Chapter 7 - Benefit Limitations Under IRC 415

Card Set Information

Author:
bboylegsr
ID:
235077
Filename:
Chapter 7 - Benefit Limitations Under IRC 415
Updated:
2013-09-15 23:19:19
Tags:
Sample Test Questions
Folders:

Description:
Chapter 7 - Benefit Limitations Under IRC 415
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user bboylegsr on FreezingBlue Flashcards. What would you like to do?


  1. All of the following statements regarding the limitations under IRC 415 are TRUE, EXCEPT:
    A.  The dollar limit must be reduced if the participant has only five years of participation at retirement.
    B.  The dollar limit must be reduced if a qualified joint and survivor annuity is the elected form of benefit.
    C.  The dollar limit is increased if the retirement age is greater than age 65.
    D.  A $10,000 minimum benefit cannot be provided in a DB plan if the employer also maintains an IRC 401(k) plan which all employees are participating.
    E.  The dollar limit must be reduced where benefit payments begin before age 62.
    B

    Statement B is false since it is not necessary to reduce the dollar limit for a qualified joint and survivor benefit.
  2. Which of the following statements regarding the limitations under IRC 415 is/are true?

    I.  The annual benefit that may be paid to a participant under a defined benefit plan is limited to the greater of the dollar limit or 100% of the participant's highest consecutive 3-year average compensation.

    II.  For the percentage limit, the compensation must be averaged over the highest consecutive three-year period.

    III.  The percentage limit must be reduced proportionately for years of service less than ten (but not less than 10% of the full limit).

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

    Statement I is false, since it should say "lesser" not "greater".  The other two statements are correct.
  3. Based on the following information, which of the following represents the maximum annual benefit that a participant reaching his NRA of 65 in 2012 can have?
    - The participant has never participated in another plan of the employer.
    - The IRC 415 dollar limit for 2012 is $200,000
    I.  $120,000 for a participant with 7 years of participation and 9 years of service with average compensation of $150,000 per year.
    II.  $9,000 for a participant with 8 years of participation and 9 years of service with an average compensation of $6,000 per year
    III.  $180,000 for a participant with 8 years of participation and 10 years of service with an average compensation of $180,000 per year.

    A.  I only
    B.  II only
    C.  I and III only
    D.  II and III only
    E.  I, II and III
    • B
    • In statement I, the maximum benefit is $135,000.  This is equal to the compensation limit of $150,000 x 9/10 (note that the dollar limit of $200,000 x 7/10 is larger).  In statement II, it is true that the maximum benefit is $9,000.  This is true even though it exceeds the $6,000 compensation due to the de minimis $10,000 benefit, which must be reduced by $1,000 due to service less than 10 years.  In statement III the maximum benefit is the dollar limit of $160,000 = $200,000 x 8/10.
  4. Based on the following information, determine the maximum monthly benefit under IRC 415 for a participant based on the following information.  The participant has never been in any other plan of the employer:
    - Average monthly compensation = $600
    - Years of service = 6
    - Years of participation = 5

    A.  $300
    B.  $360
    C.  $417
    D.  $500
    E.  $600
    • D
    • $500=$10,000/12 x 6/10.  Note that the $10,000 annual de minimis amount applies since the annual compensation is less than $10,000.  The dollar limit would clearly not apply since it is so much larger than $10,000 (on an actual basis).

What would you like to do?

Home > Flashcards > Print Preview