Chapter 5 - Average Benefit Test and Special Rules

Question 1 of 16

1

To be excludable under the annual coverage testing method, an employee must be excludable for the entire plan year.

Select one of the following:

True
False

Explanation

Question 2 of 16

1

A plan passes the nondiscriminatory classification test if it passes either the reasonable classification test or the nondiscriminatory classification ratio test.

Select one of the following:

True
False

Explanation

Question 3 of 16

1

A plan with an NHCE concentration percentage of 70 percent will have a higher safe harbor percentage than a plan with an NHCE concentration percentage of 80 percent.

Select one of the following:

True
False

Explanation

Question 4 of 16

1

A plan with a coverage ratio percentage that is less than the safe harbor percentage fails the nondiscriminatory classification ratio test.

Select one of the following:

True
False

Explanation

Question 5 of 16

1

When calculating the ABP, both employer contributions and elective deferrals are included.

Select one of the following:

True
False

Explanation

Question 6 of 16

1

Permissive aggregation might be used when one plan fails coverage on its own but could pass when aggregated with another plan.

Select one of the following:

True
False

Explanation

Question 7 of 16

1

If an employee is part of two or more disaggregated groups during a plan year, each group must take into account all allocations made to the employee’s account during the plan year.

Select one of the following:

True
False

Explanation

Question 8 of 16

1

A plan must satisfy either the nondiscriminatory classification test or the ABP test to satisfy the average benefit test.

Select one of the following:

True
False

Explanation

Question 9 of 16

1

If NHCEs are excluded from the plan, the plan is deemed to satisfy coverage requirements.

Select one of the following:

True
False

Explanation

Question 10 of 16

1

Leased employees are part of the recipient employer’s workforce for coverage testing purposes.

Select one of the following:

True
False

Explanation

Question 11 of 16

1

All of the following are reasonable classifications with respect to the average benefit test, EXCEPT:

Select one of the following:

A. Hourly paid employees
B. Salary paid employees
C. Janitors
D. Employees named Joe Smith
E. Employees working in Maryland

Explanation

Question 12 of 16

1

All of the following statements regarding the ABP test are TRUE, EXCEPT:

Select one of the following:

A. The NHCE actual benefit percentage is the average of the employee benefit percentages for each NHCE in the coverage testing group.
B. Only employees who are benefiting are considered when determining the employee benefit percentages.
C. Elective deferrals are considered employer contributions and are, thus, included when determining employee benefit percentages.
D. The employee benefit percentages may be determined based on allocation rates or benefit rates.
E. Compensation used to determine employee benefit percentages must satisfy IRC §414(s).

Explanation

Question 13 of 16

1

Based on the following information, determine the minimum number of NHCEs that must benefit in order for the plan to pass the nondiscriminatory classification ratio test.
 HCEs benefit under the plan.
 The classification of covered employee is considered to be nondiscriminatory under the relevant facts and circumstances.
 The safe harbor percentage is 38.75 if the NHCE concentration percentage is 75 percent.
 The unsafe harbor percentage is 28.75 if the NHCE concentration percentage is 75 percent.
 The safe harbor percentage is 35.00 if the NHCE concentration percentage is 80 percent.
 The unsafe harbor percentage is 25.00 if the NHCE concentration percentage is 80 percent.

Select one of the following:

A. 15
B. 18
C. 20
D. 21
E. 24

Explanation

Question 14 of 16

1

All of the following statements regarding permissive aggregation for coverage testing are TRUE, EXCEPT:

Select one of the following:

A. Plans must have the same plan year to be permissively aggregated.
B. A plan may not be included in more than one group of aggregated plans for coverage testing purposes.
C. A qualified plan under IRC §401(a) is not allowed to take into account a SEP to demonstrate that it passes coverage.
D. An employee must meet the minimum age and service requirements for all plans in a permissively aggregated group to be considered a nonexcludable employee.
E. Plans that are permissively aggregated for coverage must be aggregated for nondiscrimination purposes.

Explanation

Question 15 of 16

1

Based on the following information, determine the maximum number of HCEs that may benefit to pass the ABP test.
 The coverage testing group consists of 70 NHCEs and 30 HCEs.
 Of the 70 NHCEs, 50 have a benefit percentage of 9 percent, ten have a benefit percentage of 4 percent and the other ten do not benefit under the plan.
 Each HCE either has a benefit percentage of 15 percent or does not benefit under the plan.

Select one of the following:

A. 10
B. 12
C. 20
D. 24
E. 30

Explanation

Question 16 of 16

1

All of the following statements regarding testing otherwise excludable employees separately for coverage purposes are TRUE, EXCEPT:

Select one of the following:

A. Separate testing may be done on a year-to-year basis.
B. If the average benefit test is used for statutory employees, it must also be used for the otherwise excludable employees.
C. Employees with more than one year of service are not considered otherwise excludable employees in plans with a two-year eligibility condition, unless they are not age 21.
D. The 401(k) component of the plan may use the otherwise excludable option even if the 401(m) component of the plan does not.
E. Plans that use the otherwise excludable option for coverage purposes must also use it for nondiscrimination testing.

	Created by Justin Guy (just about 9 years ago

DC3 DC3 Quiz on Chapter 5 - Average Benefit Test and Special Rules, created by Justin Guy (just on 22/10/2015.

Chapter 5 - Average Benefit Test and Special Rules

Question 1 of 16

To be excludable under the annual coverage testing method, an employee must be excludable for the entire plan year.

Select one of the following:

Explanation

Question 2 of 16

A plan passes the nondiscriminatory classification test if it passes either the reasonable classification test or the nondiscriminatory classification ratio test.

Select one of the following:

Explanation

Question 3 of 16

A plan with an NHCE concentration percentage of 70 percent will have a higher safe harbor percentage than a plan with an NHCE concentration percentage of 80 percent.

Select one of the following:

Explanation

Question 4 of 16

A plan with a coverage ratio percentage that is less than the safe harbor percentage fails the nondiscriminatory classification ratio test.

Select one of the following:

Explanation

Question 5 of 16

When calculating the ABP, both employer contributions and elective deferrals are included.

Select one of the following:

Explanation

Question 6 of 16

Permissive aggregation might be used when one plan fails coverage on its own but could pass when aggregated with another plan.

Select one of the following:

Explanation

Question 7 of 16

If an employee is part of two or more disaggregated groups during a plan year, each group must take into account all allocations made to the employee’s account during the plan year.

Select one of the following:

Explanation

Question 8 of 16

A plan must satisfy either the nondiscriminatory classification test or the ABP test to satisfy the average benefit test.

Select one of the following:

Explanation

Question 9 of 16

If NHCEs are excluded from the plan, the plan is deemed to satisfy coverage requirements.

Select one of the following:

Explanation

Question 10 of 16

Leased employees are part of the recipient employer’s workforce for coverage testing purposes.

Select one of the following:

Explanation

Question 11 of 16

All of the following are reasonable classifications with respect to the average benefit test, EXCEPT:

Select one of the following:

Explanation

Question 12 of 16

All of the following statements regarding the ABP test are TRUE, EXCEPT:

Select one of the following:

Explanation

Question 13 of 16

Select one of the following:

Explanation

Question 14 of 16

All of the following statements regarding permissive aggregation for coverage testing are TRUE, EXCEPT:

Select one of the following:

Explanation

Question 15 of 16

Select one of the following:

Explanation

Question 16 of 16

All of the following statements regarding testing otherwise excludable employees separately for coverage purposes are TRUE, EXCEPT:

Select one of the following:

Explanation