CRC Retirement Plan Design 3

Question 1

An employer with 80 employees adopts a SIMPLE IRA. The maximum employer matching contribution as a percentage of compensation is:

Accepted Answer

3%

Answer

Under a SIMPLE IRA, the standard employer match is dollar-for-dollar up to 3% of the employee's compensation.

Question 2

Which vesting schedule is more favorable to employees who leave early?

Accepted Answer

3-year graded vesting

Answer

A 3-year graded schedule (e.g., 20%/year) gives employees partial vesting starting earlier than cliff schedules that provide nothing until fully vested.

Question 3

Which of the following is NOT a permissible in-service distribution event under a 401(k) plan?

Accepted Answer

Desire to purchase a vacation home without financial hardship

Answer

A general desire to purchase a vacation home without meeting hardship criteria is not a permissible in-service distribution event under a 401(k) plan.

Question 4

Under the ADP test, if the HCE average deferral rate is 8%, what is the maximum allowable HCE ADP under the 1.25× test?

Accepted Answer

10%

Answer

Under the 1.25× test, the HCE ADP cannot exceed 1.25 times the NHCE ADP; if HCE ADP is 8%, the NHCE ADP must be at least 6.4%, making 8% allowable when NHCEs average at least 6.4%—but stated differently, if NHCEs average 8%, HCEs can defer up to 10%.

Question 5

A plan sponsor wants to exclude part-time employees working fewer than 1,000 hours per year from plan participation. This is:

Accepted Answer

Permissible under the minimum coverage rules

Answer

ERISA permits plans to require employees to complete 1,000 hours of service in a 12-month period before becoming eligible to participate.

(CRC) Certified Retirement Counselor Practice Test

(CRC) Certified Retirement Counselor Practice Test

CRC Retirement Plan Design 3