What type of plan is a qualified plan that is subject to the ERISA contribution rules, but con-
tributions are made to each participant's IRA? - ANSWER SIMPLE 401(k) Plan.
Contributions under a 403(b) plan can be made to:
A) A custodial account invested in real property
B) An annuity contract provided through an insurance company
C) An employer trust account
D) A participant's IRA - ANSWER B) An annuity contract provided through an insurance
company
a profit-sharing or stock bonus plan that allows for employee elective deferrals - ANSWER
A 401(k) plan
T/F: State and local government employers can adopt a 401(k) plan. - ANSWER False
Aside from elective deferrals, what types of contributions can a 401(k) plan allow? - AN-
SWER - Matching contributions
-Nonelective contributions
-After-Tax contributions
-Pension Linked Emergency Savings contributions
Amounts of an employee's salary that the employer contributes to the plan, at the election
of the employee, in lieu of paying current compensation. - ANSWER Elective Deferrals
Elective deferral that is not included in the employee's current taxable income but rather is
taxable upon distribution. - ANSWER Pre-Tax Deferral
1
, Elective deferral that is currently taxable, but the earnings may be tax free upon distribution
if certain conditions are met. - ANSWER Roth Deferral
Employer contributions that are based on an employee's elective deferrals or after-tax con-
tributions. - ANSWER Matching Contributions
Employer contributions made to all employees regardless of, and not tied to, any elective de-
ferrals that an employee makes. - ANSWER Nonelective Contributions
Employee contributions that are included in the employee's current taxable income, but un-
like Roth deferrals, the earnings are taxed when distributed. - ANSWER After-Tax Contri-
butions
Employee Roth-like contributions that NHCEs may make until the account reaches
$2,500.00. These may be withdrawn during financial difficulties. - ANSWER Pension
Linked Emergency Savings
What are the 2 types of rules that need to be considered with contributions in a 401(k) plan?
- ANSWER Top-Heavy & Nondiscrimination
These rules require an employer contribution to a plan when most benefits go to the owners
and key employees. - ANSWER Top-Heavy Rules
These rules measure how much employees of a company benefit from the plan compared to
the owners and other highly paid employees. If employees choose not to defer or defer at a
low rate, it can limit how much the owners can defer. - ANSWER Nondiscrimination Rules
A less popular type of Defined Contribution Plan that has mandatory employer contribu-
tions, more restrictive distribution rules, and cannot permit elective deferrals. - ANSWER
Money Purchase Plan
2
tributions are made to each participant's IRA? - ANSWER SIMPLE 401(k) Plan.
Contributions under a 403(b) plan can be made to:
A) A custodial account invested in real property
B) An annuity contract provided through an insurance company
C) An employer trust account
D) A participant's IRA - ANSWER B) An annuity contract provided through an insurance
company
a profit-sharing or stock bonus plan that allows for employee elective deferrals - ANSWER
A 401(k) plan
T/F: State and local government employers can adopt a 401(k) plan. - ANSWER False
Aside from elective deferrals, what types of contributions can a 401(k) plan allow? - AN-
SWER - Matching contributions
-Nonelective contributions
-After-Tax contributions
-Pension Linked Emergency Savings contributions
Amounts of an employee's salary that the employer contributes to the plan, at the election
of the employee, in lieu of paying current compensation. - ANSWER Elective Deferrals
Elective deferral that is not included in the employee's current taxable income but rather is
taxable upon distribution. - ANSWER Pre-Tax Deferral
1
, Elective deferral that is currently taxable, but the earnings may be tax free upon distribution
if certain conditions are met. - ANSWER Roth Deferral
Employer contributions that are based on an employee's elective deferrals or after-tax con-
tributions. - ANSWER Matching Contributions
Employer contributions made to all employees regardless of, and not tied to, any elective de-
ferrals that an employee makes. - ANSWER Nonelective Contributions
Employee contributions that are included in the employee's current taxable income, but un-
like Roth deferrals, the earnings are taxed when distributed. - ANSWER After-Tax Contri-
butions
Employee Roth-like contributions that NHCEs may make until the account reaches
$2,500.00. These may be withdrawn during financial difficulties. - ANSWER Pension
Linked Emergency Savings
What are the 2 types of rules that need to be considered with contributions in a 401(k) plan?
- ANSWER Top-Heavy & Nondiscrimination
These rules require an employer contribution to a plan when most benefits go to the owners
and key employees. - ANSWER Top-Heavy Rules
These rules measure how much employees of a company benefit from the plan compared to
the owners and other highly paid employees. If employees choose not to defer or defer at a
low rate, it can limit how much the owners can defer. - ANSWER Nondiscrimination Rules
A less popular type of Defined Contribution Plan that has mandatory employer contribu-
tions, more restrictive distribution rules, and cannot permit elective deferrals. - ANSWER
Money Purchase Plan
2
