| A | B |
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| The employer bears all investment risk in what type of qualified plan? | Defined benefit plan |
| What does the term ERISA pre-emption mean? | ERISA provisions override/supersede state law relative to retirement plan. |
| What tax benefits are available to an employer when establishing a qualified plan? | tax-credit for start up costs and auto-enrollment, tax-deduction for employer contributions |
| What section of the Internal Revenue Code defines a qualified plan? | IRC Sec. 401(a) |
| Can an employee deduct contributions made by the employer? | No |
| What type of entity cannot establish a 401(k) plan? | State and local governments |
| What notice must be distributed when a plan applies for a determination letter? | Notice to Interested Parties |
| What are the two components that make up a pre-approved document? | The BPD and the AA |
| If a participant is married, is spousal consent needed to name a non-spouse beneficiary? | Yes |
| When a plan is first established, when must the SPD be provided? | Within 120 days of plan establishment |
| An IRS opinion letter is issued for what types(s) of plan document(s)? | Pre-approved plan documents |
| What statutory exclusions are allowed in a pre-approved plan for purposes of eligibility? | Non-resident aliens no US earned income, collective bargained employee, result of an acquisition (transition period) |
| When is a SMM provided? | Within 210 days following the end of the plan year in which an amendment occurs. |
| What are two types of pre-approved documents? | Standardized and Non-standardized |
| What is the purpose of a fidelity bond? | To protect plan assets from acts of fraud and dishonesty |
| What types of employees may NOT be excluded from participation by class? | Seasonal, temporary and part-time employees |
| What is a "non-excludable" employee? | Someone excluded by a class other than a statutory exclusion |
| What is the initial eligibility computation period? | Date of hire through 1st anniversary of date of hire. |
| What is the deadline to make a deductible contribution? | Tax-return due date, plus extensions, for the tax year that includes the end of the plan year |
| Can leased employees be excluded from the plan? | Yes, as a "non-excludable" class of employee |
| If the employer deductibility limit is exceeded, is the excess returned to the employer? | No, it remains in the plan and is carried forward to the next year it can be deducted. the employer is responsible for a 10% penalty on the excess amount. |
| What is the timing requirement for providing a safe harbor matching contributions notice? | 30-90 days prior to the beginning of the plan year if the plan has a match, no notice requirement if it is a nonelective contribution |
| What is the permitted disparity for a plan using the taxable wage base as the integration level under a social security integration allocation? | The permitted disparity is the lesser of the base allocation rate or 5.7%. |
| What is the deadline for remittance of deferral contributions to the plan? | As soon as administratively feasible, no later than the 15th business day following the month withheld. |
| What are the maximum requirements an employer can impose for a participant to receive a profit sharing contribution? | Age 21 and up to 2 years of eligibility service (if 100% vested), and qualifying conditions of 1000 hours and employment on the last day of the plan year. |
| What is a "qualifying contributing participant" per the Ascensus plan document? | defined in the Ascensus document as an eligible participant who is deferring and has met any additional qualifying contributions for a matching contribution such as last day or hours requirement. |
| What is a pro-rata allocation? | An equivalent contribution when expressed as a percentage of compensation relative to all eligible compensation in the plan. |
| When must a participant be allowed to enter the plan? | Within earlier of 1st day of plan year or 6 months from meeting eligibility. |
| What is a year of eligibility service? | 12-month eligibility computation period within which the participant completes up to 1,000 hours of service. |
| Is FICA/FUTA withholding done on all deferral contributions? | Yes |
| A 402(g) excess deferral must be removed by what date in order to avoid double taxation for the participant? | April 15th of the calendar year following the year of the deferral (402(g) limit follows the calendar year) |
| What is the basic safe harbor match contribution formula? | 100% of elective deferrals that do not exceed 3% of compensation, plus 50% of elective deferrals that exceed 3% but do not exceed the 5% of compensation. |
| Are deferrals included in the deduction limit (25% of aggregate compensation)? | No. However, they are included in total amount of aggregate compensation. |
| If a plan requires three months of service and 300 hours of service, when would a participant have to be allowed to enter the plan? | After the first 3 month period in which 300 hours are worked, or after one year of service in which the participant worked 1,000 hours, if earlier. |
