CPC Qualified Plan Compliance & Nondiscrimination Testing

Question 1

Under IRC Section 410(a), what is the maximum age and service requirement a qualified retirement plan may impose before allowing an employee to participate?

Accepted Answer

Age 21 with 1 year of service

Answer

IRC 410(a) permits plans to require employees to be at least age 21 and complete 1 year of service (1,000 hours) before becoming eligible to participate.

Question 2

Which two alternative tests may a qualified plan satisfy to meet the IRC Section 410(b) minimum coverage requirements?

Accepted Answer

Ratio percentage test or average benefit test

Answer

Under IRC 410(b), a plan must satisfy either the ratio percentage test or the average benefit test to demonstrate it does not discriminate in favor of highly compensated employees.

Question 3

Under the ratio percentage test for IRC Section 410(b) coverage, the percentage of NHCEs benefiting must be at least what fraction of the percentage of HCEs benefiting?

Accepted Answer

70%

Answer

The ratio percentage test requires that the NHCE benefit percentage equal at least 70% of the HCE benefit percentage.

Question 4

For the 2024 plan year, an employee is classified as a highly compensated employee (HCE) based on compensation from the employer that exceeded what threshold in the prior year?

Accepted Answer

$150,000

Answer

For 2024, an employee is an HCE if their 2023 compensation exceeded $150,000, or if they were a 5% owner at any time during the current or prior plan year.

Question 5

Which of the following employees may generally be excluded from coverage testing under IRC Section 410(b)?

Accepted Answer

Employees covered by a collective bargaining agreement where retirement benefits were subject to good-faith bargaining

Answer

IRC 410(b)(3)(A) permits plans to exclude employees covered by a collective bargaining agreement where retirement benefits were a subject of good-faith bargaining.

(CPC) Certified Pension Consultant Practice Test

(CPC) Certified Pension Consultant Practice Test

CPC Qualified Plan Compliance & Nondiscrimination Testing