |
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Qualified plan benefits to employers |
Contributions are currently tax deductible Contributions are NOT subject to payroll taxes |
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Qualified plan advantages to employees |
Availability of pretax contributions for employees Tax deferral of earnings on contributions ERISA protection Lump sum distribution options (10 yr averagong, NUA, Pre1974 capital gain treatment) |
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DISadvantages of qualified plans |
Limited contribution amounts Contributions canNOT be made after money is received Plans usually have limited investment options Limited/NO access to $ while active employee Dist's taxed as Ord Income ($0 basis) Early W/D penaltirs may apply Mandatory dists at 70.5 yrs old Inly ownership permitted = A/c holder Cannot assign / pledge as collateral No gifts to charity b4 age 70.5 without tax consequences Limited ebrollment periods Considered income in the respect of a decedent asset, subjecting distributions to both income & estate taxes with NO stepvupbin basis Costs to operate plan are high |
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Coverage requirements / tests |
Consider ALL employees who qualify (but can exclude collectively bargained employees) CanNOT discriminate - but not everyone has tobparticipate, so must meet 1 of 3 tests: 1 - general safe harbor test (cover 70% or more of NHC employees) 2 - ratio test (% of nhc covered divided by % of hc covered = 70% or more) 3 - avg benefits (AB) test (NHC AB% divded by HC AB% = 70% or more ... & pass 50/40 benefits test ... %NHC / % HC 》50% & #of NHC / tot eligible 》 40%) |
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Highly Comp'd employee |
》 5% (direct family) ownership currently (OR in prior year) ... OR 》 $120K in comp from prior yr * if LOTS of highly comp'd, its ok to limit to top 20% of highly compd |