| Is participant consent required in order to pay out a required minimum distribution (RMD)? | No. (Failure to distribute would represent an operational failure for the plan). |
| What notice describes distributions eligible for rollover treatment and the 20% mandatory withholding? | 402(f) notice |
| When is the Single Life Expectancy table used? | This table is used to calculate annual life expectancy payments to be taken by the beneficiary after the participant's death. |
| Can 403(b) money be rolled into a 401(k) plan? | Yes, as long as the plan allows rollovers from 403(b) plans. (transfers between 403(b) plans and 401(k) plans are not allowed.) |
| Can a participant in a qualified plan take a distribution at any time? | No, they need a triggering event. |
| What form are distributions reported to the IRS on? | Form 1099-R |
| When is the Uniform Lifetime table used? | It is used to find the life expectancy for nearly all individuals when determining required minimum distribution (RMDs) during a participant's lifetime. |
| What is the ten-year rule for beneficiary options? | The beneficiary has until 12/31 of the year containing the tenth anniversary of the date of death to distribute all assets. |
| Can ADP safe harbor dollars be distributed as an in-service distribution at any time if the plan allows? | No, not available for in-service until age 59 1/2. ADP safe harbor contributions will follow the triggers for elective deferrals. |
| What are the only 3 mandatory triggers for distribution? | Death, normal retirement age along with severance of employment, and plan termination. |
| Does the 10% early distribution penalty apply on hardship distributions? | Yes, to the extent a participant does not qualify for a penalty exception. |
| How many days does a participant have to roll over a distribution? | 60 days from constructive receipt for an indirect rollover, no time limit with a direct rollover. |
| What is the difference between a direct rollover and an indirect rollover? | Indirect rollover, the participant has constructive receipt of the assets, and therefore has 60 days from receipt to complete the rollover transaction. It is essentially a distribution until the point it is rolled over. Whereas the direct rollover is payable to the receiving plan or IRA. |
| May a hardship distribution be rolled over to another qualified plan? | No, hardship distributions are never eligible for rollover treatment. |
| What type of IRA can a non-spouse beneficiary roll over to? | Inherited IRA, either Traditional or Roth. |
| What are the three differences between a transfer and a rollover? | Rollovers are reportable, participant directed, and result of a triggering event. Transfers on the other hand are not reportable, generally plan directed, and do not need a trigger. |
| If a distribution is not an eligible rollover distribution, does the 20% mandatory withholding apply? | No, the withholding would be 10% unless the participant directs a larger amount or waives the withholding. |
| What is the maximum amount that can be forced-out as an involuntary cashout? What amount can actually be paid in cash? | $7,000 is the maximum force-out amount, $1,000 is the maximum that may be paid in cash. |
| When is the Joint Life Expectancy table used? | To calculate required minimum distribution (RMD) during a participant's lifetime in cases where the spouse is the sole primary beneficiary and is more than 10 years younger than the plan participant. |
| When is a participant's required beginning date (RBD)? | April 1st following the year in which the participant turns age 73, unless plan allows RBD to be delayed until 4/1 following year of retirement (for non-5% owners). |
| What form is filed by the participant to pay an early distribution penalty? | IRS form 5329. |
| Nondiscrimination testing is performed for what purpose? | To assure that higher paid employees do not receive more valuable benefits than lower paid employees. |
| What profit sharing formulas are 401(a)(4) (general nondiscrimination) safe harbor formulas? | Pro-rata, flat dollar, and social security integration. |
| What must the ratio percentage be in order for the plan to pass IRC Sec. 410(b) coverage testing? | 70% or greater |
| When can a plan amend from the prior year testing method to current year testing method? | The plan can switch from the prior year method to the current year method at any time. |
| What is "cross-testing"? | Testing on the basis of the future benefit as opposed to the current contribution, or converting allocations to an equivalent benefit at retirement for purposes of performing the 401(a)(4) general nondiscrimination test. |
| When performing the ADP test, what employee classification groups are being compared to each other? What type of contribution is being tested? | Highly compensated employees vs. non-highly compensated employees. Testing deferral contributions. |
| What are the four steps to performing the ratio percentage test? | 1) Determine # of HCE's and NHCE's, 2) Determine % of HCE's benefitting, 3) Determine % of NHCE's benefitting, and 4) Divide NHCE% into HCE% |
