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CRPS practice questions

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Question 1Retirement Plan Design and Selection

Which of the following is a defined contribution plan?

  1. A traditional defined benefit plan
  2. A final average pay pension plan
  3. A money purchase pension plan Correct answer.
  4. A cash balance pension plan

Explanation

Defined contribution plans maintain an individual account for each participant, and the retirement benefit is whatever the contributions plus investment experience produce. A money purchase pension plan has a required contribution formula but is still an individual-account, defined contribution arrangement. The other choices are all defined benefit designs.

Question 2Retirement Plan Design and Selection

Which employer is eligible to establish a SIMPLE IRA plan?

  1. A manufacturer with 80 employees and no other plan Correct answer.
  2. A law firm with 150 employees and a 401(k)
  3. A public university with 2,000 employees and a 403(b)
  4. A regional hospital with 400 employees

Explanation

A SIMPLE IRA is available to an employer with 100 or fewer employees who received at least $5,000 of compensation, provided the employer maintains no other qualified plan. The manufacturer meets both the size and the no-other-plan conditions.

Question 3Retirement Plan Design and Selection

Who funds a SEP IRA?

  1. The employer and a required employee match
  2. The employer only Correct answer.
  3. The employee only
  4. Both employer and employee, through salary deferrals

Explanation

SEP contributions are employer contributions made on a discretionary basis; employees do not make salary deferrals into a SEP. The contribution must be a uniform percentage of compensation for all eligible employees.

Question 4Retirement Plan Design and Selection

How must a participant's elective deferrals in a 401(k) plan be vested?

  1. Under a 2-to-6-year graded schedule
  2. Fully vested at all times Correct answer.
  3. After completing 1,000 hours in two years
  4. Under a 3-year cliff schedule

Explanation

Elective deferrals are always 100% vested because they are the participant's own money, withheld from pay. Vesting schedules may be applied only to employer-derived contributions such as matching or profit sharing amounts.

Question 5Retirement Plan Design and Selection

Which entities are permitted to sponsor a 457(b) plan?

  1. Churches and other 501(c)(3) organizations only
  2. For-profit corporations of any size
  3. Any employer with more than 500 employees
  4. Governmental and tax-exempt employers Correct answer.

Explanation

Eligible 457(b) sponsors are state and local governments and tax-exempt organizations, with churches specifically excluded from the non-governmental rules. For-profit employers cannot sponsor a 457(b) plan.

Question 6Retirement Plan Design and Selection

A 401(k) plan that satisfies the safe harbor requirements is generally:

  1. Required to use a 5-year cliff vesting schedule
  2. Required to run the ADP test each year
  3. Exempt from ADP and ACP testing Correct answer.
  4. Prohibited from accepting employee deferrals

Explanation

A safe harbor 401(k) that provides the required fully vested employer contribution is deemed to satisfy the ADP test, and a safe harbor match also satisfies the ACP test. Such a plan is also treated as not top-heavy.

Question 7Retirement Plan Design and Selection

Employer contributions to a profit sharing plan are generally:

  1. Mandatory at a fixed percentage of pay each year
  2. Fixed by ERISA at 3% of compensation
  3. Discretionary and set annually by the employer Correct answer.
  4. Required to equal each participant's deferral

Explanation

A profit sharing plan permits the employer to decide each year whether and how much to contribute, subject to the allocation formula in the plan document. This flexibility is what distinguishes it from a money purchase pension plan, which requires a fixed contribution.

Question 8Retirement Plan Design and Selection

An ESOP is a plan that:

  1. Invests primarily in employer stock Correct answer.
  2. Guarantees a fixed monthly benefit at retirement
  3. Holds only diversified mutual funds
  4. Is a type of defined benefit plan

Explanation

An ESOP is a defined contribution plan designed to invest primarily in qualifying employer securities and may borrow money to acquire them. Participants receive shares or cash rather than a promised lifetime benefit.

Question 9Retirement Plan Design and Selection

A defined contribution plan is top-heavy when key employees hold more than what percentage of total account balances?

  1. 60% Correct answer.
  2. 25%
  3. 75%
  4. 40%

Explanation

A defined contribution plan is top-heavy if the accounts of key employees exceed 60% of the total of all account balances. Top-heavy status triggers minimum contribution requirements and faster vesting for non-key employees.

