Introductory Terms

1
Introductory Terms

• Participant
• When one enters the PLAN
• Begins to accrue benefits
• Vesting
• Eligibility and participation

2
Age and Service Requirements

• Min age 21 allowed
• (Tax-exempt educational institution can use age
  26 to exclude grad assts, but must have 100
  vesting after 1 year of service.
• Max 1 year of service
• 2 years of service if 100 percent vesting upon
  entry
• Older employees
• DB contribs may be prohibitive Can define normal
  retirement age as fifth year after employment,
• Or can delay benefits until ten years after
  entry (but not later than age 70.5)

3
Age and Service Requirements

• Year of service 12 mo period with gt 1000 hours
  of service
• Eligibility uses initial 12 month period
• Otherwise, the plan year can be used.
• Break in service 12 month period with lt500
  hours service, can disregard prior service!
• If not vested and
• Not a plan participant before break 

4
Overall Coverage Tests One of Two

• Ratio percentage test
• NHCE gt .7HCE
• Average benefit test
• Avg. bene as a of compensation of NHCE gt
  .7HCE
• Plus at least 50 ees or 40 of all ees

5
Overall Coverage Tests

• Excluded ees
• Those who have not met min age and service tests
• Collectively bargained
• Railway labor act ees
• Nonresident aliens who receive no earned income
  from within the US

6
Overall Coverage Tests

• HCE
• Ever owned 5 of company
• Received greater than 99,000 per year (indexed,
  this is 94)
• Received comp gt 50,000 and was in top 20
• Ever an officer, and recd more than 59,400,
  indexed.
• Limits on number of officers

7
Who Will Pay

• Noncontributory is most common and increasingly
  so.
• Contrib
• After-tax dollar, unless salary reduction
• 401(k), 403(b), 457, SEP, and income is subject
  to FICA and FUTA (SS and UnN) 

8
Normal Retirement Age

• No later than 65 or 5 years after entry
• Used as an actuarial assumption to estimate
  contributions 

9
Early Retirement

• Receive immediate benefit
• Lower benefit
• May have some min years service
• Less time to accrue benefits
• Longer time to pay benefits
• Windows and golden parachutes

10
Delayed Retirement

• Benefits must continue to accrue
• Unless based on years of service (which can max
  out)
• Age discrimination
• Covers interstate commerce with gt19 ees during
  the year
• Excludes
• hazardous occupations
• Persons receiving gt44,000 per year (ignoring
  SS)

11
Discrimination

• Age
• Sex