Chapter 19
Chapter 19
Savings/Match Plan
lEARNING oBJECTIVES:
A. Have a basic understanding of savings/match (thrift) plans
REVIEW:
This chapter begins with a slightly longer “What is it?” section, describing savings or thrift plans. Following a section on when such a plan may be useful, the chapter identifies some advantages and disadvantages. Design features and tax implications are discussed next, and the chapter ends with a reference for learning more and the referral back to Chapter 10 for plan installation information.
Chapter Outline:
A. What Is It?
B. When Is It Indicated?
C. Advantages
D. Disadvantages
E. Design Features
F. Tax Implications
G. How To Install A Plan
H. Where Can I Find Out More About It?
I. Chapter Endnotes
FEATURED TOPICS:
Thrift plans (savings plans)
CFP® CERTIFICATION EXAMINATION TOPIC:
Topic 61: Types of retirement plans
B. Types and basic provisions of qualified plans
1. Defined contribution
c. Profit sharing
7) Thrift plan
COMPETENCY:
Upon completion of this chapter, the student should be able to:
1. Have a basic understanding of savings/match (thrift) plans
KEY WORDS:
savings plan, thrift plan, match plan, actual contribution percentage (ACP), safe harbor, notice requirement, matching contribution limitation
DISCUSSION:
1. Discuss advantages and disadvantages of savings or thrift plans, especially considering different employee age and income levels.
2. Discuss ways in which contributions from higher income employees may be limited.
QUESTIONS:
1. Which of the following are features of contributions into a savings or thrift plan?
(1) after-tax employee contributions
(2) matching employer contributions
(3) pre-tax employee contributions
(4) deductible employee contributions
a. (1) only
b. (1) and (2) only
c. (1) (2) and (3) only
d. (2) (3) and (4) only
Chapter 19, p. 171
2. Which one of the following employee categories would typically benefit most from a savings or thrift plan?
a. low income; nearing retirement
b. high income; nearing retirement
c. low income; young age
d. high income; young age
Chapter 19, p. 171
3. Plans that combine the features of a regular profit sharing plan, a savings plan, and Section 401(k) salary reductions may have which of the following features?
(1) employee pre-tax salary reductions
(2) discretionary employer contributions
(3) employee after-tax contributions
(4) guaranteed retirement income benefits
a. (1) and (3) only
b. (1) (2) and (3) only
c. (2) (3) and (4) only
d. (1) (2) (3) and (4)
Chapter 19, p. 173
4. Which of the following may be used to help a plan meet the actual contribution percentage (ACP) test for matching contributions under Code section 401(m)?
(1) a plan that meets the requirements for a SIMPLE 401(k) plan
(2) the average ratio of contributions to income is not less than 125%
(3) a safe harbor plan that satisfies certain requirements including the matching contribution limitation, by not making any match on employee deferrals in excess of 6% of compensation
(4) highly compensated employees cannot contribute to the plan
a. (1) and (3) only
b. (1) (2) and (3) only
c. (2) (3) and (4) only
e. (1) (2) (3) and (4)
Chapter 19, pp. 173-74
ANSWERS:
1. b
2. d
3. b
4. a