Question 10Retirement Plan Design and Selection

Under the ADP test, an HCE's deferral percentage may not exceed the greater of 125% of the NHCE average or the NHCE average plus:

  1. 2 percentage points Correct answer.
  2. 1 percentage point
  3. 4 percentage points
  4. 3 percentage points

Explanation

The ADP test permits an HCE average up to 125% of the NHCE average, or the NHCE average plus 2 percentage points, whichever produces the larger limit. The 2-point alternative typically applies when the NHCE average is low.

Question 11Retirement Plan Design and Selection

Under the ratio percentage test of IRC section 410(b), a plan must cover at least what percentage of the non-highly compensated employees who are eligible?

  1. 50%
  2. 70% Correct answer.
  3. 80%
  4. 100%

Explanation

The ratio percentage test is satisfied when the percentage of NHCEs benefiting under the plan is at least 70% of the percentage of HCEs benefiting. A plan failing that test may still pass the average benefit test.

Question 12Retirement Plan Design and Selection

Cross-testing tests employer contributions by converting them into:

  1. Present values of employee deferrals
  2. Units of employer stock
  3. Annual salary amounts for each participant
  4. Equivalent benefit accrual rates at retirement age Correct answer.

Explanation

Cross-testing projects account balances to normal retirement age and converts them into equivalent benefit accrual rates so that contributions can be compared on a benefits basis. This allows a plan to favor older employees while still satisfying 401(a)(4).

Question 13Retirement Plan Design and Selection

For 2024, the IRC 415(b) limit on a defined benefit annual benefit is the lesser of 100% of the participant's high-three-year average compensation or:

  1. $345,000
  2. $230,000
  3. $66,000
  4. $275,000 Correct answer.

Explanation

The 415(b) dollar limit for 2024 is $275,000, indexed annually, and it applies alongside the 100%-of-compensation limit. The dollar limit is also reduced for benefits beginning before age 62 and for participation of fewer than 10 years.

Question 14Retirement Plan Design and Selection

A cash balance plan is best described as:

  1. A defined benefit plan using hypothetical account balances Correct answer.
  2. A profit sharing plan with a guaranteed interest rate
  3. A defined benefit plan that guarantees a fixed monthly benefit for life
  4. A defined contribution plan with individual investment direction

Explanation

A cash balance plan is a defined benefit plan that states each participant's benefit as a hypothetical account credited with pay credits and interest credits. Assets are pooled and invested by the plan, so the employer bears the investment risk.

Question 15Retirement Plan Design and Selection

For qualified plan testing, a controlled group of corporations is treated as:

  1. An affiliated service group only
  2. A single employer Correct answer.
  3. A multiple employer plan
  4. Separate employers

Explanation

Commonly owned corporations are aggregated and treated as a single employer for coverage, nondiscrimination, and contribution limit purposes. This prevents an owner from splitting a workforce among entities to avoid testing requirements.

Question 16Retirement Plan Design and Selection

A 403(b) plan may be sponsored by:

  1. Only governmental entities
  2. Only churches
  3. Any for-profit corporation with 100 or more employees
  4. Public schools and 501(c)(3) organizations Correct answer.

Explanation

403(b) plans, often called tax-sheltered annuities, are available to employees of public schools and of organizations exempt under 501(c)(3). For-profit employers cannot sponsor them, and churches are governed by separate rules.

Question 17Retirement Plan Design and Selection

In a new comparability profit sharing plan, allocations are based on:

  1. Equal dollar amounts for all participants
  2. Years of service only
  3. Groups whose allocations pass cross-testing Correct answer.
  4. Age only, with no nondiscrimination testing

Explanation

A new comparability plan places participants into groups and allocates contributions that are then cross-tested under 401(a)(4). If the plan is not exempt, it must also satisfy the minimum allocation gateway for non-highly compensated employees.

Question 18Retirement Plan Design and Selection

What is the longest vesting schedule permitted for employer matching contributions in a 401(k) plan?

  1. 3-year cliff or 2-to-6-year graded Correct answer.
  2. Immediate vesting only
  3. 7-year graded
  4. 5-year cliff

Explanation

Employer matching contributions may vest no more slowly than a 3-year cliff or a 2-to-6-year graded schedule. These schedules were shortened from the older 5-year cliff and 3-to-7-year graded alternatives.

Question 19Retirement Plan Design and Selection

PBGC insurance generally covers which type of plan?

