Retirement Plan Design Flashcards
7 cards from real CRC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Retirement Plan Design flashcards as text
A company wants to reward long-tenure employees more generously. Which plan design feature best accomplishes this?
Answer: Years-of-service benefit formula
A years-of-service benefit formula directly ties the benefit amount to length of employment, rewarding long-tenure employees more.
Under IRC Section 415, what is the 2024 annual additions limit for a defined contribution plan?
Answer: $69,000
The IRC Section 415 limit on annual additions to a defined contribution plan is $69,000 for 2024 (or 100% of compensation if less).
What is the primary purpose of a top-hat plan?
Answer: Defer compensation for a select group of highly compensated or management employees
A top-hat plan is an unfunded, nonqualified deferred compensation plan maintained for a select group of management or highly compensated employees.
Which plan type requires the employer to fund based on actuarial calculations to meet future benefit obligations?
Answer: Defined benefit plan
Defined benefit plans require actuarial calculations to determine the funding needed to meet the promised future benefit obligations.
A 'frozen' defined benefit plan means:
Answer: No new participants can enter and/or no additional benefits accrue
A frozen defined benefit plan stops new benefit accruals and/or new participant entry while existing accrued benefits remain intact.
Which of the following best describes a cash balance plan?
Answer: A defined benefit plan that expresses benefits as a hypothetical account balance
A cash balance plan is a type of defined benefit plan that expresses each participant's benefit as a hypothetical account balance that grows with pay credits and interest credits.
The 'gateway' minimum contribution in a new comparability plan is required to:
Answer: Allow the plan to pass nondiscrimination testing under general testing rules
The gateway minimum contribution (typically 5% of compensation) ensures all non-highly compensated employees receive a baseline allocation so the plan can pass nondiscrimination testing.