Question

Nex sponsors a DB(k) plan that provides benefits for all employees. Nex adopted the plan four...

  1. Nex sponsors a DB(k) plan that provides benefits for all employees. Nex adopted the plan four years ago. Kleen, who is age 55 and earns $100,000, has been employed for the last ten years with Nex. Which of the following statements is correct regarding Kleen’s benefits under Nex’s DB(k) plan?
  2. Kleen will be limited on his deferral to the 401(k) plan because of the required contribution

to the DB part of the plan.

6.If the DB(k) plan provides for a cash balance option, then Kleen should be receiving pay

credits of 6% per year.

7.All benefits provided under the DB(k) plan will be 100 percent vested for Kleen.

8.Because this plan is a proto-type DB(k) plan, Nex will not have to file a Form 5500.

Homework Answers

Answer #1

Option (c) is correct. All benefits provided under the DB(k) plan will be 100 percent vested for Kleen.

Option (a) is not correct. Kleen will not be limited on his deferral to the 401(k) plan because of the required contribution. He could defer up to the annual limit.

Option (b) is not correct. If the DB(k) plan provides for a cash balance option, then Kleen should not be receiving pay credits of 6% per year. Since Kleen is over age 50, he would be receiving pay credits of 8% per year.

Option (d) is not correct because DB(k) plans must file a single Form 5500. "Because this plan is a proto-type DB(k) plan, Nex will not have to file a Form 5500" is not a correct statement.

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