QKA-1 Exam (2026) UPDATE Verified Questions And Answers | With 100% Correct Answers graded A+ Guaranteed Success!

A plan cannot satisfy ACP Safe Harbor test without meeting these requirements:

-Satisfy ADP test

-match can only be made on deferrals up to first 6% of comp

-rate of match cannot increase as rate of deferrals increases

-after-tax contributions always subject to ACP test

Cross-tested allocation method is NOT ________

a design based safe harbor allocation.

Nondiscrimination must be performed every year

When salaries are the same, older participants may receive a larger allocation

TRUE or FALSE: A plan may satisfy ADP safe harbor test and not satisfy ACP safe harbor test

TRUE

What matching formula satisfies traditional ADP safe harbor

traditional ADP safe harbor matching must be at least 100% of the first 3%, plus 50% of deferrals on 2% deferred

what characteristics does a 403(b) need to be exempt from ERISA

-only contribution source is elective deferral

-participation is voluntary

-employer involvement is limited

Characteristics of a pension plan

-subject to minimum funding requirement

-may not make hardship distributions

-payments may be paid as an annuity

-ESOPS must be funded with stock of employer

Options for a profit sharing plan for the reallocation of forfeitures

-paying plan expenses

-reducing employer contributions

-using it for additional contributions

may be utilized annually, but not accumulated year by year

Can a QJSA be paid if the spouse does not consent?

yes: it can be paid regardless of spouse's consent. consent is required when payments besides annuity are requested.

TRUE or FALSE: In a defined contribution plan, a participants benefit is based solely on the value of the account balance

TRUE

It is uncommon for a small company to have a deferral only 401(k) plan because of two rules:

Top heavy and non discrimination

What is an employer contribution made to all employees regardless of and not tied to employee deferrals?

Nonelective contributions

TRUE or FALSE: money purchase plans adopted in 2025 do not permit employee elective deferrals

True

TRUE or FALSE: a stock bonus plan has the same contribution and allocation formula as a profit sharing plan

TRUE

What plan type is designed to invest primarily in employer stock/securities

ESOP (Employee Stock Ownership Plan)

What is the maximum number of hours of service a SEP plan may require for an allocation

no minimum number of hours may be required

TRUE or FALSE: A SEP may not impose restrictions on withdrawals, employees can withdraw all funds anytime

TRUE

TRUE or FALSE: a Simple 401(k) plan is a qualified plan subject to ERISA rules, but contributions are made to each participants IRA

FALSE: the plan is subject to ERISA rules, but contributions are made to the plan's trust (not IRAs)

Contributions under a 403(b) can only be made to

- an annuity contract provided through insurance co.

-custodial account invested in mutual funds

-retirement account setup for church employees

403(b) plans are sometimes referred to as ____

tax sheltered annuity plans

The gateway test is only required when:

a plan wants to test allocations for nondiscrimination using cross-testing

What two ways to satisfy the gateway tests?

1 each NHCE receives allocation of 5% of 415 comp

2 allocation rate of any NHCE is at least 1/3 of the highest allocation for any HCE

TRUE or FALSE: a plan cannot require an employee to be employed at the end of the year to receive an allocation

FALSE: a plan can require employees to be employed at the end of the plan year

if the plan imposes service condition, it cannot be more than 1000 hours

Method for correcting excess annual additions

can be corrected by reallocating such amounts to other participants

plan can also refund after-tax contributions/deferrals, or hold excess amounts in a suspense account

What is included in the 415 Annual additions limit

elective deferrals

employee after tax contributions

employer contributions

forfeitures

What is the 415 Annual additions limit amount

the lesser of a participant's 415 compensation or the statutory dollar limit

When can an existing 401(k) plan add a safe harbor feature

Matching feature: can be added as long as there are at least 3 months of the year left

Nonelective: can be added up to 12 months following the end of the year

How to satisfy ACP test with matching contributions

matching contributions can only be made on deferrals up to the first 6% of comp

if the match is discretionary, the total cannot exceed 4% of comp

how are ADP and ACP satisfied under Safe Harbor

ADP and ACP provisions are set in plan document

used to auto satisfy nondiscrimination tests for elective deferrals and matching contributions

When must Safe harbor contributions be made

made no later than 12 months after the plan year

Safe Harbor Plan features

designed to provide safe harbor contributions to HCE/NHCE or only NHCE

safe harbor contributions can be distributed at 59.5 for any reason

safe harbor provisions communicated through annual notice

safe harbor contributions must be fully vested

TRUE or FALSE: defined contribution plans may be designed so that the employer contributions are discretionary

TRUE: some plans set a fixed match/nonelctive contribution but this is not required under the law

Features of a SEP plan

limited to employer contributions, these must be fully vested

employers cannot restrict distributions

Shared feature of SEP and Simple IRA plans

since they are not covered by ERISA, the contributions are held in an IRA account

participants can withdraw anytime

employer cannot impose withdrawal restrictions

Leave of Absences credited with service

FMLA leave

Military service

defined in the plan, prevents a break-in-service

When may a forfeiture occur under a defined contribution plan

timing depends on plan terms

may occur at the earlier of:

- five 1 year breaks in service

-distribution of vested account

When do participants become fully vested

- plan termination

- upon reaching normal retirement age (NRA)

What two methods can a plan use to determine vesting service?

