Main Test
Based on the following information, determine the forfeiture amount attributable to the participant. • Date of Hire= April 30, 2020 (full-time employee) • Date of Participation = July 1, 2020 • Age of Participant= 30 0 $1,920 • Vesting service based on plan year (1000 hours) 0 $2,880 • Plan Year= Calendar year • Date of Termination = November 30, 2023 0 $3,200 • Date of Distribution = December 30, 2023 0 $4,000 • Vesting Schedule = 6-year graded • Nonelective Account Balance = $4,800 • Rollover Balance = $3,200 • Elective Deferral Balance = $2,000 -$1,920 -$2,880 -$3,200 -$4,000
-$1,920
Red Blood, Inc. maintains a 401(k) plan with a traditional ADP safe harbor using the minimum nonelective contribution. HCEs are eligible for the safe harbor contribution. Based on the following participant information, determine the total employer safe harbor contribution for 2023. The IRC §401(a)(17) compensation limit for 2023 is $330,000. -$5,250 -$13,200 -$15,150 -$145,150
-$15,150
Maroon, Inc. maintains a calendar year 401(k) plan with a traditional ADP nonelective safe harbor contribution equal to 3% of net compensation (compensation less deferrals). As of December 31, 2023, 90% of the plan assets were attributable to Martella, the only key employee in the company. Eugene is the only NHCE and non-key employee in the company. Based on the information below for 2024, what is the additional amount, if any, Maroon, Inc. must contribute to Eugene for the 2024 plan year? -$0 -$190 -$1,450 -$1,500
-$190
Based on the following information, determine the amount of forfeiture from the participant's account. Participant's Vested Percentage= 60% Elective Deferrals= $11,000 Rollovers = $3,000 QMACs = $1,000 Employer Match = $2,000 Employer Nonelective = $3,000 -$800 -$2,000 -$2,400 -$3,600
-$2,000
Based on the following information, determine the participant's RMD for 2024: • Date of Birth: 02/14/1949 • The participant is retired • Account balance as of 12/31/2023: $50,000 • Account balance as of 12/31/2024: $75,000 • The Uniform Lifetime Table is applicable to this participant • The life expectancy factor for age 74 is 25.5 • The life expectancy factor for age 75 is 24.6 -$1,960.78 -$2,032.52 -$2,941.18 -$3,048.78
-$2,032.52
Based on the following information, determine the maximum elective deferral in 2023 for the participant: • The plan is a calendar year 401 (k) plan that allows the maximum deferral amount • The participant is age 35 • The participant's compensation is $50,000 • The only contributions in 2023 are elective deferrals -$7,500 -$12,500 -$22,500 -$30,000
-$22,500
Johnny is a participant in the Black and Blue, Inc. 401 (k) plan. The plan permits in-plan Roth rollovers of all contribution sources. Based on the information below, what amount will Johnny need to include for federal income taxes purposes if he elects an in-plan Roth rollover of all possible sources? • Pre-Tax Elective Deferral Account= $100,000 • Roth Elective Deferral Account = $45,000 • After-tax voluntary employee contribution account= $30,000 ($8,000 attributable to earnings on contributions) • Employer safe harbor contribution account = $150,000 -$250,000 -$258,000 -$280,000 -$325,000
-$258,000
Based on the following information, determine the maximum elective deferral in 2023 for the participant: • The plan is a calendar year 401 (k) plan that allows for the maximum deferral amount and catch-up contributions • The participant is age 55 • The participant's compensation is $100,000 -$7,500 -$22,500 -$27,000 -$30,000
-$30,000
Richard is a participant in the Elm Street 401 (k) plan. He is not a participant in any other plans. The plan allows for multiple loans. The Elm Street 401 (k) plan is a calendar year plan. Based on the following information, what is the maximum loan that Richard can take from his plan on June 30, 2024? • Richard's Vested Account Balance on June 30, 2024 = $113,222 • Richard's Outstanding Loan Balance on June 30, 2024 = $12,000 • Richard's Outstanding Loan Balance on December 31, 2023 = $14,125 • Richard's Highest Outstanding Loan Balance in the 12 months prior to June 30, 2024 = $16,500 -$33,500 -$35,875 -$38,000 -$56,611
-$33,500
Beta, Inc. has a calendar year 401(k) plan which permits a discretionary employer nonelective contribution. The nonelective contribution is allocated using a permitted disparity method that satisfies the design-based safe harbor. Determine the allocation to Participant A for 2023: • The Taxable Wage Base (TWB) for 2023 is $160,200 • The integration level is 80% of the TWB for 2023 plus $1 • The employer has elected to make a nonelective contribution for 2023 equal to $100,000 • Round to the nearest dollar amount • All participants are eligible to share in the allocation for the plan year -$13,500 -$20,079 -$26,957 -$47,036
-$47,036
Based on the following information, determine what the tax withholding applicable to Brenden's distribution will be. • Brenden is receiving an eligible rollover distribution of $300,000 from a 401 {k} plan, all of which represent pre-tax amounts • $100,000 of the distribution consists of real estate • Brenden elects to directly roll over $30,000 to an IRA and to take a distribution of the real estate and whatever cash remains -$0 -$46,000 -$54,000 -$60,000
