Chapter 4 - Compensation

Question 1 of 15

1

IRC §415 compensation must include elective deferrals to a 401(k) plan.

Select one of the following:

True
False

Explanation

Question 2 of 15

1

The average percentage of total compensation that is considered for NHCEs must be at least 70 percent of the average percentage of total compensation considered for HCEs in order for the definition of compensation to satisfy IRC §414(s).

Select one of the following:

True
False

Explanation

Question 3 of 15

1

The plan’s definition of compensation used for allocating contributions must satisfy the nondiscriminatory definition of compensation under IRC §414(s).

Select one of the following:

True
False

Explanation

Question 4 of 15

1

IRC §414(s) compensation must include elective deferrals to a 401(k) plan to avoid testing that definition for nondiscrimination.

Select one of the following:

True
False

Explanation

Question 5 of 15

1

IRC §415 compensation must be used to determine HCEs.

Select one of the following:

True
False

Explanation

Question 6 of 15

1

IRC §414(s) compensation must be used to determine key employees.

Select one of the following:

True
False

Explanation

Question 7 of 15

1

IRC §415 compensation must not include tips, depending on how IRC §415 compensation is defined.

Select one of the following:

True
False

Explanation

Question 8 of 15

1

Designated Roth contributions are included in IRC §415 compensation.

Select one of the following:

True
False

Explanation

Question 9 of 15

1

Excluding nontaxable fringe benefits from IRC §415 compensation is a safe harbor modification to IRC §414(s) compensation, meaning the resulting definition will not need to be tested for nondiscrimination purposes.

Select one of the following:

True
False

Explanation

Question 10 of 15

1

IRC §415 compensation is based on the plan year.

Select one of the following:

True
False

Explanation

Question 11 of 15

1

All of the following statements regarding IRC §414(s) compensation are TRUE, EXCEPT:

Select one of the following:

A. A plan using a safe harbor definition of IRC §414(s) compensation for nondiscrimination testing need not perform the compensation ratio test.
B. A plan using a nonsafe harbor definition of IRC §414(s) compensation for nondiscrimination testing must apply such definition consistently for all participants.
C. A plan may meet the safe harbor definition of IRC §414(s) compensation by including 401(k) elective deferrals and excluding 125 plan elective deferrals.
D. A plan may use a 12-month period other than the plan year for purposes of determining IRC §414(s) compensation.
E. A plan may use a rate-of-pay definition of compensation for IRC §414(s) purposes.

Explanation

Question 12 of 15

1

All of the following exclusions are deemed reasonable for defining IRC §414(s) compensation, EXCEPT:

Select one of the following:

A. 20 percent of regular compensation
B. Bonuses
C. Overtime
D. Expense allowances
E. Fringe benefits

Explanation

Question 13 of 15

1

Based on the following information, determine the participant’s IRC §415 compensation:
 The employer sponsors a 401(k) plan that allows designated Roth contributions.
 The plan excludes overtime for allocation purposes.
 The participant’s taxable income, not including elective deferrals, is $58,000.
 The participant defers $4,000 as pre-tax elective deferrals and $4,000 as designated Roth contributions.
 The participant defers $500 into the employer’s IRC §125 plan.
 The participant’s overtime compensation totals $3,000.

Select one of the following:

A. $58,000
B. $59,500
C. $62,500
D. $66,500
E. $69,500

Explanation

Question 14 of 15

1

All of the following statements regarding the calculation of the employer deduction are true, EXCEPT:

Select one of the following:

A. In the case of a short taxable year, the deduction limit for a defined contribution plan is applied to aggregate participant compensation paid for the short period.
B. A short taxable year results in a prorated compensation dollar limit under IRC §401(a)(17).
C. A short plan year does not directly affect the defined contribution deduction limit because that deduction limit is based on participant compensation for the employer’s taxable year.
D. Compensation for deduction purposes is measured on the basis of the employer’s taxable year, whereas compensation for IRC §415 purposes is measured on the basis of the limitation year.
E. The definition of compensation used for allocation purposes must be the same as the definition of compensation used for deduction purposes.

Explanation

Question 15 of 15

1

Based on the following information, which of the following statements regarding the compensation ratio is/are TRUE?

I. The plan passes the compensation ratio test.
II. The compensation ratio for the HCEs is 81.5%.
III. The compensation ratio for the NHCEs is 93.3%.

Select one of the following:

A. I only
B. II only
C. I and II only
D. II and III only
E. I, II and III

	Created by Justin Guy (just over 8 years ago

DC3 DC3 Quiz on Chapter 4 - Compensation, created by Justin Guy (just on 21/10/2015.

Chapter 4 - Compensation

Question 1 of 15

IRC §415 compensation must include elective deferrals to a 401(k) plan.

Select one of the following:

Explanation

Question 2 of 15

The average percentage of total compensation that is considered for NHCEs must be at least 70 percent of the average percentage of total compensation considered for HCEs in order for the definition of compensation to satisfy IRC §414(s).

Select one of the following:

Explanation

Question 3 of 15

The plan’s definition of compensation used for allocating contributions must satisfy the nondiscriminatory definition of compensation under IRC §414(s).

Select one of the following:

Explanation

Question 4 of 15

IRC §414(s) compensation must include elective deferrals to a 401(k) plan to avoid testing that definition for nondiscrimination.

Select one of the following:

Explanation

Question 5 of 15

IRC §415 compensation must be used to determine HCEs.

Select one of the following:

Explanation

Question 6 of 15

IRC §414(s) compensation must be used to determine key employees.

Select one of the following:

Explanation

Question 7 of 15

IRC §415 compensation must not include tips, depending on how IRC §415 compensation is defined.

Select one of the following:

Explanation

Question 8 of 15

Designated Roth contributions are included in IRC §415 compensation.

Select one of the following:

Explanation

Question 9 of 15

Excluding nontaxable fringe benefits from IRC §415 compensation is a safe harbor modification to IRC §414(s) compensation, meaning the resulting definition will not need to be tested for nondiscrimination purposes.

Select one of the following:

Explanation

Question 10 of 15

IRC §415 compensation is based on the plan year.

Select one of the following:

Explanation

Question 11 of 15

All of the following statements regarding IRC §414(s) compensation are TRUE, EXCEPT:

Select one of the following:

Explanation

Question 12 of 15

All of the following exclusions are deemed reasonable for defining IRC §414(s) compensation, EXCEPT:

Select one of the following:

Explanation

Question 13 of 15

Select one of the following:

Explanation

Question 14 of 15

All of the following statements regarding the calculation of the employer deduction are true, EXCEPT:

Select one of the following:

Explanation

Question 15 of 15

Based on the following information, which of the following statements regarding the compensation ratio is/are TRUE? I. The plan passes the compensation ratio test. II. The compensation ratio for the HCEs is 81.5%. III. The compensation ratio for the NHCEs is 93.3%.

Select one of the following:

Explanation

Based on the following information, which of the following statements regarding the compensation ratio is/are TRUE?

I. The plan passes the compensation ratio test.
II. The compensation ratio for the HCEs is 81.5%.
III. The compensation ratio for the NHCEs is 93.3%.