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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.
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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.
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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.
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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).
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