-$54,000
Based on the following information, determine the participant's vested account balance. • Years of Vesting Service= 3 • The participant is age 45 • Plan's Vesting Schedule = 6-year graded schedule Accounts • Rollover = $5,000 • QNEC = $500 • Matching Account Balance= $1,750 • Elective Deferrals = $3,500 • Total Account Balance = $10,750 -$4,300 -$9,400 -$9,700 -$9,850
-$9,700
Nicole is hired by Central, Inc. as a non-union employee. When does Nicole enter the 401(k) plan? 401K Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 1 Year of Service (=12 consecutive months during which the employee has completed at least 1,000 hours of service) • Eligibility computation period switches to plan year after the first eligibility period • Entry date: The 1st day of the month coinciding with or following the satisfaction of the eligibility requirements • Employee Exclusions: Nonresident aliens, union employees Nicole's employment data and Hours Worked • Date of Birth: 3/20/87 0 5/1/2023 • Date of Hire: 4/12/22 0 7/1/2023 • 4/12/22 - 12/31/22 = 500 hours • 1 /1 /23 - 4/11 /23 = 270 hours @ 1/1/2024 • 4/12/23 -12/31/23 = 1000 hours 0 5/1/2024 • 1 /1 /24 - 4/11 /24 = 500 hours -5/1/2023 -7/1/2023 -1/1/2024 -5/1/2024
-1/1/2024
A deemed distribution is reported on which of the following tax forms? -K-1 -5330 -W-2 -1099-R
-1099-R
Lisa is hired by Western, Inc. on 10/12/2023 as a part-time receptionist. She becomes a full-time client service representative on 4/2/2024. When does Lisa enter the 401 (k) plan? 401 (K) Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 1 month (Elapsed Time) • Entry Date: The first day of the month coinciding with or following the completion of the eligibility requirements • Employee Exclusions: Nonresident aliens, union, director level employees Lisa's Employment Data • Date of Birth: 9/14/1986 • Date of Hire: 10/12/2023 • Part-time from 10/12/2023 to 4/1/2024 • Full-time effective 4/2/2024 -12/1/2023 -11/1/2024 -1/1/2025 -Lisa does not enter the plan
-12/1/2023
Tamara is hired by Raven, Inc., terminates employment, and is rehired. When does Tamara enter the 401 (k) plan after she is rehired? 401K Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 6 consecutive months of service • Entry date: The first day of the month coinciding with or following the satisfaction of the eligibility requirements • Employee Exclusions: None Tamara's Employment Data • Date of Birth: 11/26/1980 • Date of Hire: 8/27/2012 • Date of Termination: 12/30/2012 • Date of Rehire: 5/27/2024 -5/27/2024 -12/1/2024 -6/1/2025 -1/1/2026
-12/1/2024
Sonat is hired by Robin, Inc., terminates employment, and is rehired. When did Sonat enter the 401{k) plan after he was rehired? 401 (~) Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirements: 3 consecutive months of service • Entry Date: The first day of the month coinciding with or following the satisfaction of the eligibility requirements • Employee Exclusions: None Sonat's Employment data • Date of Birth: 4/26/1977 • Date of Hire: 4/22/2017 • Date of Termination: 6/23/2017 • Date of Rehire: 10/13/2020 -10/13/2020 -2/1/2021 -11/1/2021 -1/1/2022
-2/1/2021
Wanda is hired by Sparrow, Inc. which sponsors a 401 (k) plan that has a 3-month eligibility period. Sparrow, Inc. amends their plan to add an employer match with a 1-year of service requirement effective as of 1/1/2023 (401(k) deferrals still requires 3-month eligibility period. When does Wanda enter the employer matching portion of the plan? Wanda's Employment data: • Date of Birth: 6/21/1990 0 7/1/2022 • Date of Hire: 2/18/2022 0 1/1/2023 • Employment Status: Full-time with 40 hours/week -3/1/2023 -7/1/2022 -1/1/2023 -1/1/2024
-3/1/2023
Southern, Inc. hires Ernie as a part-time delivery driver. Ernie is not a member of a union. When does Ernie enter the 401 (k) plan? 401 (~) Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 1 month of service (Elapsed Time) • Entry Date: 1st day of the month coinciding with or following the satisfaction of eligibility requirements • Employee Exclusions: Nonresident aliens, union employees Ernie's Personal Information • Date of Birth: 6/19/2002 • Hire Date: 2/4/2024 -3/1/2024 -3/4/2024 -4/1/2024 -Ernie does not enter the plan because he is part of an excluded class
-4/1/2024
Based on the following information, by which date must Libby receive her first required minimum distribution? • Libby is a 20% owner • Libby was born on March 5, 1952 • Libby retires on December 15, 2025 -3/5/2025 -4/1/2026 -12/31/2026 -12/31/2027
-4/1/2026
Which of the following statements regarding Qualified Domestic Relations Orders (QDROs) is TRUE? -A plan can provide for the payment of a QDRO to an alternate payee, even if the participant is not entitled to a current distribution. -A QDRO can provide that the amount due to an alternate payee will be determined at a future date. -A QDRO can include forms of payments that are not permitted by the plan document. -A QDRO does not require court approval.
-A plan can provide for the payment of a QDRO to an alternate payee, even if the participant is not entitled to a current distribution.
