NIPA APA cheat sheet

Accrued benefit is the participant's benefit payable at normal retirement age, computed from credited service and compensation as of any given date; it is the figure used for vesting and benefit statements.

Vesting schedules: cliff vesting requires 100% vesting after no more than 3 years of service; graded vesting requires at least 20% after 2 years rising to 100% by year 6 (2-6 year schedule) for single-employer plans.

A break in service is generally a 12-month period with 500 or fewer hours of service; vesting service must be restored unless the break exceeds the greater of 5 years or the pre-break service period.

The summary annual report (SAR) must be furnished to participants within 9 months after the plan year end, or 2 months after the Form 5500 filing deadline if an extension applies.

The summary plan description (SPD) must be furnished within 120 days of plan adoption and every 5 years if amended, or every 10 years if unchanged; a summary of material modifications is due within 210 days after the plan year of the change.

Benefit statements: defined benefit plans furnish an accrued benefit statement at least once every 3 years, and defined contribution plans furnish a benefit statement at least annually (quarterly for participant-directed accounts).

Hours of service: 1,000 hours in a 12-month period is the standard threshold for a year of service for eligibility; 1,000 hours also generally defines a year of vesting service.

Eligibility: the maximum permissible age and service conditions are age 21 and 1 year of service; a plan may permit earlier entry but may not impose longer conditions (subject to the 2-year/100% vesting exception).

Plan administration records must reconcile participant counts, vested balances, and contribution deposits; participant contributions must be deposited by the earliest date they can reasonably be segregated from general assets (generally the 15th business day of the following month for small plans).

Top-heavy plan: more than 60% of plan account balances or accrued benefits belong to key employees; top-heavy plans must provide a minimum contribution or benefit of 3% of compensation (defined contribution) or 2% per year of service up to 20% (defined benefit).

Key employee: an officer with compensation above the indexed threshold, a 5% owner, or a 1% owner with compensation above $150,000 (indexed).

Coverage testing: the ratio percentage test requires the plan cover at least 70% of the non-highly compensated employees who are eligible; otherwise the average benefit test applies.

ADP test for 401(k): the ADP of highly compensated employees may not exceed the greater of 125% of the non-HCE ADP or the lesser of 200% of non-HCE ADP or non-HCE ADP plus 2 percentage points.

ACP test applies to matching and after-tax contributions using the same 125%/200%+2 framework as the ADP test; a plan may use the prior-year testing method for both.

Section 415 limits for 2024: the annual defined contribution limit is $69,000 and the annual defined benefit limit is $275,000; compensation used for limits is capped at $345,000.

Section 402(g) elective deferral limit for 2024 is $23,000, plus a $7,500 catch-up for participants age 50 or older.

Highly compensated employee: a 5% owner at any time during the year or prior year, or an employee with compensation above the indexed threshold ($150,000 for 2024 lookback) who was in the top-paid group.

Minimum funding: defined benefit plans are subject to minimum required contributions under IRC 430, with quarterly contributions required if the prior year's funding shortfall exceeded the threshold.

ERISA fiduciary duties: loyalty (act solely in the interest of participants), prudence (care, skill, and diligence of a prudent person), diversification of investments, and adherence to plan documents.

Prohibited transactions under ERISA 406 include sales or exchanges between the plan and a party in interest, and extensions of credit; statutory exemptions exist under ERISA 408 and PTEs.

ERISA 404(c) relief from fiduciary liability for investment losses applies when participants exercise control over plan investments and the plan meets disclosure and diversification requirements.

Form 5500 annual return/report is due by the last day of the 7th month after the plan year end (July 31 for calendar-year plans); a 2.5-month extension is available via Form 5558.

ERISA bond: every plan official handling plan funds must be bonded for at least 10% of the amount handled, with a minimum of $1,000 and a maximum of $500,000 (or $1,000,000 if the plan holds employer securities).

The Employee Retirement Income Security Act of 1974 (ERISA) sets minimum standards for pension plans, including reporting, disclosure, fiduciary conduct, and funding; it does not require employers to establish plans.

The Pension Protection Act of 2006 made permanent the 401(k) cash-or-deferred arrangement and the Roth 401(k) option, and added funding rules for defined benefit plans.

SECURE Act (2019) raised the required beginning age for RMDs to 72 and eliminated the stretch IRA for most non-spouse beneficiaries, replacing it with a 10-year distribution rule.

ERISA preempts state laws that relate to employee benefit plans, except for state insurance, banking, and securities laws, and state criminal laws of general application.

Required minimum distributions (RMDs) must begin by April 1 of the year following the year the participant reaches the applicable age (73 for those born 1951-1959, 75 for those born 1960 or later under SECURE 2.0); subsequent RMDs are due by December 31.

The RMD is calculated by dividing the account balance as of December 31 of the prior year by the applicable distribution period from the IRS Uniform Lifetime Table (or Joint and Last Survivor Table if a spouse beneficiary is more than 10 years younger).

A 50% excise tax applies to the amount of an RMD that is not distributed by the deadline; the tax may be reduced or waived for reasonable error under IRS correction procedures.

Direct rollover: an eligible rollover distribution paid directly to an eligible retirement plan avoids the 20% mandatory federal withholding that applies to distributions paid to the participant.

Early distribution from a qualified plan before age 59½ is subject to a 10% additional tax unless an exception applies (e.g., separation from service at age 55 or later, disability, qualified birth or adoption, or a qualified domestic relations order).

Loans from qualified plans are permitted if the plan allows them; the maximum loan is the lesser of $50,000 or 50% of the vested balance, reduced by the highest outstanding loan balance in the prior 12 months.

Form 1099-R reports distributions from pensions, annuities, and retirement plans; copy A goes to the IRS, copy B to the recipient, and it is due by January 31 following the distribution year.

Form W-2 reports wages and elective deferrals; Form 1099-R reports distributions; Form 5500 reports plan financials and participant counts.

Hardship distributions must be made on account of an immediate and heavy financial need and be limited to the amount necessary to satisfy that need, including taxes and penalties; the plan may use a deemed safe harbor list of events.