Johnson & Wales University Wk 2 Use of Internal Revenue Service in Company Questions
Question Description
1.XYZ covered the following employees under its qualified plan.
1. Rob, a 4% owner and employee with compensation of $32,000.
2. Robin, Robs cousin, a commissioned salesperson with compensation of $160,000 last year (the highest paid employee). Robin owns 2% of the company stock.
3. Randy, the chief operating officer, who had compensation of $155,000 last year, but was not in the top 20% of paid employees.
Assuming the company made the 20% election when determining who is highly compensated, which of the following statements is correct?
Rob and Robin are both key employees.
Robin is a key employee, but Rob is not.
Randy is a key employee, but not a highly compensated employee.
Neither Rob, Robin, or Randy are highly compensated employees or key employees.
2.Which of the following people would be considered a highly compensated employee for 2020?
1. Amy, a 2% owner whose salary last year was $165,000.
2. Red, a 6% owner whose salary was $23,500 for the last five years.
3. Reese, an officer, who earned $115,000 last year and is the sixth highest paid employee of 96 employees.
4. Hank, a 0.5% owner who earned $127,000 last year and is in the top 20% of paid employees.
1 and 4.
1, 2, and 4.
1, 3, and 4.
1, 2, 3, and 4.
3. Acme Inc. has 200 total employees, 150 of which are nonexcludable employees. Ten employees are highly compensated. Seven of the 10 highly compensated and 100 of the 140 non-highly compensated employees are covered under Acmes qualified plan. The average accrued benefits for the highly compensated is 3% and the average accrued benefit for the non-highly compensated is 1.5%. Which of the following statements is true regarding coverage?
1. The plan passes the ratio percentage test.
2. The plan passes the average benefits test.
4. ABC Inc. sponsors a defined contribution plan. Seth, age 39, has compensation of $150,000 for the year. ABC has made a $20,000 profit sharing plan contribution for Seth and $5,000 of plan forfeitures were allocated to Seths profit sharing plan during the year. How much can Seth defer into his CODA plan (401(k) plan) for 2020?
5. Axe company sponsors a 401(k) profit sharing plan with no employer match, but the company did make noncontributory employer contributions because the plan was top-heavy. Jack quit today after six years working for Axe and has come to you to determine how much of his retirement balance he can take with him. The plan uses the least generous graduated vesting schedule available. What is Jacks vested account balance if he has been a participant for 57 months?
EMPLOYER EMPLOYEE
CONTRIBUTIONS $9,000 $12,000
EARNINGS $4,000 $5,000
6. Which of the following is an example of a qualified retirement plan?
7. Urban LLC sponsors a profit-sharing plan that requires employees to complete one year of service and be 21 years old before entering the plan. The plan also excludes all commissioned sales people and all other allowable exclusions allowed under the IRC. Which of the following employees could be excluded?
1. Jack, age 20, who works in administration and has been with the company for 32 months.
2. Jen, a commissioned sales person working in the Houston office. She is 37 years old and has been with the company for 3 years.
3. John works as the lead foreman in the company factory. Jack is 39 and has been with the company for 12 years and is covered under a collective bargaining agreement.
8.Which of the following vesting schedules may a top-heavy qualified cash balance plan use?
9. Tidewater Company has 1,000 eligible employees and sponsors a defined benefit pension plan. The company is unsure if they are meeting all of their testing requirements. How many employees (the minimum) must be covered by Tidewaters defined benefit pension plan for the plan to conform with ERISA?
10. Qualified plan documents can be written to accommodate plan forfeitures in different ways. Which of the following statements is correct?
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