Counting hours > cannot require more than 1000 during one period

Elapsed time

TRUE or FALSE: Plans must include years prior to the establishment of the plan when calculating vesting

FALSE: plans may exclude years prior

What types of contributions MUST be fully vested at the time they are contributed

elective deferrals

rollovers

after tax contributions

QNEC/QMAC

Safe harbor contributions

What types of contributions DO NOT need to be fully vested at the time they are contributed

Employer match

Employer nonelective contributions

Does an ex-spouse have a right to the participants benefits?

They only have a right if a QDRO (court approved Domestic Relations Order) has been issued, a plan is required to follow the terms of a QDRO

Where can a plans allocation provisions be found?

The plan document

Federal agency with jurisdiction over qualified plan participant rights and fiduciary oversight

Department of Labor (DOL)

Federal agency with jurisdiction responsible for oversight of the tax issues

Department of Treasury (includes IRS)

Federal agency that guarantees a participant's interests in a defined benefit plan

The Pension Benefit Guaranty Corporation

Title II of ERISA contains:

the tax laws associated with retirement plans, enforced by department of treasury

Title I of ERISA contains:

the labor laws provisions, enforced by DOL

Title III of ERISA:

Enforcement between Treasury and DOL

Title IV of ERISA:

only applies to defined benefits

What is the interest rate used when refinancing a participant loan

the rate of the new/replacement loan

What happens during a deemed distribution of a participant loan?

the pre-tax amounts are treated as income (taxed the year deemed) and subject to 10% penalty if they are under 59.5, it remains part of the balance until there is a distributable event

How is the max available loan amount calculated?

The LESSER of:

50% times the vested acct balance minus any outstanding loan amounts

OR

$50,000 minus repaid amount in prior 12 months, minus any outstanding loan amounts

TRUE or FALSE: A plan can provide the payment of a QDRO to the alternate payee even if the participant is not entitled to a distribution

TRUE

Characteristics of rollovers

-death benefits can be rolled over

-plans are not required to accept rollovers

-hardships cannot be rolled over

Distributable events for elective deferrals

-severance of employment

-reach 59.5

-death

-disability

-hardship

-child birth/adoption

-domestic abuse

-emergency

-disasters

Permissible reason to allow an in-service of elective deferrals

reach age 59.5

What document must be provided to a participant prior to them receiving a distribution?

required to provide a tax notice

True or False: installment payments guarantee the length of payments

False: payments will cease once the account is depleted

When do annuities cease payments?

upon the death of the participant and in some cases the death of the beneficiary

When are distributions exempt from the 10% penalty tax?

-distributions made due to separation of service after age 55

-death benefit

-QDRO

-disability

When must form 1099R be provided?

no later than January 31st of the the calendar year following the year of the distribution

When is a 1099R not required after a distribution?

When the amount distributed is less than $20

Qualifying hardship events

-medical expenses

-purchase of principal residence

-post secondary education

-prevent eviction/foreclosure

-burial expenses

-repairs that qualify for casualty deduction

-expenses related to federally declared disaster

Conditions a 401(k) plan must meet to be exempt from QJSA

1 spouse is entitled to entire death benefit (unless they consent to another beneficiary)

2 participant does not elect annuity payment (don't offer it)

3 benefit not attributable to a money purchase asset plan

Defined contribution plan characteristics

-maintains individual account for each participant

-benefit is based solely on value of acct balance

-balance reflects contributions, forfeitures, and earnings (and deducted expenses)

-participant bears the risk

-many plans permit participants to direct investments

401(k) plan characteristics

-profit sharing plan or stock bonus plan

-allows elective deferrals

-may allow PLESA

-can't be adopted by state/local government employers

Types of contributions made to 401(k) plans

elective deferrals

matching contributions

nonelective contributions

Matching contributions are:

employer contributions based on an employees elective deferral or after tax contribution

Nonelective contributions

employer contributions made to all employees regardless of elective deferrals made

After tax contributions

employee contributions that are included in current taxable, earnings are taxed when distributed

Pension Linked Emergency Savings (PLESA)

employee roth like contributions that NHCEs may make until $2,500

can be withdrawn in case of emergency

Top heavy rules

require an employer contribution to a plan where most benefits go to owners/key employees