| A 401(m) excess aggregate contribution (ACP) excess must be removed by what date in order for the employer to avoid paying an excise tax? | 2 1/2 months following the plan year end (March 15th for calendar year plans), 6 months following the end of the plan year is the deadline for a plan with EACA which includes ALL employees |
| Under family attribution rules, an individual is considered to own the stock owned by whom? | Their parents, spouse, children and grandchildren |
| Less than what percentage of assets may be in the key employee's accounts in order to avoid being top-heavy? | Less than 60% of plan assets |
| If a plan is top heavy, what is the remedy? | Top heavy minimum contribution must be provided to non-key employees in the amount of the lesser of 3% or the highest contribution % of any key employee (including deferrals). |
| What three categories must a plan demonstrate nondiscrimination in under the IRC Sec. 401(a)(4) General Nondiscrimination test? | Nondiscrimination in the amount of contributions or benefits, nondiscrimination in the availability of benefits, rights and features, and nondiscrimination in effect of plan under special circumstances. |
| What is the maximum average deferral percentage (ADP) for the highly compensated group of employees in order to satisfy the ADP test if the applicable non-highly compensated employee ADP for the plan year is 1.5%? | 3% (the greater of a) 125% or b) the lesser of 2+/2 times the ADP for nonHCEs |
| Identify at least two factors in determining if an Operational Failure is "insignificant". | totality of all failures, amount/% of plan assets involved in failure relative to total plan assets, # of years failure occurred, # of participants affected relative to total in plan, reason for failure, if correction is made withing reasonable time, etc. |
| What are the four types of qualification failures? | Document failures, operational failures, demographic failures, and employer eligibility failures. |
| Which IRS program requires a compliance fee or IRS user fee in order to participate? | Voluntary Correction Program (VCP) |
| What type(s) of Qualification Failure may be corrected under the Self Correction Program? | Operational failures |
| What agency enforces the timely remittance of deferral contributions? | Employee Benefits Securities Administration (EBSA) (the enforcement agency of the Department of Labor) |
| If a disqualified person engages in a prohibited transaction, what is the tax that may apply? | A 15% excise tax on the amount involved under IRC Sec. 4975. |
| What is the reduced penalty that would apply to a plan filing under the Delinquent Filer Voluntary Correction (DFVC) program? | $10/day that the filing is late, up to a maximum of $750 for a small plan filing, or $2,000 for a large plan filing. Potentially have IRS fees waived. |
| What is an Operational Failure? | A failure that arises solely from the failure to follow plan provisions. |
| Why might an employer want to pursue the Voluntary Correction Program (VCP), even when SCP may be an option? | To receive assurance from the IRS in the form of a Compliance Statement that their proposed remedy is sufficient in correcting the matter. |
| What type of plan may be penalized for an accumulated funding deficiency? | Money purchase plans and Target benefit plans. Initial tax of 10%, 100% if not corrected timely. |
| On what IRS form are employer penalties and excise taxes paid? | Form 5330 |
| What correction program may be available to employers who fail to file a Form 5500? | The Delinquent Filer Voluntary Correction program or DFVC |
| In what situations can the Self Correction Program be used? | Insignificant operational failures can be corrected under SCP at any time, and significant operational failures if corrected within the correction period |
| What are the three IRS correction programs under the Employee Plans Compliance Resolution System (EPCRS)? | Self Correction Program, Voluntary Correction Program, and Audit Closing Agreement Program |
| Under what IRS correction program may an employer be required to pay a sanction related to the failure? | Audit CAP |
| What are the two types of plan amendments? | Legislative and discretionary |
| If amending a money purchase plan to reduce or freeze the contribution, what notice needs to be provided to the participants first? | 204(h) reduction of benefits notice |
| If an employer amends their vesting schedule to a less favorable schedule, how many years of service does an employee need to have to be able to elect which vesting schedule to follow for new accruals? | 3 years of service |
| Is a plan required to allow for 100% vesting upon reaching Normal Retirement Age? | Yes |
| Provide an example of a benefit that is not protected. | The ability to take a hardship distribution or loan, the right to direct investments, the right to a particular investment, or the right to make after tax contributions. |
| Who may step in to terminate an "orphan" plan? | A Qualified Termination Administrator (QTA) or the DOL |
| What is a possible outcome for a plan that is not amended when required? | Loss of qualified status; contributions and earnings become taxable to the participant. |
| Is 100% vesting required for partial plan termination? | Yes, for "affected" participants only |
