Question

Match the following terms with their definition: Permits an employee to make pre-tax contributions to the profit sharing plan - Cash or Deferred Arrangement (CODA) - Forfeiture Allows higher contributions into the qualified plan for high-income * employees - A Social Security Integration - Enables an employee to make after-tax contributions to a qualified plan in excess of the normal contribution limits - A Thrift Plan Non-vested benefit lost when an employee leaves the profit sharing plan

Answer 1

1. Cash or deferred arrangement (CODA): A. This is where employee can choose an election where money is withheld from wages and credited to their account in an qualified plan. Thus the money is tax before tax and thus tax is deferred.

2. Forfeiture: D. When the employees leaves a profit sharing plan, he forfeits/losses his non-vested benefits in it

3. Social security Integration: B. Here pension plan can subtract the social security benefit from the employees pension benefit. With higher income, the relative offset is less which is compensated by higher accrual rate making it possible to make higher contributions under the latest changes in social security Integration.

4. Thrift plan:C. Thrift savings plan (TSF) is a defined contribution plan to provide federal employees the benefits if different savings plans available to private employees. It also gives the employee the option to make before tax and after tax contributions depending on the option the employee chooses.