Which of the following statements regarding Qualified Domestic Relations Orders (QDROs} is TRUE? -A QDRO can include forms of payments that are not permitted by the plan document. -A plan can provide for the payment of a QDRO to an alternate payee, even if the participant is not entitled to a current distribution. -A QDRO does not require court approval. -A QDRO can provide that the amount due to an alternate payee will be determined at a future date.
-A plan can provide for the payment of a QDRO to an alternate payee, even if the participant is not entitled to a current distribution.
Which of the following statements regarding sharing in discretionary nonelective employer contributions is correct? -Participants who complete more than 500 hours of service must share in the allocations. -A plan can require that a participant complete at least 2,000 hours of service during a plan year to receive an allocation of contributions for such year. -A plan can require that all participants be employed at the end of a plan year in order to receive an allocation for such year. -Disabled participants must share in allocations for a plan year regardless of any allocation conditions imposed by the plan.
-A plan can require that all participants be employed at the end of a plan year in order to receive an allocation for such year.
Which of the following statements regarding a designed-based allocation method using permitted disparity is TRUE? -If an HCE begins to collect Social Security benefits, then the maximum permitted disparity percentage is reduced to 0%. ~If the integration level is equal to 100% of the Taxable Wage Base, then the maximum permitted disparity percentage is 5.7%. -If the integration level is equal to 150% of the Taxable Wage Base, then the maximum permitted disparity percentage is 5.4%. -The Taxable Wage Base is the limit on wages that are taken into account when determining retirement plan benefits.
~If the integration level is equal to 100% of the Taxable Wage Base, then the maximum permitted disparity percentage is 5.7%.
Xavier is hired by Cardinal, Inc. as a Client Service Rep. He is promoted to Sales Director on 10/15/2023. What is Xavier's plan participation status on 1/1/2024? 401K Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 6 months of service (Elapsed Time) • Entry Date: The first day of the month coinciding with or following the completion of the eligibility requirements • Employee Exclusions: Sales directors, hourly employees Xavier's Emgloyment Data • Date of Birth: 9/20/1967 • Date of Hire: 5/11/2021 • Plan Entry: 12/1/2021 • Employment Status: Full-time with 40 hours/week -Excluded employee on 1/1/2024 -Plan participant on 1/1/2024
-Excluded employee on 1/1/2024
Which one of the following would qualify for a hardship withdrawal under the IRS safe harbor reasons? -Expenses to prevent eviction from an apartment a participant lives in -Expenses for the next semester of private high school tuition for a participant's minor child -Expenses for the repair of the participant's vacation home that was damaged due to a tornado -Expenses for the repair of a dependent child's home that was damaged by a wildfire
-Expenses to prevent eviction from an apartment a participant lives in
Which of the following is a permissible reason to allow an in-service distribution of elective deferrals? -Attainment of age 55 -Deferrals that have been in the plan for at least two years -Completion of 5 years of participation in the plan -Financial hardship
-Financial hardship
Northern, Inc. hires Fran as a non-union hourly employee. When does Fran enter the 401 (k) plan? (Disregard the Long-Term Part-Time employeer rule for this question.) 401K Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 1 Year of Service (Year of Service is 12 consecutive months of employment with 1,000 hours of service) • Entry Date: 1st day of the month coinciding or with following the satisfaction of eligibility requirements • Employee Exclusions: Nonresident aliens, union employees, hourly employees Fran's Employee Information • Date of Birth: 11/26/1962 0 6/12/2024 • Date of Hire: 6/12/2023 • Hours of service: 35 hours/week -7/1/2023 -6/12/2024 -7/1/2024 -Fran does not enter the plan because she is part of an excluded part of employees
-Fran does not enter the plan because she is part of an excluded part of employees
An advantage of a SEP plan over a 401 {k) plan is which of the following? -SEP plans may restrict distributions to an employee until after they reach the normal retirement date in the plan. -It takes longer for an employee to become fully vested in their accounts in a SEP plan. -The catch-up contribution limit for a SEP plan is greater than that of a 401 (k) plan. -Generally, SEP plans do not have to file a Form 5500 each year.
-Generally, SEP plans do not have to file a Form 5500 each year.
Dianne has recently started employment with a new company and wants to roll over her balance, which is entirely pre-tax, from her prior employer's 401 (k) plan into her new employer's 401 (k) plan. Which of the following is a true statement about Dianne's rollover? -By law, her new employer's plan must accept rollovers from newly eligible participants. -If Dianne elects a direct rollover, then 20% of the account balance will be sent to the IRS as tax withholding. -If Dianne has received a taxable distribution of her account, then she has 120 days in which to complete the rollover to her new employer's plan. -If Dianne had an outstanding participant loan from her prior employer's plan, then if her new plan permits it, she may roll over the loan to the new plan.
-If Dianne had an outstanding participant loan from her prior employer's plan, then if her new plan permits it, she may roll over the loan to the new plan.