  1. SIMPLE IRA plans
  2. 401(k) plans
  3. Single-employer defined benefit plans Correct answer.
  4. Profit sharing plans

Explanation

The PBGC insures most private single-employer and multiemployer defined benefit plans. Defined contribution plans such as 401(k), profit sharing, and SIMPLE IRA arrangements are not covered.

Question 20Retirement Plan Design and Selection

When an operational plan failure is discovered, EPCRS generally calls for the employer to:

  1. File only an amended Form 5500
  2. Terminate the plan and distribute assets
  3. Put the plan where it would have been absent the failure Correct answer.
  4. Ignore failures involving less than $5,000

Explanation

The governing principle of EPCRS is full correction, meaning the plan and participants are restored to the position they would have occupied had the failure not occurred. Depending on the program, a fee, VCP submission, or self-correction may be required.

Question 21Retirement Plan Design and Selection

Under the minimum allocation gateway for a cross-tested plan, each NHCE must receive an allocation of at least:

  1. 3% of compensation for all non-key employees
  2. The same dollar amount as the highest paid HCE
  3. The lesser of 5% or one-third of the top HCE rate Correct answer.
  4. 7.5% of compensation for every eligible participant

Explanation

The gateway requires each NHCE's allocation rate to be at least the lesser of 5% of compensation or one-third of the highest HCE allocation rate. Plans satisfying a broadly available allocation or a minimum 5% rate to all NHCEs pass automatically.

Question 22Retirement Plan Design and Selection

Under IRC 404(a)(7), the combined deduction limit for an employer maintaining both a defined benefit and a defined contribution plan is generally:

  1. 25% of pay, counting DB contributions Correct answer.
  2. 6% of covered compensation
  3. 15% of covered compensation
  4. 100% of covered compensation

Explanation

The combined limit is generally 25% of covered compensation, with defined benefit contributions counted toward that cap and subject to an exception when the DB plan is PBGC-covered. Contributions above the limit are carried forward.

Question 23Retirement Plan Design and Selection

A participant with 20 years of participation retires at age 55 and begins a defined benefit annuity. The 415(b) limits are:

  1. Applied in full with no adjustment
  2. Reduced only if participation is under 10 years
  3. Increased to the actuarial equivalent of the age-65 limit
  4. Reduced for early commencement and short participation Correct answer.

Explanation

The 415(b) dollar limit is actuarially reduced for benefits commencing before age 62, and the compensation-based limit is reduced when participation is less than 10 years. Here the age-55 commencement triggers an early-retirement reduction even though participation exceeds 10 years.

Question 24Retirement Plan Design and Selection

IRC section 409(p) is designed to:

  1. Limit annual contributions to 25% of pay
  2. Require diversification at age 55
  3. Mandate a 3-year cliff vesting schedule for all ESOPs
  4. Limit ownership concentration in S corporation ESOPs Correct answer.

Explanation

Section 409(p) prevents the use of an S corporation ESOP to concentrate ownership among a small group of disqualified persons. A nonallocation year arises when disqualified persons own at least 50% of the equity, which triggers adverse tax consequences.

Question 25Retirement Plan Design and Selection

A cash balance plan's interest crediting rate must:

  1. Equal the plan's actual investment return each year
  2. Not exceed a market rate of return Correct answer.
  3. Be at least 5% per year
  4. Match the PBGC's assumed interest rate

Explanation

Final regulations require the interest crediting rate to be a market rate of return or otherwise not exceed one, and it may not be tied to employer securities or to plan asset performance in a way that shifts investment risk to participants. Common permitted rates include fixed rates within a corridor and certain bond indices.

Question 26Retirement Plan Design and Selection

Which statement best distinguishes a defined benefit plan from a defined contribution plan?

  1. A DB plan promises a benefit determined by a formula, while a DC plan provides an individual account whose benefit depends on contributions and investment results. Correct answer.
  2. A DB plan permits participant-directed investments, while a DC plan does not permit participants to direct investments.
  3. A DB plan provides an individual account for each participant, while a DC plan promises a fixed monthly benefit payable for life regardless of investment results.
  4. A DB plan is funded solely by employee contributions, while a DC plan is funded solely by employer contributions.

Explanation

A defined benefit plan promises a benefit determined under a plan formula, typically based on compensation and service, and the employer bears the investment risk. A defined contribution plan provides an individual account, and the participant's benefit is the account balance, which depends on contributions and investment results.

