Coverage

Question 1

What is the Safe Harbor Test for qualified plans?

Answer 1

Greater than or equal to 70% of NHC Covered

This test is one of the requirements for qualified plans to ensure coverage.

Question 2

What does the Ratio Test measure?

Answer 2

% of NHC Covered divided by % of HC Covered

This test is used to assess the coverage of qualified plans.

Question 3

What is the Average Benefits Test?

Answer 3

AB % of NHC Covered divided by AB % of HC Covered

This test evaluates the average benefits provided by the plan.

Question 4

What must all Defined Benefit Plans meet?

Answer 4

One of the coverage tests and pass the 50/40 test

This ensures that defined benefit plans provide adequate coverage.

Question 5

What is the 50/40 Test?

Answer 5

Must cover the lesser of 50 non-excludable employees or 40% of non-excludable employees

This test is part of the requirements for qualified plans.

Question 6

Who qualifies as a Highly Compensated Employee?

Answer 6

• Owner Employees: Owner of >5% OR Previous year’s compensation in excess of $160k for 2025 or $155k for 2024
• Non-owner Employees: Previous year’s compensation in excess of $160k for 2025 or $155k for 2024

This classification is important for determining plan coverage and benefits.