Ruth is hired by Sky, Inc., terminates employment, and is rehired. When did Ruth enter the 401 (k) plan after she was rehired? 401 (k) Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: None • Service Requirement: 6 months (Elapsed Time) • Entry date: The first day of the month coinciding with or following the satisfaction of the eligibility requirements • Employee Exclusions: None Ruth's Employment Data • Date of Birth: 1/3/2002 • Date of Hire: 9/21/2019 • Date of Entry: 4/1/2020 • Date of Termination: 5/15/2020 • Date of Rehire: 4/14/2021 • Employment Status: Full-time with 40 hrs/week during both employment stints • Break-in-service Rules: Plan does not use the 1-year Break-in-service Hold Out or the Rule of Parity -4/14/2021 -5/1/2021 -1/30/2023 -2/1/2023
-4/14/2021
Dee is a member of a union and is hired by Coffee, Inc. When does Dee enter the 401(k) plan? 401 (k) Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 1 • Age Requirement: Age 18 • Service Requirement: 1 month of service (Elapsed Time) • Entry Date: 1st day of the quarter after satisfying the eligibility requirements • Employee Exclusions: None Dee's Employee Data: • Date of Birth: 3/20/1993 • Date of Hire: 3/15/2024 -4/15/2024 -5/1/2024 -7/1/2024 -Dee does not enter the plan because she is part of an excluded class
-7/1/2024
Kyla is hired by Wonder, Inc. and wants to participate in the 401 (k) plan. When does Kyla enter the 401 (k) plan? 401K Plan Eligibility Conditions • Plan Year: Jul 1 to Jun 30 • Age Requirement: Age 21 • Service Requirement: 1 Year of Service (Year of Service is 12 consecutive months during which the employee has completed at least 1,000 hours of service). The eligibility computation period shifts to the plan year after the 1st computation period • Entry Date: The 1st day of the quarter coinciding with or following the satisfaction of the eligibility requirements • Employee Exclusions: Nonresident aliens Kyla's Employment Data • Date of Birth: 5/15/2004 • Date of Hire: 7/13/2022 • Employment Status: Full-time with 40 hours/week -10/1/2023 -1/1/2025 -5/15/2025 -7/1/2025
-7/1/2025
Quinn is hired by Midwest, Inc., terminates employment, and is rehired. When did Quinn enter the 401 {k) plan after he is rehired? 401K Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 1 Year of Service {=12 consecutive months during which the employee has completed at least 1,000 hours of service). The eligibility computation period shifts to the plan year after the 1st computation period. • Entry date: The 1st day of the month coinciding with or following the satisfaction of the eligibility requirements • Employee Exclusions: None Quinn's Employment Data and Hours • Date of Birth: 6/4/1991 • Date of Hire: 3/18/2013 • Date of Entry: 4/1/2014 • Date of Termination: 11/22/2018 -7/2/2021 -8/1/2021 -1/1/2022 -1/1/2023
-7/2/2021
Based on the following information, determine the participant's vested percentage as of the plan year endingJune 30, 2024. Hire Date= October 15, 2019 (full-time employee) Plan's Vesting Schedule = 6-year graded Normal Retirement Date in Plan= Age 65 Date of Birth = April 2, 1968 Computation Period = Plan Year Plan Year= July 1 -June 30 -40% -60% -80% -100%
-80%
Which of the following statements regarding cross-testing of employer nonelective contributions is TRUE? -Cross-testing requires that employees be put into groups based on their age. -A cross-tested allocation is not a designed based safe harbor allocation method. -With a cross-tested allocation, younger employees can receive a larger allocation than older employees with the same salary. -A cross-tested allocation can only be used if a plan is not top-heavy.
-A cross-tested allocation is not a designed based safe harbor allocation method.
Which of the following is a true statement about a deemed distribution of a participant loan? -A deemed distribution is offset from the participant's account and the obligation to pay is removed. -A deemed distribution of pre-tax money remains part of the account as an after-tax amount. -A deemed distribution is eligible to be rolled over to an IRA. -A deemed distribution cannot occur for the portion of an account that is attributable to elective deferrals.
-A deemed distribution of pre-tax money remains part of the account as an after-tax amount.
A plan uses the nonelective safe harbor contribution to satisfy the ADP safe harbor contribution requirement. Which of the following matching contributions satisfies the ACP safe harbor contribution requirement? -A discretionary matching contribution on deferrals up to the first 6% of compensation -A discretionary matching contribution on all deferrals -A discretionary matching contribution on deferrals up to the first 6% of compensation provided the total match does not exceed 4% of compensation -A match of 25% of deferrals on the first 8% of compensation
-A discretionary matching contribution on deferrals up to the first 6% of compensation provided the total match does not exceed 4% of compensation
Which of the following distributions would be subject to the 10% additional tax on early distributions? -A distribution made to a participant, age 50, who has elected early retirement under the plan. -A distribution made to a participant who has separated from service at age 56. -A QDRO distribution made to an alternate payee. -A distribution made to a participant's beneficiary, on account of the participant's death.
-A distribution made to a participant, age 50, who has elected early retirement under the plan.
Which of the following matching formulas satisfies the traditional ADP safe harbor? -A fixed matching contribution of 100% on the first 2% of compensation deferred, plus 50% on the next 3% of compensation deferred -A fixed matching contribution of 75% on the first 3% of compensation deferred, plus 50% on the next 3% of compensation deferred -A fixed matching contribution of 100% on the first 3% of compensation deferred, plus 75% on the next 3% of compensation deferred -A fixed matching contribution of 75% of all deferrals
-A fixed matching contribution of 100% on the first 3% of compensation deferred, plus 75% on the next 3% of compensation deferred
Alex has an account balance of $300,000 in his 401 (k) plan. He will be attaining the normal retirement age of 65 later this year. The plan must provide Alex with which of the following documents prior to him receiving a distribution? -A notice which explains the taxation rules -No documents must be provided as long as Alex makes a verbal request for a distribution -IRS Form 1099-R -IRS Form 945
-A notice which explains the taxation rules
Which of the following statements regarding a Qualified Automatic Contribution Arrangement (QACA) is TRUE? -A plan that includes an employer contribution that satisfies the traditional ADP safe harbor contribution requirement would also satisfy the QACA safe harbor contribution requirement. -The automatic contribution percentage under a QACA for a new participant must be at least 8% of compensation. Under a QACA, a participant cannot elect out of the automatic contribution feature. -Plans with a QACA are never required to provide an annual notice to participants.
