Retirement Chapter 4: Qualified Plan Rules and Options Flashcards
(16 cards)
Nondiscrimination and eligibility requirements for qualified plans
- ## Age 21 and one year of service (2 year special provision but then EE 100% vested)
Ratio % Test (coverage)
the plan must cover a % of NHCEs that is at least 70% of the % of HCEs
Average Benefit Test (coverage)
the average benefits for all NHCEs must be at least 70% of those for HCEs
Minimum participation (defined benefit only)
Must benefit the lesser of one of the following:
- 50 EEs
- The greater of:
- 40% of all eligible EEs or
- 2 EEs (or if only 1 EE, that EE)
Highly Compensated EE
> 5% owner, or
An EE earning >$155k in the preceding year
Key EE
> 5% owner
An officer and has compensation > $220k (2024)
> 1% owner and compensation >$155k (2024)
Salary considers previous year
Top-heavy Plans
if more than 60% of its aggregate accrued benefits or account balances are allocated to key EEs
Do you count the first year for graded vesting schedules?
No, one-year eligibility
What is the most stringent service requirement?
2-year / 100% schedule
What kind of vesting schedule should you use to retain EEs?
A graded schedule
Do you include EE salaries who doesn’t meet age/service requirements when calculating for coverage?
No
Only _____________ _______ _______ plans can use slower vesting schedules.
Non-top-heavy defined benefit plans
When NHCEs do not participate the plan generally does not meet the coverage % (ratio %) which
will trigger ADP/ACP testing
Catch-up contributions do not affect
deferrals, company contributions or the $69,000 max annual additions limit
What kind of plans can be integrated with Social Security?
Stock bonus, SEP, Defined Benefit, Target Benefit
How could contributions be skewed towards older participants in a profit-sharing plan?
1) Through Social Security integration
2) Age-weighting
3) cross-testing
