QKA 1 Practice Verified Multiple Choice and
Conceptual Actual Frequently Tested Exam
Questions With Reviewed 100% Correct
Detailed Answers
Guaranteed Pass!!Current Update!!
1. For a plan with 150 participants, when must elective deferrals be deposited into
the plan after being withheld?
A) Within 30 days after payroll
B) By the 15th business day of the following month
C) As soon as administratively feasible
D) By the end of the plan year
Correct Answer: C) As soon as administratively feasible
Explanation:
DOL rules require that elective deferrals be deposited into the plan as soon as
they can reasonably be segregated from employer assets, not later than the 15th
business day of the following month. For most employers, this is much sooner.
"15th business day" is not a safe harbor—it’s the outer limit.
2. What is the latest date an employer can cash out unused vacation time for a
terminated participant and still have it count as compensation for deferral
purposes?
A) The end of the calendar year of termination
B) 30 days after severance
C) The later of the end of the limitation year or 2 ½ months after severance
D) The participant’s last day of employment
Correct Answer: C) The later of the end of the limitation year or 2 ½ months
after severance
,Explanation:
IRS rules allow post-severance compensation such as unused vacation payout to
be considered compensation if paid by this deadline. Beyond that, it cannot be
treated as compensation for contribution purposes.
3. A participant is age 35 with $50,000 compensation in 2023. The plan allows the
maximum deferral amount. What is the maximum elective deferral?
A) $20,500
B) $22,500
C) $30,000
D) $50,000
Correct Answer: B) $22,500
Explanation:
Under IRC §402(g), the 2023 elective deferral limit is $22,500 for participants
under age 50. The participant’s compensation ($50,000) is not a limiting factor
because it exceeds the deferral cap.
4. A participant is age 55 with $100,000 compensation in 2023. The plan allows
the maximum deferral and catch-up contributions. What is the maximum elective
deferral?
A) $22,500
B) $30,000
C) $23,000
D) $100,000
Correct Answer: B) $30,000
Explanation:
Participants age 50 or older may defer up to the §402(g) limit plus catch-up
contributions. In 2023, that means $22,500 + $7,500 = $30,000.
,5. Which statement best describes the taxation of Roth contributions in a 401(k)
plan?
A) Roth contributions are tax-deductible when made and taxable when
withdrawn.
B) Roth contributions are taxable in the year made, but earnings may be tax-free if
certain conditions are met.
C) Roth contributions are excluded from income when made and tax-free when
withdrawn.
D) Roth contributions are subject to double taxation: once when contributed and
again when withdrawn.
Correct Answer: B) Roth contributions are taxable in the year made, but
earnings may be tax-free if certain conditions are met.
Explanation:
Roth 401(k) contributions are made after-tax. The contributions themselves are
never taxed again, and qualified distributions of earnings are tax-free if
requirements (age 59½ and 5-year rule) are met.
6. Which of the following is TRUE regarding annual additions under IRC §415?
A) Employer contributions only are included.
B) After-tax employee contributions are excluded.
C) After-tax employee contributions are included.
D) Only elective deferrals count toward annual additions.
Correct Answer: C) After-tax employee contributions are included.
Explanation:
Annual additions under §415 include all contributions to a participant’s account:
employer contributions, elective deferrals, and after-tax employee contributions.
7. Which of the following statements regarding excess annual additions is TRUE?
, A) They can remain in the participant’s account if identified within one year.
B) They must always be returned to the participant as taxable income.
C) They may be corrected by reallocating the excess to other participants.
D) They can only be corrected by plan disqualification.
Correct Answer: C) They may be corrected by reallocating the excess to other
participants.
Explanation: Excess annual additions under IRC §415 must be corrected. One IRS-
approved correction method is reallocating the excess to other eligible
participants, subject to plan terms and nondiscrimination requirements.
8. Which of the following statements regarding sharing in discretionary
nonelective employer contributions is correct?
A) Plans cannot condition allocations on year-end employment.
B) A plan may require that participants be employed at the end of the plan year to
receive an allocation.
C) Allocations must always include terminated participants with any service during
the year.
D) The IRS prohibits allocation conditions tied to employment.
Correct Answer: B) A plan may require that participants be employed at the end
of the plan year to receive an allocation.
Explanation: Many plans impose an "employment on last day of plan year"
condition for profit-sharing allocations. This is permissible under IRS rules if it
complies with nondiscrimination requirements.
9. Which of the following statements regarding cross-testing of employer
nonelective contributions is TRUE?
A) It is considered a design-based safe harbor allocation method.
B) It requires converting allocations to equivalent benefits at retirement age.