-A plan that includes an employer contribution that satisfies the traditional ADP safe harbor contribution requirement would also satisfy the QACA safe harbor contribution requirement.
Which of the following statements regarding rollovers is TRUE? -A qualified plan must accept all eligible rollover distributions. -A hardship distribution can be rolled over using a 60-day rollover election. -The determination of whether a distribution is an eligible rollover distribution depends on the terms of the plan making the distribution. -A single sum death benefit paid to a beneficiary can be rolled over.
-A single sum death benefit paid to a beneficiary can be rolled over.
Which of the following statements regarding ADP and ACP safe harbor features is correct? -ADP and ACP safe harbor provisions must be set forth in the plan document. -The ADP and ACP safe harbor provisions allow an employer to avoid nondiscrimination testing on all employer contributions. -ADP and ACP safe harbor provisions are not available to employers that are partnerships. -If an employer cannot afford to make the ADP and ACP safe harbor contributions for a prior year, then the employer can delay making the contribution for up to 3 years.
-ADP and ACP safe harbor provisions must be set forth in the plan document.
When may a forfeiture occur under the terms of a defined contribution plan? -When the participant reaches the plan's normal retirement date -When the plan terminates -After a distribution is made to a terminated participant -When the participant reaches the plan's early retirement date
-After a distribution is made to a terminated participant
Which of the following statements regarding annual additions under IRC §415 is TRUE? -A participant who enters the plan mid-year has a prorated annual addition limit. -Annual additions are limited to the greater of 100% of IRC §415 compensation or the dollar limit in effect for the year. -Earnings are included as annual additions. -After-tax employee contributions are included as annual additions.
-After-tax employee contributions are included as annual additions.
Which of the following is a true statement about the break-in-service rules for vesting? -Prior service for a rehired employee must be ignored for purposes of calculating the employee's vested percentage. -The vesting percentage for a participant who has incurred three 1-year breaks-in-service will not increase based on future service. -The rule of parity allows a plan to disregard future service of a rehired employee when calculating vesting service. -An employee must be 0% vested in order for the rule of parity to apply.
-An employee must be 0% vested in order for the rule of parity to apply.
For a plan with 150 participants, the deadline for depositing deferrals into the plan after they are withheld is which of the following? -As soon as administratively feasible -7 business days -25 business days -By the end of the quarter
-As soon as administratively feasible
In addition to payroll deduction, which of the following is a way that after-tax employee contributions may be made to a plan? -By the employee's election to have the employer contribute match as after-tax -There is no other acceptable method -Recharacterizing a defaulted loan -By a personal payment such as a check
-By a personal payment such as a check
Which of the following statements regarding excess annual additions is TRUE? -Excess annual additions attributable to employer contributions can be distributed to participants. -Excess annual additions attributable to matching contributions can be returned to the employer. -Excess annual additions may be corrected by reallocating such amounts to other participants. -Excess annual additions must be reported to the IRS.
-Excess annual additions may be corrected by reallocating such amounts to other participants.
Cara defaulted on a participant loan in 2022. The amount of principal and interest was reported as a deemed distribution for 2022. She has a distributable event in 2024 and the loan is offset. Which of the following is a true statement regarding the loan offset? -There is no tax due for 2024 because it was attributable for 2022. -The plan must continue to carry to loan as an asset until the participant repays it. -It is reported on the W-2 as non-taxable income. -The defaulted loan is taxed a second time in 2024.
-There is no tax due for 2024 because it was attributable for 2022.
Which of the following statements regarding ADP safe harbor plans is TRUE? -If an employer is opposed to giving contributions to participants who terminate employment during a plan year, then a 401 (k) plan without an ADP safe harbor feature might be a better option. -Forfeitures cannot be used to offset ADP safe harbor contributions but can be used to offset contributions made to a 401 (k) plan that does not use the ADP safe harbor provisions. -ADP safe harbor contributions can be subject to the same statutory vesting schedules applicable to nonelective contributions under a 401 (k) plan that does not use the ADP safe harbor provisions. -The ADP safe harbor notice that must be provided to participants is substantially similar to
-If an employer is opposed to giving contributions to participants who terminate employment during a plan year, then a 401 (k) plan without an ADP safe harbor feature might be a better option.
Which of the following statements regarding a Qualified Joint and Survivor Annuity (QJSA)s correct? -If the distribution is being made as a joint and 50% survivor annuity and the monthly payment to the participant is $1,000, then upon the participant's death, the amount payable to the survivor would be $500. -A participant's spouse must consent to receiving a QJSA form of payment. -The QSJA is required to make distributions for a minimum of 1 0 years. -The QJSA is only available as a form of distribution if a participant retires on or after the plan's normal retirement age.
-If the distribution is being made as a joint and 50% survivor annuity and the monthly payment to the participant is $1,000, then upon the participant's death, the amount payable to the survivor would be $500.
