Qualified Plan Compliance & Nondiscrimination Testing Flashcards
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Read the first 7 Qualified Plan Compliance & Nondiscrimination Testing flashcards as text
Under IRC Section 410(a), what is the maximum age and service requirement a qualified retirement plan may impose before allowing an employee to participate?
Answer: Age 21 with 1 year of service
IRC 410(a) permits plans to require employees to be at least age 21 and complete 1 year of service (1,000 hours) before becoming eligible to participate.
Which two alternative tests may a qualified plan satisfy to meet the IRC Section 410(b) minimum coverage requirements?
Answer: Ratio percentage test or average benefit test
Under IRC 410(b), a plan must satisfy either the ratio percentage test or the average benefit test to demonstrate it does not discriminate in favor of highly compensated employees.
Under the ratio percentage test for IRC Section 410(b) coverage, the percentage of NHCEs benefiting must be at least what fraction of the percentage of HCEs benefiting?
Answer: 70%
The ratio percentage test requires that the NHCE benefit percentage equal at least 70% of the HCE benefit percentage.
For the 2024 plan year, an employee is classified as a highly compensated employee (HCE) based on compensation from the employer that exceeded what threshold in the prior year?
Answer: $150,000
For 2024, an employee is an HCE if their 2023 compensation exceeded $150,000, or if they were a 5% owner at any time during the current or prior plan year.
Which of the following employees may generally be excluded from coverage testing under IRC Section 410(b)?
Answer: Employees covered by a collective bargaining agreement where retirement benefits were subject to good-faith bargaining
IRC 410(b)(3)(A) permits plans to exclude employees covered by a collective bargaining agreement where retirement benefits were a subject of good-faith bargaining.
The average benefit test under IRC Section 410(b) consists of two prongs. Which of the following correctly identifies both prongs?
Answer: Nondiscriminatory classification and average benefit percentage test
The average benefit test requires (1) a nondiscriminatory classification of employees and (2) that the average benefit percentage for NHCEs is at least 70% of the average benefit percentage for HCEs.
Under the permissive aggregation rules for IRC Section 410(b), when may an employer combine two separate qualified plans for coverage testing purposes?
Answer: When the aggregated plan would satisfy the applicable coverage tests as if it were a single plan
Permissive aggregation allows an employer to treat two plans as one for coverage testing, provided the combined plan would independently satisfy the applicable coverage requirements.