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
Under the 'ratio percentage' test for minimum coverage, a plan must cover at least what percentage of NHCEs relative to the percentage of HCEs covered?
Answer: 70%
The ratio percentage test requires that the percentage of NHCEs benefiting under the plan be at least 70% of the percentage of HCEs benefiting.
A plan that provides different contribution rates to different employee classes must generally pass which IRC section test?
Answer: Section 401(a)(4) nondiscrimination testing
IRC Section 401(a)(4) requires that contributions or benefits not discriminate in favor of highly compensated employees, tested through various nondiscrimination tests.
Which feature of a safe harbor 401(k) plan eliminates the need to perform the ADP/ACP test?
Answer: A required employer contribution meeting safe harbor minimums with immediate 100% vesting
A safe harbor 401(k) plan avoids ADP/ACP testing by requiring the employer to make a specified minimum contribution that is immediately 100% vested.
What is the maximum compensation that can be taken into account for qualified plan purposes in 2024?
Answer: $345,000
The IRC Section 401(a)(17) compensation limit for qualified plan purposes is $345,000 for 2024.
In a top-heavy plan, the minimum employer contribution for non-key employees in a defined contribution plan is:
Answer: 3% of compensation
When a defined contribution plan is top-heavy, the employer must contribute at least 3% of compensation for each non-key employee who participates.
An employer redesigning a plan to include an automatic escalation feature primarily aims to:
Answer: Gradually increase employee deferral rates over time to improve retirement savings
Automatic escalation automatically increases employee deferral percentages each year, using inertia to help employees save progressively more toward retirement.
Which plan design allows an employer to make discretionary contributions that can vary from year to year, including contributing nothing in lean years?
Answer: Profit-sharing plan
A profit-sharing plan allows the employer to make discretionary contributions each year, including contributing nothing, giving maximum flexibility.