Which of the following statements regarding a Qualified Joint and Survivor Annuity (QJSAi)s correct? -If the distribution is being made as a joint and 50% survivor annuity and the monthly payment to the participant is $1,000, then upon the participant's death, the amount payable to the survivor would be $500. -A participant's spouse must consent to receiving a QJSA form of payment. -The QJSA is only available as a form of distribution if a participant retires on or after the plan's normal retirement age. -The QSJA is required to make distributions for a minimum of 10 years.
-If the distribution is being made as a joint and 50% survivor annuity and the monthly payment to the participant is $1,000, then upon the participant's death, the amount payable to the survivor would be $500.
Which of the following statements regarding the form of distribution is correct? -An installment payment is usually provided by purchasing an annuity from an insurance company. -Installment payments may end prior to the selected payment period if the account has negative investment returns. -The amount of an installment payment must be based on the life expectancy of a participant. -Annuity payments cannot be made for more than 10 years.
-Installment payments may end prior to the selected payment period if the account has negative investment returns.
Which of the following statements regarding the form of distribution is correct? -Annuity payments cannot be made for more than 1 O years. -The amount of an installment payment must be based on the life expectancy of a participant. -Installment payments may end prior to the selected payment period if the account has negative investment returns. -An installment payment is usually provided by purchasing an annuity from an insurance company.
-Installment payments may end prior to the selected payment period if the account has negative investment returns.
Joan has an outstanding loan of $30,000 that is due to be fully repaid on February 1, 2026. She wants to refinance the loan and receive the maximum additional amount that is available and repay that on a new five-year repayment period starting on July 1, 2024. Her vested account balance is $322,000. How will the original loan impact the calculation of the refinanced new loan amount? -It will be disregarded because it is being repaid. -It will be subtracted from the $50,000 limit but not the 50% of the vested account balance limit. -It will be subtracted from the 50% of the vested account balance limit but not the $50,000 limit. -It will be treated as an outstanding loan when determining the new maximum loan amount.
-It will be treated as an outstanding loan when determining the new maximum loan amount.
Manny is a non-union employee who works 10 hours a week at Eastern, LLC. When does Manny enter the plan? Disregard the Long-Term Part-Time employee rule for this question. 401K Plan Eligibility Conditions • Plan Year: Jan 1 to Dec 31 • Age Requirement: Age 21 • Service Requirement: 1 Year of Service (Year of Service is 12 consecutive months during which the employee has completed at least 1,000 hours of service) • Entry Date: The earliest of Jan 1 or Jul 1 following the date the eligibility requirements are satisfied • Employee Exclusions: Nonresident aliens, union employee Manny's Employment Data: • Date of Birth: 10/19/1967 • Date of Hire: 2/5/2022 • Employment Status: Works 10 hours/week -3/1/2023 -7/1/2023 -1/1/2024 -Manny does not enter the plan
-Manny does not enter the plan
Which of the following sources of contributions may be subject to vesting? -Matching contributions -Elective deferrals -Rollovers -Qualified nonelective contributions
-Matching contributions
Which of the following is one of the main reasons for adopting a money purchase plan? -The plan can be designed with only lump sum payments so there is no need for spouses to approve distributions. -Unions that negotiate benefits want the certainty of a contribution for their members. -Employers have the discretion to not make contributions each year. -Active participants may withdraw their accounts at any time.
-Unions that negotiate benefits want the certainty of a contribution for their members.
Ellie is the HR Manager of Oriole, Inc. Ellie asks: "We are rehiring an employee who was with us two years ago. She is over age 21 but never satisfied the service requirement c participated in our 401 (k) plan. How do we determine when she is eligible for the plan - is it like she is a brand-new employee What is the best response? 401(k) Plan Eligibility Conditions • Age Requirement: Age 18 • Service Requirement: 1 year of service (Year of Service is 12 consecutive months during which the employee has -No, she is not considered a new employee. You review her prior employment. Since she did not satisfy the initial eligibility requirements, you look at her service in each subsequent plan year. -Once she satisfies the requirements during the plan year, she would enter the plan on the next entry date. Because of her previous employment, she will enter the plan on the date of rehire. -Yes, it is like she is a new em
-No, she is not considered a new employee. You review her prior employment. Since she did not satisfy the initial eligibility requirements, you look at her service in each subsequent plan year.
Which of the following statements regarding the ACP safe harbor feature is TRUE? -A plan that satisfies the ADP safe harbor must also satisfy the ACP safe harbor. -Employee after-tax contributions only satisfy the ACP test safe harbor if they are limited to 4% of compensation. -A matching formula of 100% of deferrals on the first 4% of compensation plus 150% on the next 2% of compensation satisfies the ACP safe harbor as long as the match is available to both HCEs and NHCEs. -One requirement of the ACP safe harbor is that the plan also satisfy the ADP safe harbor.
-One requirement of the ACP safe harbor is that the plan also satisfy the ADP safe harbor.
Which of the following statements regarding the ACP safe harbor feature is TRUE? -One requirement of the ACP safe harbor is that the plan also satisfy the ADP safe harbor. -Employee after-tax contributions only satisfy the ACP test safe harbor if they are limited to 4% of compensation. -A matching formula of 100% of deferrals on the first 4% of compensation plus 150% on the next 2%
-One requirement of the ACP safe harbor is that the plan also satisfy the ADP safe harbor.
