term1 Definition1term2 Definition2term3 Definition3
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A plan must have both a contribution formula and an allocation formula.
TRUE
A last‐day employed condition on receiving an allocation will not affect a plan’s coverage testing under IRC §410(b).
NO
Imposing a last‐day employment condition on an allocation may affect coverage testing because participants in the coverage testing group who terminate employment before the end of the plan year will not be considered benefiting.
but a last day employment condition can be imposed in regards to terminating participants. if a EE terminates before the end of the determination period, then they may be excluded from coverage testing. but last day condition on allocations is not permitted.
A plan may use a different definition of compensation for allocation purposes and nondiscrimination testing.
TURE
Compensation used to calculate the required minimum benefit in a top‐heavy plan must be IRC §415 compensation.
cant be EE compensation for the year. must be IRC 415 compensation. (its different for some reason)
The IRC limits the amount of compensation that may be considered for allocation purposes.
A non‐top‐heavy plan could have a requirement that a participant complete at least 750 hours of service in the plan year to be eligible for a contribution allocation.
The annual additions limit under IRC §415 is the greater of 100 percent of IRC §415 compensation or $40,000, as indexed.
The annual additions limit is the LESSER of 100 percent of IRC §415 compensation or $40,000, as indexed.
Elective contributions that are characterized as catch‐up contributions are not included in a participant’s annual addition limit.
Allocations that do not satisfy the safe harbor requirements will need to show they are nondiscriminatory by passing the general test.
A participant may need to be employed on the last day of the plan year to be eligible for a minimum top‐heavy allocation.
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