Conceptual Actual Frequently Tested Exam
Questions With Reviewed 100% Correct
Detailed Answers
Guaranteed Pass!!Current Update!!
1. For a plan with 150 participants, when must elective deferrals be deposited into
the plan after being withheld?
A) Within 30 days after payroll
B) By the 15th business day of the following month
C) As soon as administratively feasible
D) By the end of the plan year
Correct Answer: C) As soon as administratively feasible
Explanation:
DOL rules require that elective deferrals be deposited into the plan as soon as
they can reasonably be segregated from employer assets, not later than the 15th
business day of the following month. For most employers, this is much sooner.
"15th business day" is not a safe harbor—it’s the outer limit.
2. What is the latest date an employer can cash out unused vacation time for a
terminated participant and still have it count as compensation for deferral
purposes?
A) The end of the calendar year of termination
B) 30 days after severance
C) The later of the end of the limitation year or 2 ½ months after severance
D) The participant’s last day of employment
Correct Answer: C) The later of the end of the limitation year or 2 ½ months
after severance
,Explanation:
IRS rules allow post-severance compensation such as unused vacation payout to
be considered compensation if paid by this deadline. Beyond that, it cannot be
treated as compensation for contribution purposes.
3. A participant is age 35 with $50,000 compensation in 2023. The plan allows the
maximum deferral amount. What is the maximum elective deferral?
A) $20,500
B) $22,500
C) $30,000
D) $50,000
Correct Answer: B) $22,500
Explanation:
Under IRC §402(g), the 2023 elective deferral limit is $22,500 for participants
under age 50. The participant’s compensation ($50,000) is not a limiting factor
because it exceeds the deferral cap.
4. A participant is age 55 with $100,000 compensation in 2023. The plan allows
the maximum deferral and catch-up contributions. What is the maximum elective
deferral?
A) $22,500
B) $30,000
C) $23,000
D) $100,000
Correct Answer: B) $30,000
Explanation:
Participants age 50 or older may defer up to the §402(g) limit plus catch-up
contributions. In 2023, that means $22,500 + $7,500 = $30,000.
,5. Which statement best describes the taxation of Roth contributions in a 401(k)
plan?
A) Roth contributions are tax-deductible when made and taxable when
withdrawn.
B) Roth contributions are taxable in the year made, but earnings may be tax-free if
certain conditions are met.
C) Roth contributions are excluded from income when made and tax-free when
withdrawn.
D) Roth contributions are subject to double taxation: once when contributed and
again when withdrawn.
Correct Answer: B) Roth contributions are taxable in the year made, but
earnings may be tax-free if certain conditions are met.
Explanation:
Roth 401(k) contributions are made after-tax. The contributions themselves are
never taxed again, and qualified distributions of earnings are tax-free if
requirements (age 59½ and 5-year rule) are met.
6. Which of the following is TRUE regarding annual additions under IRC §415?
A) Employer contributions only are included.
B) After-tax employee contributions are excluded.
C) After-tax employee contributions are included.
D) Only elective deferrals count toward annual additions.
Correct Answer: C) After-tax employee contributions are included.
Explanation:
Annual additions under §415 include all contributions to a participant’s account:
employer contributions, elective deferrals, and after-tax employee contributions.
7. Which of the following statements regarding excess annual additions is TRUE?
, A) They can remain in the participant’s account if identified within one year.
B) They must always be returned to the participant as taxable income.
C) They may be corrected by reallocating the excess to other participants.
D) They can only be corrected by plan disqualification.
Correct Answer: C) They may be corrected by reallocating the excess to other
participants.
Explanation: Excess annual additions under IRC §415 must be corrected. One IRS-
approved correction method is reallocating the excess to other eligible
participants, subject to plan terms and nondiscrimination requirements.
8. Which of the following statements regarding sharing in discretionary
nonelective employer contributions is correct?
A) Plans cannot condition allocations on year-end employment.
B) A plan may require that participants be employed at the end of the plan year to
receive an allocation.
C) Allocations must always include terminated participants with any service during
the year.
D) The IRS prohibits allocation conditions tied to employment.
Correct Answer: B) A plan may require that participants be employed at the end
of the plan year to receive an allocation.
Explanation: Many plans impose an "employment on last day of plan year"
condition for profit-sharing allocations. This is permissible under IRS rules if it
complies with nondiscrimination requirements.
9. Which of the following statements regarding cross-testing of employer
nonelective contributions is TRUE?
A) It is considered a design-based safe harbor allocation method.
B) It requires converting allocations to equivalent benefits at retirement age.