Which of the following is a characteristic of a pension plan? -Pension plans are subject to a minimum funding requirement. -Pension plans must be funded primarily with the stock of the employer sponsoring the plan. -Pension plans may allow hardship distributions.
-Pension plans are subject to a minimum funding requirement.
When comparing ADP safe harbor and non-safe harbor plans, which of the following statements is TRUE? -ADP safe harbor contributions may be distributed at age 50 for any reason. -ADP safe harbor plans require full vesting for all contribution sources. -ADP safe harbor plan provisions must be communicated to participants annually by distributing an SPD. -Plans may be designed to provide ADP safe harbor contributions to only NHCEs and not HCEs.
-Plans may be designed to provide ADP safe harbor contributions to only NHCEs and not HCEs.
Which of the following statements is true when describing a year of vesting service? -Years of vesting service are always measured on a participant's anniversary date of hire. -Plans may use either the Counting Hours method or the Elapsed Time method to determine years of vesting service. -Years of service prior to the establishment of the plan must be counted when determining years of vesting service. -Participants are required to be employed on the last day of the year to be credited with a year of vesting service.
-Plans may use either the Counting Hours method or the Elapsed Time method to determine years of vesting service.
Which of the following is a characteristic of a defined contribution plan? -All 401 (k) plans are exempt from the top-heavy requirements -A newly established money purchase plan may permit elective deferrals as a contribution source -Profit-sharing plans may offer discretionary contributions -A stock bonus plan must purchase annuities payable from an insurance company for each vested employee that terminates
-Profit-sharing plans may offer discretionary contributions
Which of the following is a true statement about plans covered by ERISA and those that are not, such as SEP plans and SIMPLE IRA plans? -SEP plans do not need a plan document. -Qualified plans may limit when a participant may withdraw funds, but an IRA based plan may not. -Sponsors of all IRA based plans are required to file a Form 5500 each year. -SIMPLE IRA plans may have a vesting schedule while SEP plans may not.
-Qualified plans may limit when a participant may withdraw funds, but an IRA based plan may not.
What is the federal agency with jurisdiction over qualified plan participant rights and fiduciary oversight? -The Department of the Treasury -The Department of Justice -The Department of Labor -The Pension Benefit Guaranty Corporation
-The Department of Labor
Which of the following describes the taxation of Roth contributions in a 401 (k) plan? -The earnings are taxable to the participant each year as they are earned. -The contributions are deductible by the participant in the year contributed and taxed in the year distributed. -The contributions and earnings are included as taxable to the participant in the year contributed. -The contributions are taxable to the participant in the year contributed and may be tax free when distributed.
-The contributions are taxable to the participant in the year contributed and may be tax free when distributed.
Cyan, LLC has an existing profit-sharing plan and would like to add a deferral feature and ADP safe harbor utilizing matching contributions feature to its plan. Cyan, LLC has a calendar year plan and would like to add the features during the current plan year. Which of the following statements is TRUE? -The deferral and ADP matching safe harbor feature can only be added as of the first day of the following plan year. -Both features can be added at any time during the current plan year. -The deferral feature can be added during the year, but the ADP matching safe harbor feature can only be added as of the first day of the following plan year. -The deferral feature can be added at any time during the current plan year and the ADP matching safe harbor can be added as long as there are at least 3 months left in the current plan year.
-The deferral feature can be added at any time during the current plan year and the ADP matching safe harbor can be added as long as there are at least 3 months left in the current plan year.
Which of the following statements regarding IRS Form 1099-R is TRUE? -The form must be submitted to the IRS no later than December 31 following the year of the reportable distribution. -The form is not required if the total distribution is directly rolled over to another qualified plan or IRA. -The form must be provided to the participant no later than January 31st of the calendar year following the year of the distribution -The form is not required if the distribution consists only of Roth amounts which are not includible in income.
-The form must be provided to the participant no later than January 31st of the calendar year following the year of the distribution
Which of the following statements regarding the gateway test for using cross-testing is TRUE? -The gateway test is not satisfied, then employer allocations are not permitted to be made for the plan year. -The gateway test is satisfied if each NHCE receives an allocation of at least 5 percent of IRC §415 compensation. -Designed-based safe harbor allocation methods are subject to the gateway test only when plans are top-heavy. -The gateway test is satisfied if the allocation rate for any NHCE who benefits under the plan is at least 25% of the lowest allocation rate for any HCE who benefits under the plan.
-The gateway test is satisfied if each NHCE receives an allocation of at least 5 percent of IRC §415 compensation.
What is the latest date that an employer can cash out unused vacation time for a terminated participant and have it count as compensation for deferral purposes? -The earlier of the end of the limitation year or 2 1/2 months .after severance -The earlier of the end of the plan year or the employee's tax filing deadline -The later of the end of the limitation year or 2 1/2 months after severance -The later of the end of the plan year or the employee's tax filing deadline
-The later of the end of the limitation year or 2 1/2 months after severance
Which of the statements regarding a vesting break-in-service is TRUE? -The break-in-service rules do not apply to plans that use the Elapsed Time method for crediting vesting service. -The law requires a plan to credit service for some types of leave of absence to prevent a break-in-service. -A plan may define a break-in-service as a plan year with less than 1000 hours of service. -Years of service prior to a partially vested participant's break-in-service may always be disregarded for vesting.