Nondiscrimination rules

measure how much the employees of a company benefit from the plan compared to owners/key employees

affected by employees who defer low/none

Types of qualified plans

Defined contributions

Defined benefits

Types of defined contribution plans

Money purchase

Profit sharing

Stock bonus

Money purchase plan requirements

-required to have defined contribution formula

-may permit distribution only upon: retirement death, disability, termination, in-service (59.5)

-minimum funding requirements

-must comply with QJSA rules

-distribution must be annuity (unless participant/spouse consent to alternative payment)

Two reasons for money purchase plan

1 employers want obligation to make contributions, can be communicated to employees

2 unions/other classes want certainty of contributions

Profit sharing plan characteristics

defined contribution plan

employers contribution may be discretionary

can elect to include a formula

many include a 401(k) feature

Profit sharing plan requirements

-discretionary formula allowed

-requires contributions to be substantial and recurring

-allocation formula must be defined

-distributions are flexible, in-service can be allowed

-must comply with QJSA rules (satisfy exemptions)

Reasons for a profit sharing plan

1 flexible contributions and distributions

2 ability to add 401(k) deferral feature

Stock bonus plan characteristics

-like a profit sharing plan

-benefits are distributable in employer stock

-same contribution/allocation formula options as profit sharing

-discretionary formula allowed

-employer permitted to make contributions in stock

-cash contributions invested in employer stock

Reasons for stock bonus

required to be invested primarily in employer stock

Employee Stock Ownership Plan (ESOP)

-may be stock bonus or combo of stock bonus + money purchase

-entire play may be ESOP or a portion

-primarily invest in employer securities

-allocation/contribution formula rules are the same as PS plans

Defined benefits plan

-do NOT maintain individual account balances

-plan guarantees a benefit

-employer is responsible to ensure the plan has enough money to provide all benefits

-contributions required even if company has a bad year

Reasons for Defined benefits

-contributions can be very large (more than defined contributions max)

-accumulate larger benefits for owners/key employees

Simplified Employee Pension Plan (SEP)

-an employer provided IRA

-no trust established

-employer contributions to IRAs for participants

-employer cannot control when withdrawals are made

SEP eligibility

-minimum age up to 21

-service for at least 3 of the last 5 years

-no minimum hours

SEP contributions and allocations

allocation/contributions similar to PS plan

formulas are limited to:

pro-rata based on comp

-permitted disparity

-comp capped at max under 401a

-may require employee to receive minimum comp to be eligible for contribution

SEP Contribution and Deduction limits

max contribution and deduction per participant is lesser of 25% of comp or annual code section 415 limit

elective deferrals not allowed

contributions must be fully vested

SEP Misc

top heavy is based on contributions made to plan

uses SEP document 5305-SEP

exempt from filing form 5500

Starter(k)

-allows deferrals up to $6,000

-no option for employer contributions

-auto enrollment between 3%-15%

-no testing associated

SIMPLE IRA (Savings incentive match plan for employees)

-eligible employee can defer

-pre-tax or Roth deferrals

-deferrals are deposited to employee IRA

-contributions full vested

-exempt from top heavy and nondiscrimination

SIMPLE IRA Eligibility

-can only maintain the plan if it has 100 or fewer employees earning at least $5,000

-counts employees employed at any time of the year

-if plan exceeds 100, two year grace period to continue plan

SIMPLE IRA Misc

-two documents: plan document authorizes employer to make contributions

SIMPLE IRA document: vehicle that accepts contributions on employees behalf

-plan year same as calendar year

-does not have to file 5500

SIMPLE IRA Contributions

-deferral limit is smaller than 401(k)

-applicable dollar limit for each year

-comp limit applies for nonelective contribution

-cap on employer match of 3% of comp (not subject to limit)

-employer can only make one of the following contributions:

match 100% of deferral up to 3% of comp OR nonelective 2% of comp

SIMPLE IRA distributions

-distributions within first 2 years of participation may be subject to increased excise tax prior to 59.5

-increase excise from 10% to 25%

-employer cannot control when withdrawals are made

-RMD rules are different

SIMPLE 401(k) Plan (Savings Incentive Match Plan for Employees)

-qualified plan subject to SIMPLE IRA contribution rules

-contributions made to plan trust

-maintain less than 100 employees

-lower dollar limitation on deferrals

-employer contribution requirements

-top heavy/nondiscrimination satisfied

-contributions fully vested

-plan year is calendar year

-eligibility rules of 401(k) plan

-loans permitted

-form 5500 required

403(b) Plan

-deferred compensation plan

-educational orgs, churches, related orgs

-tax exempt employers under 501(c)

-elective deferrals made available to everyone (universal availability)

-elective deferrals not subject to ADP or coverage testing

What is ERISA

-requirements set forth by the law for qualified retirement plans

-stands for Employee Retirement Income Security Act of 1974

Define a trust

-separate legal entity that holds title to assets set aside for employees

-trust administered by trustee, responsible for safe guarding and investing funds