FIN 442 CH 8 Discussion Q's

1.The business and personal issues that should be considered for a qualified plan selection are the employee's census, turnover, the funding requirements to keep the plan in place and to adopt, and the company philosophy on employee savings. 2.An employee census is a place that identifies every employee and their: age, compensation, length of service, and any ownership interest they have.This is important because it allows the owner to narrow down the plan to fit their own objectives. 3.The steps to adopt a qualified plan include: 1. Adoption of the written plan 2. Receiving a determination letter from the IRS and 3. Notifying the employees of the plan. 4.Employees should be notified by email, mail, in-person, or by post in an office bulletin board, etc.This plan notification should be told to those who need to know about it within 7-21 days before the determination letter is sent over to the IRS. 5.The minimum funding requirements for a qualified plan are that the amount must be based on what is contributed under the plan formula using actuarial assumptions and formulas provided.An actuary can work with the plan sponsor to determine the minimum funding requirements. 6.Contributions to a qualified plan can be deducted by an employer when those contributions were made in the same year as the deduction.Can be deducted up until taxes are submitted which is usually around April 15th. 7.Forfeitures treated in qualified plans can either reduce the amount the plan can contribute, or it can be spread across all of the participants' accounts. 8.The transactions that are prohibited in a qualified plan and the exceptions are those done by a disqualified person of the plan.For example a prohibited transaction would be a fiduciary of the plan, a person providing services to the plan, or an employer whose employees are covered in the plan. 9.The regulatory bodies and filing requirements for the operation of a qualified plan are ERISA, PBGC, and DOL. 10. A qualified plan would be amended or terminated under compensation particularly with smaller plans. 11. A qualified plan is amended when the summary plan document and also let the participants know about the change made. 12. A qualified plan can be terminated when all contributions and benefits to the plan stop and all employees are fully vested.All the money in the plan must be distributed within a reasonable amount of time. 13. The three types of termination are standard, distress, and involuntary.Standard termination is voluntary and can occur when the plan has sufficient assets to pay all liabilities at time of the final distribution.Distress termination is also voluntary and happens when the employer is financially unstable and is not able to keep the plan in action.Involuntary termination can be initiated by the PBGC with a plan that is unable to pay benefits from the plan in place.The PBGC can also terminate a pension plan even if the employer hasn't filed. 14. Assets from a qualified plan can revert back to the employer when assets in the plan exceed liabilities and obligations that are under the plan before the plan is terminated. There are a 20% excise tax on any amount that is reverted back to the employer.