| When a qualified plan terminates, when does the final Form 5500 need to be filed by? | The last day of the 7th month following liquidation of assets. |
| What types of distribution triggers are protected benefits? | Distributions upon termination, Disability, NRA, 59 1/2, In-service, and withdrawal of rollovers at any time are all protected triggers for accrued dollars. |
| Can a deemed distribution of a defaulted loan be rolled over? | No |
| What is the deadline to file the 5500? | The last day of the 7th month following the end of the plan year. |
| What is the most restrictive graded and cliff vesting schedules a plan can require for employer contributions? | 6-year graded, 3-year cliff |
| In what ways may the forfeiture account in a qualified retirement plan be used? | Restoration of account balance upon rehire, payment of plan expenses and recordkeeping fees, reduce employer contributions or reallocate to participants. |
| How is the maximum loan amount determined for a participant? | Lesser of 1) $50,000 - highest outstanding loan balance in the last 12 months, or 2) greater of 50% of the vested balance of the participant - current outstanding loan balance or $10,000 |
| If a participant terminates service, when will the unvested portion of their account be forfeited? | Upon the earlier of a full distribution or five consecutive breaks in vesting service. |
| How can a re-hired participant have forfeited amounts restored? | If the participant is rehired before 5 consecutive breaks in vesting service and pays back to the plan the full amount of the distribution subject to vesting, then the employer restores the forfeited portion. |
| What years of service may be excluded from vesting credit? | Years of service prior to age 18 and years prior to plan establishment. |
| What are the requirements to comply with 404(c)? | 1) broad range of investments, 2) diversified investments, 3) disclosure to participants, and 4) allow changes to investments at least quarterly. |
| Who must file a form 5500-EZ? | Owner only plans where the account balance exceeds $250,000. |
| Is a plan trustee a fiduciary? | Yes, (discretionary authority) although discretion may be limited by trust agreement. |
| When is the deadline to provide the Summary Annual Report to participants and beneficiaries? | Within the later of nine months after the close of the plan year or two months after the 5500 is due (in the case of an IRS granted extension). |
| What is the maximum cure period for a loan with late payments? | End of the calendar quarter following the quarter the first missed payment was due. |
| Can a loan be repaid after it is deemed distributed? | Yes, the loan remains outstanding and continues to accrue interest until repaid. The plan administrator is responsible to continue to pursue repayment. |
| Is 100% vesting required at Early Retirement Age? Death? Normal Retirement Age? | 100% vesting is an optional provision for early retirement age and death, but is mandatory for normal retirement age. |
| What is the maximum loan repayment term permitted? | 5 years for a general purpose loan, however, can be longer for purchase of a principal residence. |
| What types of investments are allowed for a qualified plan? | Stocks, bonds, notes, debentures, mutual funds, deposit accounts, LLP interests, mortgages, real estate, treasury bills, common trust funds, savings accounts, CD's, life insurance policies, annuity contracts, etc. |
| What section of ERISA grants relief for the fiduciary's responsibility with respect to investment performance? | ERISA Sec. 404(c) |
| If an alternate payee of a QDRO takes a distribution, who pays the tax? | The recipient typically pays the tax, although there are some exceptions. |
| Which contribution sources must be 100% vested immediately? | Deferrals, ADP safe harbor contributions, QNEC, QMAC, and rollovers. |
| If a defaulted loan balance is deemed distributed, how does it get reported to the IRS? | 1099-R, Code L |
| What is the age 50 catch-up limit for 2025? | $7,500 |
| What is the required coverage for a fidelity bond? | At least 10% of plan assets, max $500,000 (or $1,000,000 if there are employer securities in the plan) |
| What is the deadline for an employer to establish a qualified retirement plan in order for the employer to make a profit sharing contribution for the plan year ending 12/31/2020 | Employer's tax filing deadline plus extensions. |
| Bill is hired in 2024 and earned $160,000 in 2024. Based on compensation alone, is Bill considered an HCE for 2024? | No. Compensation in the preceding plan year does not exceed the compensation threshold since he didn't work there during 2023. Bill will be considered an HCE for 2023, based on 2022 compensation. |
| What is the contribution limit for Roth 401(k) contributions for 2025? | $23,500 |
| Can the employer have an individual K plan and a SEP? | Yes, however they have a combined contribution limit. |
| If the participant takes part of the distribution and does a direct rollover with the other portion, what are the tax and penalty consequences? | The amount that is not rolled over, direct or indirect, will be taxed and penalized if under 59 1/2. |
