Question

Which of the following statements concerning non-discrimination rules that apply to qualified plans is correct?

Group of answer choices

Compliance can only be achieved if the contribution rate for HCEs is no more than twice the rate of contribution for NHCEs.

There are only subjective, case-by-case tests for determining non-discrimination compliance.

The regulations require that all plans perform a mathematical test each year.

A plan can demonstrate compliance by showing that either benefits or contributions are non-discriminatory.

Answer 1

Ans: Option D: A Non- discrimination plan means that each employee of an Organisation is provided the same employee benefits , i.e, same benefits between HCEs (Highly compensated employees) and NHCEs (Non Highly compensated employees). A plan must fulfill one of the following conditions to qualify as non-discriminatory:

1. the contribution of HCEs can't exceed 125% of the contribution of NHCEs; or

2. the average HCE contribution doesn't exceed teh average NHCE contribution plus 2%, or doesn't exceed twice the NHCE rate, whichever is lower.

A plan can demonstrate compliance by showing that either benefits or contributions are non-discriminatory in nature, i.e, doesn't favour HCEs