Question

Which of the following statements regarding EGTRRA 2001 is false? A) EGTRRA 2001 increased the employer’s deductible contribution limit for profit sharing plans to 25 percent of employer compensation. B) After the enactment of EGTRRA 2001, money purchase pension plans adoptions have increased. C) Many Tandem Plans were terminated and/or converted after the enactment of EGTRRA 2001. D) Prior to EGTRRA 2001, an employer could deduct contributions to a money purchase pension plan up to 25 percent of employer covered compensation.

Answer 1

Answer:

The correct answer is B.

Step by step explanation:

EGTRRA 2001 increased the deduction limit for profit sharing plans to 25 percent of employer compensation. This increase created an equal deduction limit for both profit sharing plans and pension plans.

Statement a is a true statement.

Statement b is false because fewer money purchase pension plans were established after EGTRRA 2001 because of the equal deductibility of contributions to profit sharing plans. An employer would establish a profit sharing plan rather than a money purchase pension plan because the profit sharing plan does not have the mandatory funding requirements of the money purchase pension plan.

Statement c is true employers convened their target benefit pension plans to eliminate the mandatory funding requirements of the pension plans.

Statement d is true