CPC Qualified Plan Compliance & Nondiscrimination Testing 2

Question 1

Under IRC Section 411, what is the maximum cliff vesting schedule permitted for employer contributions to a non-top-heavy qualified plan?

Accepted Answer

3 years

Answer

Non-top-heavy plans may use cliff vesting up to 3 years, requiring employees to be 100% vested upon completing 3 years of service.

Question 2

Under the graded vesting schedule for non-top-heavy defined contribution plans, what percentage must an employee be vested after completing 4 years of service?

Accepted Answer

60%

Answer

Under the 2-to-6-year graded schedule, employees vest 20% per year starting at year 2: 20% at year 2, 40% at year 3, 60% at year 4, 80% at year 5, and 100% at year 6.

Question 3

For vesting purposes under ERISA, a 'year of service' is generally defined as a 12-consecutive-month period in which an employee completes at least how many hours of service?

Accepted Answer

1,000 hours

Answer

An employee must complete at least 1,000 hours of service within a 12-consecutive-month period to be credited with a year of service for vesting purposes.

Question 4

Under the 'rule of parity,' an employer may disregard an employee's pre-break years of service if the consecutive one-year breaks in service equal or exceed which threshold?

Accepted Answer

The greater of 5 years or pre-break years of service

Answer

The rule of parity permits disregarding pre-break service if the number of consecutive one-year breaks equals or exceeds the greater of 5 years or the employee's years of pre-break service.

Question 5

The '133-1/3 percent rule' for defined benefit plan accrual under IRC Section 411(b) prohibits the rate of future benefit accrual from exceeding what percentage of the rate of accrual for prior years?

Accepted Answer

133-1/3%

Answer

The 133-1/3% rule prevents back-loaded accruals by capping the annual accrual rate for later years at no more than 133.33% of the accrual rate for any earlier year.

(CPC) Certified Pension Consultant Practice Test

(CPC) Certified Pension Consultant Practice Test

CPC Qualified Plan Compliance & Nondiscrimination Testing 2