CPM Retirement Plans & 401(k) Administration Flashcards

What is a SIMPLE IRA plan, and which employers are eligible?

Answer: A Savings Incentive Match Plan for Employees; employers with 100 or fewer employees

A SIMPLE IRA is a Savings Incentive Match Plan for Employees available to employers with 100 or fewer employees who received at least $5,000 in compensation in the prior year.

What is a 'highly compensated employee' (HCE) for 401(k) nondiscrimination testing purposes in 2024?

Answer: An employee earning more than $155,000 or owning more than 5% of the company in the prior year

For 2024, an HCE is defined as an employee who earned more than $155,000 in the prior year or who owns more than 5% of the employer at any time during the year.

What does 'plan termination insurance' provided by the PBGC cover?

Answer: Defined benefit pension benefits up to statutory limits when a plan terminates with insufficient assets

The Pension Benefit Guaranty Corporation (PBGC) insures defined benefit pension plan benefits up to annual limits if a plan terminates with insufficient assets.

Under the SECURE 2.0 Act, what new provision helps employees save for retirement while repaying student loans?

Answer: Employers can make matching contributions to a retirement plan based on an employee's qualifying student loan payments

SECURE 2.0 allows employers to treat an employee's qualifying student loan payments as elective deferrals for purposes of the employer match.

What is a Roth 401(k) contribution?

Answer: An after-tax employee contribution that grows tax-free with qualified tax-free withdrawals

Roth 401(k) contributions are made with after-tax dollars, and qualified distributions (including earnings) are tax-free.

What is an 'automatic enrollment' feature in a 401(k) plan?

Answer: All employees are automatically enrolled unless they opt out

Automatic enrollment (EACA or QACA) defaults eligible employees into the plan at a set deferral rate unless they affirmatively opt out.