CPM CPM Retirement Plans & 401(k) Administration 2

Question 1

Which law governs the minimum standards for most voluntarily established retirement plans in private industry?

Accepted Answer

ERISA

Answer

ERISA (Employee Retirement Income Security Act of 1974) sets minimum standards for pension and benefit plans in private industry.

Question 2

What is a Required Minimum Distribution (RMD)?

Accepted Answer

The minimum withdrawal a participant must take from a retirement account starting at a certain age

Answer

An RMD is the minimum amount the IRS requires retirement account owners to withdraw annually, beginning at age 73 under SECURE 2.0.

Question 3

How is a 401(k) hardship withdrawal different from a 401(k) loan?

Accepted Answer

A hardship withdrawal is not repaid and is generally taxable; a loan is repaid with interest

Answer

A hardship withdrawal permanently reduces the account balance and is taxable income, while a loan is repaid with interest and not immediately taxable.

Question 4

What is the ADP test in 401(k) plan administration?

Accepted Answer

Actual Deferral Percentage test — a nondiscrimination test comparing HCE and NHCE deferral rates

Answer

The ADP (Actual Deferral Percentage) test ensures that highly compensated employee deferral rates do not exceed allowable limits relative to non-highly compensated employees.

Question 5

When must employee 401(k) deferrals be deposited into the plan trust?

Accepted Answer

As soon as administratively feasible, but no later than the 7th business day for small plans or 15 business days for large plans under DOL safe harbor

Answer

The DOL requires deferrals to be deposited as soon as reasonably possible; the safe harbor is 7 business days for small plans and no later than 15 business days for larger plans.

(CPM) Certified Payroll Manager Practice Test

(CPM) Certified Payroll Manager Practice Test

CPM CPM Retirement Plans & 401(k) Administration 2