Question 27Retirement Plan Design and Selection

What is the maximum age and service requirement a 401(k) plan may impose for eligibility to make elective deferrals?

  1. Age 25 and one year of service.
  2. Age 21 and one year of service. Correct answer.
  3. Age 18 and two years of service.
  4. Age 21 and two years of service.

Explanation

IRC section 410(a) generally limits eligibility conditions to age 21 and one year of service, measured by a 1,000-hour year. A two-year eligibility requirement is permitted only for certain employer contributions and must be paired with immediate full vesting.

Question 28Retirement Plan Design and Selection

For 2024, what is the maximum elective deferral limit under IRC section 402(g) for a 401(k) participant who is under age 50?

  1. $23,000 Correct answer.
  2. $30,000
  3. $22,500
  4. $20,500

Explanation

The IRC section 402(g) limit on elective deferrals for 2024 is $23,000. Participants age 50 or older may make an additional catch-up contribution, but that does not change the base 402(g) limit.

Question 29Retirement Plan Design and Selection

A safe harbor 401(k) plan using the nonelective contribution approach must generally provide what contribution?

  1. At least 5% of compensation to each eligible NHCE, 100% vested.
  2. At least 3% of compensation to each eligible NHCE, 100% vested. Correct answer.
  3. At least 4% of compensation to each eligible NHCE, subject to a 2-year cliff vesting schedule.
  4. At least 1% of compensation to each eligible NHCE, subject to a 6-year graded vesting schedule.

Explanation

The safe harbor nonelective contribution is at least 3% of compensation for each eligible non-highly compensated employee. It must be fully vested and is not conditioned on the employee making elective deferrals.

Question 30Retirement Plan Design and Selection

For a participant born in 1960 or later, required minimum distributions from a qualified plan must generally begin by April 1 of the year following the year the participant reaches what age?

  1. Age 72
  2. Age 80
  3. Age 75 Correct answer.
  4. Age 70½

Explanation

Under SECURE 2.0, the required beginning date for a participant born in 1960 or later is April 1 of the year after the participant reaches age 75. Older birth cohorts are subject to earlier applicable ages under the transition rules.

Question 31Retirement Plan Design and Selection

Which statement best describes a Simplified Employee Pension (SEP) plan?

  1. A governmental 457(b) plan funded by employee deferrals.
  2. An IRA-based plan funded solely by employer contributions. Correct answer.
  3. A qualified defined benefit plan funded by employer contributions.
  4. An IRA-based plan funded solely by employee salary deferrals.

Explanation

A SEP is an IRA-based retirement plan to which the employer makes contributions for eligible employees. Employees do not make salary deferrals to a SEP, and the employer contributions are funded through individual retirement accounts or annuities.

Question 32Retirement Plan Design and Selection

Which statement about a money purchase pension plan is correct?

  1. It is an IRA-based plan rather than a qualified plan.
  2. Contributions are discretionary each year and may be skipped entirely by the employer.
  3. Contributions are fixed by a formula and generally required annually. Correct answer.
  4. It may not be integrated with Social Security under permitted disparity rules.

Explanation

A money purchase pension plan is a defined contribution plan that requires fixed, formula-based employer contributions. This contrasts with a profit sharing plan, where employer contributions are generally discretionary.

Question 33Retirement Plan Design and Selection

Which statement about Roth 401(k) deferrals is correct?

  1. They are not subject to the IRC section 402(g) elective deferral limit.
  2. They may be offered only by governmental employers.
  3. They are made on a pre-tax basis and taxed when distributed.
  4. They are included in the participant's taxable income in the year deferred, and qualified distributions are tax-free. Correct answer.

Explanation

Roth 401(k) deferrals are made with after-tax dollars, so they are included in taxable income in the year deferred. Qualified distributions are excluded from gross income, and Roth deferrals count toward the same 402(g) limit as pre-tax deferrals.

Question 34Retirement Plan Design and Selection

What minimum contribution does a top-heavy defined contribution plan generally need to provide to non-key employees?

  1. 2% of compensation.
  2. 3% of compensation. Correct answer.
  3. 5% of compensation.
  4. 1% of compensation.

Explanation

A top-heavy defined contribution plan generally must provide a minimum contribution of 3% of compensation to each non-key employee who is employed on the last day of the plan year. This minimum is separate from the ADP or ACP nondiscrimination tests.

