Chapter 10 - Simple, 403b and 457 plans

Question 1

SIMPLE IRA eligibility

Answer 1

100 or fewer employees
Earned at least $5,000 in previous 2 years
Expected to earn $5,000 in current year
Employer can reduce or waive earnings requirement

Question 2

5304 vs 5305

Answer 2

5304 - employee selects broker
5305 employer selects broker

Question 3

Grace period

Answer 3

2 year grace period to continue contributing after employees count passes 100

Question 4

SIMPLE establish deadline

Answer 4

October 1

Question 5

SIMPLE IRA rollover

Answer 5

25% penalty in first 2 years if not to/from another SIMPLE

Question 6

SIMPLE IRA 2024 contribution increase

Answer 6

25 or fewer employees w/ at least $5,000 in compensation limit increased by 10% for contribution and catch up
more than 25 employees increase only available if employer elects 4% match or 3% non-elective contribution

Question 7

Primarily employee deferrals

Answer 7

Payroll deduction IRA plan
SIMPLE IRA
Safe Harbor 401k

Question 8

Entirely employer contributions - nonstock

Answer 8

SEP
Prototype SEP w/ permitted disparity
DC Age-based new comparability

Question 9

Balanced contributions

Answer 9

PSP w/ 401k
PSP w/ 401k and Thift plan

Question 10

Entirely employer contributions - stock

Answer 10

Stock bonus plan
ESOP
Leveraged ESOP

Question 11

403b

Answer 11

Employees of public schools and charitable organizations

Question 12

403b to avoid ERISA

Answer 12

No employer contributions

Question 13

403b universal availability rule

Answer 13

If one employee is permitted to defer salary then all employees must be allowed unless:
contribute less than $200 per year
participate in another workplace plan
nonresident aliens
work less than 20 hrs per wk

Question 14

15 year catch-up contributions

Answer 14

Permits additional $15,000 ($3,000 per year) to 403b if participant has completed 15 years of service with employer

Question 15

Employee participates in multiple plans

Answer 15

Aggregate of all deferrals cannot exceed limit - 457b plans not included

Question 16

403b investments

Answer 16

Annuity contracts
Fixed or variable deferred annuities
Mutual funds
Retirement income account for church employees that invests in annuities or mutual funds

Question 17

Safe Harbor 403b

Answer 17

Eligible employees enrolled (3-15%)
No employer contributions
Contributions $6,000 plus $1,000 catch up over 50
Required automatic enrollment in 2025

Question 18

457b asset protection

Answer 18

Public - protected
Private - not protected
457f - not protected

Question 19

457b employer types

Answer 19

Public - states and entities
Private - Tax exempt entities under 501c
457F - both

Question 20

457b participation

Answer 20

Public - rank and file and key management
Private - key management & HCEs
457f - Key management & HCEs

Question 21

Private 457b rollover

Answer 21

Only allowed to/from another private 457b plan

Question 22

457b 50+ catch up

Answer 22

Only available to public 457b plans

Question 23

457b Final 3 year catchup

Answer 23

Available to both public and private 457b plans
Must be within last 3 years before reaching normal retirement age
Limited to prior unused deferral amounts
Can only use one type of catch up in any year

Question 24

457 distributions

Answer 24

Public not allowed before terminates employment or age 59 1/2
Private not allowed before terminates employment or age 72 if earlier
Neither subject to pre 59 1/2 penalty

Question 25

457f

Answer 25

Top heavy
For HCEs
Assets not protected by trust
No limits on salary deferral
Once risk of loss ends all funds are subject to income tax

Question 26

457 plans early withdrawal penalty

Answer 26

No penalty except for distributions attributable to rollovers from another type of plan

Question 27

Covered compensation limit

Answer 27

$330,000

Question 28

SIMPLE IRA employer contributions

Answer 28

Matching - must match up to 3% no exceeding $15,500
Non elective - minimum 2% up to $330,000 salary

Question 29

Employer 403b contributions

Answer 29

Trigger ERISA
ACP testing
Can be mandatory, matching or discretionary
21 yrs old and 2 years of service or 26 yrs old and 1 year of service requires immediate vesting
21 years and 1 year either 3 yr cliff or 2-6 graduated
Public - payroll taxes due when vested
Private - payroll taxes due when no longer subject to forfeiture