Fundamental Payroll Certification Payroll Benefits and Retirement Plans 1 — Questions and Answers
Question 1: What is the IRS employee deferral limit for a 401(k) plan in 2024?
- $19,500
- $22,500
- $23,000 (Correct answer)
- $20,500
Correct answer: $23,000
The IRS set the 2024 annual 401(k) employee deferral limit at $23,000.
Question 2: Which type of retirement plan guarantees a specific monthly benefit at retirement based on salary and years of service?
- 401(k)
- Defined contribution plan
- Defined benefit plan (Correct answer)
- SIMPLE IRA
Correct answer: Defined benefit plan
A defined benefit plan promises a specific retirement benefit calculated from salary history and years of service.
Question 3: What is the catch-up contribution limit for employees aged 50 and over in a 401(k) plan for 2024?
- $5,000
- $6,500
- $7,500 (Correct answer)
- $3,000
Correct answer: $7,500
Employees aged 50 and older can make an additional $7,500 catch-up contribution to a 401(k) in 2024.
Question 4: A SIMPLE IRA plan may be established by employers with no more than how many employees?
- 25
- 50
- 100 (Correct answer)
- 250
Correct answer: 100
SIMPLE IRA plans are available to employers with 100 or fewer employees who earned at least $5,000 in the prior year.
Question 5: Which retirement plan requires the employer to contribute the same percentage of compensation for all eligible employees?
- 401(k)
- SEP IRA (Correct answer)
- 403(b)
- SIMPLE IRA
Correct answer: SEP IRA
In a SEP IRA, the employer must contribute the same percentage of compensation for every eligible employee.
Question 6: Pre-tax employee contributions to a traditional 401(k) plan reduce the employee's taxable wages for which tax?
- FICA taxes
- Federal income tax withholding (Correct answer)
- State unemployment tax
- Medicare tax
Correct answer: Federal income tax withholding
Traditional 401(k) pre-tax deferrals reduce federal income tax withholding but remain subject to FICA (Social Security and Medicare) taxes.
Fundamental Payroll Certification Payroll Benefits and Retirement Plans 1
What is the IRS employee deferral limit for a 401(k) plan in 2024?