Question 35Retirement Plan Design and Selection

For the 2024 plan year, an employee is generally a highly compensated employee based on prior-year compensation exceeding what amount?

  1. $150,000 Correct answer.
  2. $135,000
  3. $100,000
  4. $125,000

Explanation

For the 2024 plan year, HCE status is generally based on compensation in the prior year exceeding $150,000. The threshold is adjusted periodically, and the prior-year lookback is a key part of the HCE determination.

Question 36Retirement Plan Design and Selection

Which individual is a key employee for top-heavy testing purposes?

  1. A leased employee with six months of service.
  2. An employee who earned $50,000 in the prior year.
  3. A former employee who is not a 5% owner.
  4. A 5% owner of the employer. Correct answer.

Explanation

A key employee includes a 5% owner, a 1% owner with compensation above the threshold, and certain officers with compensation above the threshold. Rank-and-file employees and former employees who are not 5% owners are not key employees solely because of their prior employment.

Question 37Retirement Plan Design and Selection

Which vesting schedule satisfies the IRC section 411(a)(2) minimum vesting requirement for employer nonelective contributions in a qualified plan?

  1. A 5-year cliff vesting schedule.
  2. A 7-year graded vesting schedule.
  3. A 2-year cliff vesting schedule.
  4. A 3-year cliff vesting schedule. Correct answer.

Explanation

For employer nonelective contributions, section 411(a)(2) permits either 3-year cliff vesting or 2- to 6-year graded vesting. A 5-year cliff or 7-year graded schedule would be too slow for those contributions.

Question 38Retirement Plan Design and Selection

The ACP test generally applies to which contributions?

  1. Employer nonelective contributions only, which are tested separately from matching contributions.
  2. Elective deferrals made by highly compensated employees only, as tested under the ADP test.
  3. Rollover contributions from another qualified plan.
  4. Employer matching contributions and employee after-tax contributions. Correct answer.

Explanation

The actual contribution percentage (ACP) test measures employer matching contributions and employee after-tax contributions. Elective deferrals are tested under the ADP test, and rollover contributions are generally disregarded for these tests.

Question 39Retirement Plan Design and Selection

A participant has a vested account balance of $60,000 and no other outstanding plan loans. What is the maximum plan loan the participant may generally take?

  1. $25,000
  2. $10,000
  3. $30,000 Correct answer.
  4. $20,000

Explanation

Plan loans are generally limited to the lesser of $50,000 or 50% of the participant's vested account balance. Fifty percent of $60,000 is $30,000, which is below the $50,000 cap.

Question 40Retirement Plan Design and Selection

Which expense is generally a deemed immediate and heavy financial need under the hardship distribution safe harbor?

  1. Purchase of a vacation home.
  2. Medical expenses for the participant's spouse. Correct answer.
  3. Investment in a brokerage account.
  4. Payment of credit card debt unrelated to a listed hardship event.

Explanation

The hardship safe harbor includes medical expenses for the participant, spouse, or dependents, along with certain other listed events such as tuition and purchase of a principal residence. General consumer debt and investment purchases are not deemed hardships.

Question 41Retirement Plan Design and Selection

An employer sponsoring a SIMPLE IRA may satisfy the employer contribution requirement by making which contribution?

  1. Either a 3% matching contribution or a 2% nonelective contribution. Correct answer.
  2. A 6% matching contribution only.
  3. A discretionary profit sharing contribution.
  4. A 5% nonelective contribution only.

Explanation

A SIMPLE IRA employer must choose either a dollar-for-dollar matching contribution up to 3% of compensation or a 2% nonelective contribution for all eligible employees. Discretionary profit sharing contributions are not part of the SIMPLE IRA design.

Question 42Retirement Plan Design and Selection

A QACA safe harbor 401(k) must provide an automatic deferral percentage of at least what amount in the first plan year of participation?

  1. 1%
  2. 3% Correct answer.
  3. 2%
  4. 6%

Explanation

A qualified automatic contribution arrangement must start participants at an automatic deferral rate of at least 3% in the first year of participation. The minimum rate increases in later years, up to the applicable maximum.

Question 43Retirement Plan Design and Selection

For 2024, the IRC section 415(c) annual additions limit for a defined contribution plan is the lesser of 100% of compensation or what dollar amount?

  1. $67,500
  2. $61,000
  3. $66,000
  4. $69,000 Correct answer.

