QKA Designation: Exam 1 || Solved Correctly.
defined contribution plan correct answers retirement plan in which the employer sets up an
individual account for each employee and specifies the size of the investment into that
account
401(k) plan correct answers a tax-deferred retirement plan offered to employees by their
employer
401(k) Plan Features correct answers - can be Profit Sharing or Stock Bonus
- always has elective deferrals
- all employers except government
- combo of employee + employer (matching and nonelective) contributions
Money Purchase Plan correct answers Defined contribution plan with mandatory employer
contributions and no employee contributions
Money Purchase Plan Features correct answers - plan that uses a fixed percentage of
employee earnings to defer compensation
- good for organizations with relatively stable earnings percentage is fixed
- contributions must be made every year
- contribution limits are same as profit-sharing plans
pension plan correct answers a retirement plan that is funded at least in part by an employer
Pension Plan Features correct answers - plan with minimum funding requirement
- no hardship distributions
profit-sharing plan correct answers an organization-wide plan that distributes compensation
based on some established formula designed around a company's profitability
Profit Sharing Plan Features correct answers - plan with optional employer contributions
- 401(k) feature
- Discretionary employer contribution formula
- flexible distribution rules
- shares profit with all employees
Stock Bonus Plan correct answers a type of profit-sharing plan in which the employer
rewards employees with company stock instead of cash
Employee Stock Ownership Plan (ESOP) correct answers a company-established benefits
plan in which employees acquire stock, often at below-market prices, as part of their benefits.
can be combined with other DC plan or money purchase plan, or just stock bonus
403(b) plan correct answers a tax-deferred retirement plan for employees of tax-exempt
organizations
403(b) Plan + ERISA correct answers Plan that can be exempt from ERISA if they have no
employer contributions and the employer has limited involvement, and is not subject to
ADP/coverage testing
, defined benefit plan correct answers pension plan that guarantees a specified level of
retirement income
Simple employer plan (SEP) correct answers - Plan for small businesses
- only has employer contributions
- all eligible employees must participate
- low admin
- Pro-rata based on compensation or permitted disparity
Permitted Disparity Formula correct answers *PD=Excess cont % - Base Cont %*
*DC PD*
Lesser of
i. base contribution % or ii. 5.7%
*DB D*
Lesser of
i. 1/2 excess bene % or ii. 5.7%
Permitted Disparity (Social Security Integration) correct answers A technique or method of
allocating qualified plan contributions to an employee account that provides a higher
contribution to those employees whose compensation is in excess of the Social Security wage
base ($137,700 for 2020) or selected integration level for the plan year.
SIMPLE IRA correct answers an IRA for small businesses in which the employer matches
employee contributions
SIMPLE 401(k) correct answers -a cross between a simple ira and traditional 401(k) plan and
offers some features of both plans.
-employee is vested immediately.
- for small businesses
Retirement Plan Government Requirements correct answers Satisfying ERISA + IRC Sec
401(a)
ERISA correct answers - Body of law that governs retirement plans
- Governs through DOL or Dept. of Treasury (IRS)
DOL Oversight correct answers Dept. that oversees:
- participant rights
- fiduciary behavior
DOT + IRS Oversight correct answers Dept. that oversees:
- tax issues
- tax benefit qualification (for qualified plans)
ERISA Title I correct answers Includes:
- Labor Law Provisions
- DOL Enforced
- Advise employees regarding benefits they offer
- Deliver promised benefits
defined contribution plan correct answers retirement plan in which the employer sets up an
individual account for each employee and specifies the size of the investment into that
account
401(k) plan correct answers a tax-deferred retirement plan offered to employees by their
employer
401(k) Plan Features correct answers - can be Profit Sharing or Stock Bonus
- always has elective deferrals
- all employers except government
- combo of employee + employer (matching and nonelective) contributions
Money Purchase Plan correct answers Defined contribution plan with mandatory employer
contributions and no employee contributions
Money Purchase Plan Features correct answers - plan that uses a fixed percentage of
employee earnings to defer compensation
- good for organizations with relatively stable earnings percentage is fixed
- contributions must be made every year
- contribution limits are same as profit-sharing plans
pension plan correct answers a retirement plan that is funded at least in part by an employer
Pension Plan Features correct answers - plan with minimum funding requirement
- no hardship distributions
profit-sharing plan correct answers an organization-wide plan that distributes compensation
based on some established formula designed around a company's profitability
Profit Sharing Plan Features correct answers - plan with optional employer contributions
- 401(k) feature
- Discretionary employer contribution formula
- flexible distribution rules
- shares profit with all employees
Stock Bonus Plan correct answers a type of profit-sharing plan in which the employer
rewards employees with company stock instead of cash
Employee Stock Ownership Plan (ESOP) correct answers a company-established benefits
plan in which employees acquire stock, often at below-market prices, as part of their benefits.
can be combined with other DC plan or money purchase plan, or just stock bonus
403(b) plan correct answers a tax-deferred retirement plan for employees of tax-exempt
organizations
403(b) Plan + ERISA correct answers Plan that can be exempt from ERISA if they have no
employer contributions and the employer has limited involvement, and is not subject to
ADP/coverage testing
, defined benefit plan correct answers pension plan that guarantees a specified level of
retirement income
Simple employer plan (SEP) correct answers - Plan for small businesses
- only has employer contributions
- all eligible employees must participate
- low admin
- Pro-rata based on compensation or permitted disparity
Permitted Disparity Formula correct answers *PD=Excess cont % - Base Cont %*
*DC PD*
Lesser of
i. base contribution % or ii. 5.7%
*DB D*
Lesser of
i. 1/2 excess bene % or ii. 5.7%
Permitted Disparity (Social Security Integration) correct answers A technique or method of
allocating qualified plan contributions to an employee account that provides a higher
contribution to those employees whose compensation is in excess of the Social Security wage
base ($137,700 for 2020) or selected integration level for the plan year.
SIMPLE IRA correct answers an IRA for small businesses in which the employer matches
employee contributions
SIMPLE 401(k) correct answers -a cross between a simple ira and traditional 401(k) plan and
offers some features of both plans.
-employee is vested immediately.
- for small businesses
Retirement Plan Government Requirements correct answers Satisfying ERISA + IRC Sec
401(a)
ERISA correct answers - Body of law that governs retirement plans
- Governs through DOL or Dept. of Treasury (IRS)
DOL Oversight correct answers Dept. that oversees:
- participant rights
- fiduciary behavior
DOT + IRS Oversight correct answers Dept. that oversees:
- tax issues
- tax benefit qualification (for qualified plans)
ERISA Title I correct answers Includes:
- Labor Law Provisions
- DOL Enforced
- Advise employees regarding benefits they offer
- Deliver promised benefits
