CRPC Employer-Sponsored Retirement Plans 4 — Questions and Answers
Question 1: What is the 415 limit for defined contribution plans in 2024?
- $23,000
- $46,000
- $69,000 (Correct answer)
- $275,000
Correct answer: $69,000
IRC Section 415 limits total annual additions to a participant's defined contribution account to $69,000 in 2024 (or 100% of compensation, if less).
Question 2: A 457(b) plan is available to which of the following employees?
- Employees of publicly traded corporations
- Self-employed sole proprietors
- State and local government employees and certain nonprofit employees (Correct answer)
- Only federal government employees
Correct answer: State and local government employees and certain nonprofit employees
457(b) plans are nonqualified deferred compensation plans for state/local government employees and eligible nonprofit employees.
Question 3: Under the terms of ERISA, what does the term 'plan year' mean for vesting calculation purposes?
- Always the calendar year January 1 through December 31
- The 12-month period designated by the plan document (Correct answer)
- Any period of at least 6 months elected by the employer
- The fiscal year the employer files its tax return
Correct answer: The 12-month period designated by the plan document
The plan year is a 12-month period specified in the plan document, which may or may not coincide with the calendar year.
Question 4: A participant in a defined benefit plan earns a pension benefit based on 1.5% × final average salary × years of service. This is an example of what formula type?
- Flat-benefit formula
- Career-average formula
- Final-pay formula (Correct answer)
- Unit-credit formula
Correct answer: Final-pay formula
A final-pay formula calculates benefits using compensation in the final years before retirement multiplied by years of service.
Question 5: What is the maximum compensation that can be considered for qualified plan contribution calculations in 2024?
- $230,000
- $265,000
- $305,000
- $345,000 (Correct answer)
Correct answer: $345,000
The IRC Section 401(a)(17) compensation limit for qualified plan calculations is $345,000 in 2024.
Question 6: Which of the following is TRUE about a cash balance pension plan?
- It is a type of defined contribution plan where investment risk falls on the participant
- It is a hybrid defined benefit plan that expresses benefits as a hypothetical account balance (Correct answer)
- It is only available to employees of financial institutions
- Participants direct their own investments within the hypothetical account
Correct answer: It is a hybrid defined benefit plan that expresses benefits as a hypothetical account balance
A cash balance plan is a defined benefit plan that credits participants with pay credits and interest credits to a hypothetical account balance.
Question 7: An employee leaves a job and has $6,000 in a former employer's 401(k). What is the employer permitted to do without employee consent?
- Roll the funds into an IRA chosen by the employer
- Force a cash distribution subject to 20% mandatory withholding (Correct answer)
- Hold the funds indefinitely regardless of balance
- Transfer the funds directly to the new employer's plan
Correct answer: Force a cash distribution subject to 20% mandatory withholding
For vested balances of $1,000–$7,000, plans may make an involuntary cash-out, subject to 20% mandatory withholding, unless the participant elects otherwise.
CRPC Employer-Sponsored Retirement Plans 4
What is the 415 limit for defined contribution plans in 2024?