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401(k) Beyond the Basics 05: Coverage Testing Issue
Presentor: Derrin Watson Recorded Date: 9/12/2016 Duration: 60 Min.

Description
This program was recorded during a live presentation given on September 12, 2016 at 12:00PM EST.
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Do you already know the basics of 401(k) plans, and want to move on to the nitty gritty? There are so many rules, that it is impossible even for a very experienced practitioner to remember them all. Each installment in this series will present a one-hour focused look at a single topic affecting 401(k) plans and provide the information practitioners need to know to be sure they are fully assisting the companies and participants they serve. You can brush up on a single topic, or view the whole set, either as a live seminar, where you can ask questions, or as an archived presentation on your own schedule. Our standard pricing has been discounted to make attendance to all sessions in this series more cost effective. The series will cover the following:

401(k) Plans: Beyond the Basics Web Series

  • 401(k) BB 01: IRS and DOL Correction Programs:More than Alphabet Soup
  • 401(k) BB 02: Plan Document Requirements and Deadlines
  • 401(k) BB 03: Eligibility and Vesting Design Considerations
  • 401(k) BB 04: HCEs and Compensation
  • 401(k) BB 05: Coverage Testing Issues
  • 401(k) BB 06: The Average Benefit Test
  • 401(k) BB 07: Elective Deferral Options
  • 401(k) BB 08: ADP Testing Techniques
  • 401(k) BB 09: ACP Testing Techniques
  • 401(k) BB 10: After-tax Contributions: The Other White Meat
  • 401(k) BB 11: Safe Harbor 401(k) Plan Design
  • 401(k) BB 12: Safe Harbor 401(k) Plan Operation
  • 401(k) BB 13: Distribution Restrictions & Hardships
  • 401(k) BB 14: Participant Loans: The Fine Print
  • 401(k) BB 15: All About Roth

401(k) Beyond the Basics 05: Coverage Testing Issues

Coverage testing is fundamental not only in its own right, but also because it forms the backbone of nondiscrimination testing. And there is so much more to it than just the ratio percentage test. This program takes a detailed look and the nuances of the coverage test. Topics include:

  • Definition of a plan
    • What contributions are tested where
    • How many “plans” are in a single document
    • Permissive aggregation and disaggregation
  • Definition of benefiting
  • Differentiating between excludable and nonexcludable employees
  • Computing the coverage fraction
  • The average benefit percentage test for coverage
    • Reasonable, objective classifications
    • Safe and unsafe harbors
    • Average benefit percentage test
  • Allocation failsafe clauses
  • Coverage testing with different types of contributions

Note: This program is important in its own right, but also leads into the following program in the series dealing with the Average Benefit Test in nondiscrimination testing.

Prerequisites:

There are no prerequisites or other advanced preparation for this program. The instructor will assume attendees have a general familiarity with the qualified plan requirements, and a minimum of two years of experience in dealing with qualified plans.

Level: Intermediate

Instructional Delivery Method: Group – Internet-Based

NASBA Field of Study: Taxes

Speaker: S. Derrin Watson, J.D.
Recipient of ASPPA's 2006 Educator of the Year Award

Objectives: After attending this Web seminar, an attendee should be able to:

  • Determine which contributions are tested togethers
  • Accurately compute the coverage fractions
  • Explain how the coverage fraction is used in both the ratio percentage test and the average benefit test
  • Correctly use the average benefit test to show a plan passes coverage

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