-The law requires a plan to credit service for some types of leave of absence to prevent a break-in-service.
Which of the following is the correct formula for determining the maximum loan amount a participant may receive from a defined contribution plan? -50% of the vested account balance minus the highest outstanding loan balance in the prior twelve months -$50,000 minus 50% of the vested account balance minus any current outstanding loan amounts -The lesser of 50% of the vested account balance minus any current loans OR $50,000 minus the repaid amount minus any current outstanding loan amounts -The lesser of $50,000 OR 50% of the vested account balance minus the repaid amount on any current loans
-The lesser of 50% of the vested account balance minus any current loans OR $50,000 minus the repaid amount minus any current outstanding loan amounts
The HR director at Purple Co. asks Penelope, their Plan Manager, to assist with determining how employer contributions are allocated to participants in the Purple 401 (k) plan. Which document should they refer to? -The plan's SMM -The plan's operating procedures -The specs in the administrative software -The plan document
-The plan document
Which of the following statements regarding the distribution of an elective deferral account is TRUE? -The plan may allow an in-service distribution on account of a financial hardship regardless of a participant's age. -A distribution upon a participant's termination of employment can only be made if the participant has attained age 50. -A distribution upon a participant's disability can only be made if the participant has attained age 59ó. -An in-service distribution can be made at age 50 regardless of the reason for the distribution.
-The plan may allow an in-service distribution on account of a financial hardship regardless of a participant's age.
Which of the following is one of the conditions a 401 (k) plan must satisfy in to be exempt from the Qualified Joint and Survivor Annuity (QJSA) rules? -The plan offers an installment form of payment -The plan only offers a single life annuity form of payment -The plan provides a death benefit to a participant's surviving spouse (unless the spouse consents to an alternative beneficiary) equal to 100% of the participant's account -The plan offers a joint and 50% survivor annuity payment option
-The plan provides a death benefit to a participant's surviving spouse (unless the spouse consents to an alternative beneficiary) equal to 100% of the participant's account
When refinancing a participant loan, the interest rate used will be which of the following: -The DOL's monthly permissible rate -The rate of the replacement loan -A blended rate of the replaced and replacement loan -The rate of the replaced or original loan
-The rate of the replacement loan
Title II of ERISA contains which of the following? -The labor laws associated with retirement plans -The division of responsibilities between the Department of Labor and the Department of the Treasury Department -The insurance provisions for defined benefit plans -The tax laws associated with retirement plans
-The tax laws associated with retirement plans
Which of the following is a characteristic of a 403{b) arrangement that is exempt from ERISA? -Very limited employer involvement in the administration of the plan -It must offer a matching contribution equal to 100% of elective deferrals -Elective deferrals are required to be made as a condition of employment -Nonelective deferrals must be at least 3% of compensation
-Very limited employer involvement in the administration of the plan
Duane is the President of Eagle, asks: "I have hired several new employees recently and when we start our plan, I would like them to be eligible. However, I would like new employees that I hire going forward to wait 3 months before they enter the plan, can I do this?" What is the best response? -No, you cannot waive the eligibility requirements for a new plan with HCEs because it would cause the plan to fail the nondiscrimination requirements. -Yes, all existing employees are automatically eligible when you start a 401 (k) plan. The only way to avoid this is to file Form 5288 with the IRS. -No, eligibility service for a 401 (k) plan can only start when the plan starts. So, all employees will have to meet the service requirement starting at the commencement date of the plan. -Yes, when you start a plan, you can allow all existing employees to enter the plan immediately while requiring new employees to satisfy a servi
-Yes, when you start a plan, you can allow all existing employees to enter the plan immediately while requiring new employees to satisfy a service requirement.
Christine is the President of Penguin, Inc. Christine asks: 'We hired a number of part-time employees in 2023 that work between 10-30 hours/week. How can we exclude them from employer contributions in our 401 (k) plan?" What is the best response? -You cannot exclude part-time employees by name, however you can put an hourly requirement in the plan. The maximum number of hours you can require is 1,000 in a year for employer contributions. -You cannot exclude part-time employees by name, however you can put an hourly requirement in the plan and exclude employees that work less than 30 hours/week. -The 401 (k) plan is only for full-time employees, you do not need to report or provide any plan information to part-time employees. -You can exclude all employees that you consider part-time by writing it in as a job class exclusion as long as your plan satisfies the annual nondiscrimination requirements.
-You cannot exclude part-time employees by name, however you can put an hourly requirement in the plan. The maximum number of hours you can require is 1,000 in a year for employer contributions.
Barnabus, the owner of Dark Shadows, Inc. is about to be divorced. He asks if his account balance is protected from his spouse. Which of the following is the correct response? -Your spouse is only entitled to the amount stated in a Qualified Domestic Relations Order (QDRO). -Your spouse is entitled to 25% of your account upon divorce. -Your spouse cannot receive any part of your account upon divorce. -Your spouse is only entitled to the amount stated in a mutual agreement with your spouse.
-Your spouse is only entitled to the amount stated in a Qualified Domestic Relations Order (QDRO).
Which of the following is a true statement about the reallocation of forfeitures in a profit-sharing plan? Forfeitures may be used as an additional contribution to participants.
Forfeitures may be used as an additional contribution to participants.