Explanation

The 2024 section 415(c) limit on annual additions to a defined contribution plan is $69,000. Annual additions include employer contributions, employee elective deferrals, and forfeitures allocated to the participant's account.

Question 44Retirement Plan Design and Selection

Under permitted disparity, the maximum excess contribution percentage for a defined contribution plan is the lesser of the base contribution percentage plus 5.7% or what other amount?

  1. 100% of compensation.
  2. Twice the base contribution percentage. Correct answer.
  3. The base contribution percentage plus 10%.
  4. Three times the base contribution percentage.

Explanation

Permitted disparity allows a plan to favor compensation above the Social Security wage base within limits. For a defined contribution plan, the excess contribution percentage may not exceed the lesser of the base percentage plus 5.7% or twice the base percentage.

Question 45Retirement Plan Design and Selection

A basic safe harbor matching contribution formula generally equals 100% of elective deferrals up to 3% of compensation plus 50% of deferrals on the next 2% of compensation. What is the maximum match as a percentage of compensation?

  1. 5%
  2. 4% Correct answer.
  3. 3%
  4. 6%

Explanation

The formula produces 3% of compensation on the first tier plus 1% of compensation on the second tier, for a maximum of 4%. This basic match satisfies the safe harbor matching requirement when the other conditions are met.

Question 46Retirement Plan Design and Selection

An employer makes a top-paid group election. Which statement is correct?

  1. The election eliminates the need for coverage testing under section 410(b).
  2. The election increases the number of highly compensated employees by adding all former employees.
  3. The top-paid group is limited to the top 20% of employees by compensation, which can reduce the number of HCEs. Correct answer.
  4. All employees earning over $150,000 remain highly compensated employees regardless of the election, and the election does not affect the officer test at all.

Explanation

A top-paid group election limits the top-paid group to the top 20% of employees by compensation, which can reduce the number of HCEs. Ownership and officer categories are applied separately under the HCE rules, and coverage testing is still required.

Question 47Retirement Plan Design and Selection

Which statement best describes an affiliated service group under IRC section 414(m)?

  1. A group of employers connected only by a collective bargaining agreement.
  2. A group of organizations with a service relationship that must be treated as a single employer for plan purposes. Correct answer.
  3. A group of unrelated employers that share a common investment advisor.
  4. A group of employers that each maintain separate plans with no common ownership.

Explanation

Section 414(m) treats certain affiliated service groups as a single employer for qualified plan purposes. These rules target organizations that provide services and have a relationship involving common ownership or active management.

Question 48Retirement Plan Design and Selection

Under IRC section 401(a)(26), a defined benefit plan must benefit at least the lesser of 50 employees or what percentage of the employer's workforce?

  1. 60%
  2. 40% Correct answer.
  3. 50%
  4. 70%

Explanation

Section 401(a)(26) requires a defined benefit plan to benefit at least the lesser of 50 employees or 40% of the employer's nonexcludable workforce. This minimum participation rule is applied separately to each plan.

Question 49Retirement Plan Design and Selection

An employer amends its cash balance plan to reduce future interest credits prospectively for all participants. Which requirement applies?

  1. The amendment cannot reduce accrued benefits, and a section 204(h) notice is required for a significant reduction in future benefit accruals. Correct answer.
  2. No notice is required because the change is prospective.
  3. The amendment is prohibited entirely.
  4. The amendment requires PBGC approval before it can be adopted.

Explanation

The anti-cutback rule prevents a plan amendment from reducing a participant's accrued benefit. A significant reduction in the rate of future benefit accrual also requires a section 204(h) notice to affected participants.

Question 50Retirement Plan Design and Selection

An employer terminates 30 of its 100 active participants during a plan year. Which statement is most accurate?

  1. A partial termination only applies to defined benefit plans and never to defined contribution plans.
  2. Significant employer-initiated turnover, often around 20% or more, can create a partial termination and full vesting for affected participants. Correct answer.
  3. No partial termination can occur unless the plan is formally terminated, and a 30% reduction cannot create partial vesting.
  4. A partial termination requires exactly 50% turnover in a single plan year before any vesting applies.

Explanation

A partial termination may occur when employer-initiated turnover is significant, and the IRS has generally viewed turnover around 20% or more as a relevant factor. Participants affected by a partial termination become fully vested in their accrued benefits.