One more question regaridng one of the questions on the sample test:

Q. 24: Based on the following information, determine the maximum allowable monthly benefit for a participant in 2008 who has never been in any other plan of the employer:


Average monthly compensation $500
Years of service 5
Years of participation 4
Maximum Dollar Limit for 2008 $185,000



A. $200
B. $250
C. $333
D. $417
E. $500


A: B

The percentage of comp limit is 5/10*$500 = $250 while the dollar limit is $185,000*4/10 = $74,000 per year of $6,167 per month. The maximum monthly accrual is the lesser of the two or $250.

Why doesn't the answer taken into consideration the $10,000 deminimus?

$10,000/12 * 4/10 = $333

It should, I think, but the fraction to use is 5/10.

Do the instructions to the test tell you to assume the de minimus benefit applies? (Is it optional, after all.)

I thought 'maximum' is an absolute. It is obvious from the possible answers that the de minimus was considered at both 4 and 5 years. As mr. rigby pointed out it depends on if instructions specifically exclude the de minimus benefits. If not, the suggested answer (IMHO) is wrong. I would use D.

Thank you.

No, the question does not specify that the $10,000 deminimus applies. However, an almost identical question appears in the study guide (Sample Test Question #4 of the 2009 DB Study Guide) in which the correct answer given does apply the $10,000 deminimus and the question does not instruct that the deminimus is being used.

Here is the entire text of the question:
Calculate the maximum monthly benefit for a participant in 2007 based on
the following information. The participant has never been in any other plan
of the employer.
Average monthly compensation - $600
Years of Service - 6
Years of participation - 5
A. $300
B. $360
C. $417
D. $500
E. $600

Answer: The correct answer is D.
$500=$10,000/12 * 6/10. Note that the $10,000 annual de minimis amount
applies since the annual compensation is less than $10,000.

The only text in Chapter 7 about the $10,000 deminimum is on page 192:
I.A.2.c: If the employer never maintained a defined contribution plan in
which the employee has participated, a $10,000 de minimis annual benefit
can be provided, regardless of compensation.