ERPA Exam Sample Test Question

[Dennis Povloski]

I'm not coming up with the answer on the answer key, but then again....I'm one of those strange DB guys. Anyone care to take a look?

Based on the following information, which of the following statements regarding excess contributions is/are TRUE?

*The plan is a calendar year 401(k) plan.

*The plan does not permit employer contributions.

*The plan fails the ADP test and is going to correct by refunding excess contributions to the HCEs.

*The HCE ADP limit is 6.00%.

*All HCEs are listed in the table below.

*None of the HCEs are catch-up eligible.

HCE1, comp = $180,000, Deferral = $15,000, ADR = 8.34%

HCE2, comp = $100,000, Deferral = $10,000, ADR = 10%

HCE3, comp = $80,000, Deferral = $5,600, ADR = 7%

I. The total amount of excess contributions to be refunded is $8,200.

II. HCE1's excess contribution is $4,200.

III. HCE2's excess contribution is $2,000.

A. I only

B. II only

C. I and II only

D. II and III only

E. I, II, and III

The Answer Key says C is the correct answer, but I'm coming up with $9,000 for the amount to be refunded. Aren't I supposed to bring each HCE ADR down to 6% to determine the excess contribution? That gives me $4,200 for HCE1, $4,000 for HCE2, and $800 for HCE3.

[D Lewis]

I agree with you - the answer key is wrong IMO

Total Excess Contributions are 9,000

HCE 1 = 4,200

HCE 2 = 4,000

HCE 3 = 800

Refunds:

HCE 1 = 7,000

HCE 2 = 2,000

"B", "II Only" is the correct answer.

[Dennis Povloski]

It's nice to know I'm not crazy. Thanks!

[Guest Sieve]

Well, even though someone agrees with you on this issue, you could still be crazy. After all, you do make a living from such exciting stuff as this.

They're coming to take us away . . . to the funny farm . . .

[cpc0506]

Did you look to see if there has been a published errata for the test. ASPPA does update information on their website for exams as well as study guide changes.

[Dennis Povloski]

There is errata on airellc.org, but this particular question is not referenced.

[quinnfield]

There is errata on airellc.org, but this particular question is not referenced.

just an observation--if HCE3 is a NHCE, then the answer is C. I and II only. In any year after 1988, the HCE limit is more than 80,000.

[david rigby]

In any year after 1988, the HCE limit is more than 80,000.

True, but that's not the only way to become an HCE.

[BG5150]

In any year after 1988, the HCE limit is more than 80,000.

True, but that's not the only way to become an HCE.

Plus, the problem states that the person is an HCE. That, and remembert that the compensation test for HCEs is based on the previous year's comp. He or she could have terminated mid year, and that's why the comp is "only" 80k.

[Guest 2much2no]

I agree that the answer should be "B" and not "C". It was probably missed in the review. I brought it to AIRE's attention. They said they will review it. I'm sure you'll see this corrected soon.

[Dennis Povloski]

Thanks for sending that to AIRE. By the way, that same question (just with different numbers was on the test). I found that many of the questions on the real exam were on the sample exam with a tweak in the wording. So, for all you ERPA candidates out there, spend a couple dollars and get the practice exams! They are totally worth it!

[kocak]

If this post is re Q47 on the 2009 practice exam, the answer choices are:

A. I only

B. III only

C. I and II only

D. II and III only

E. I, II and III

The answer key indicates B is the correct choice - III is the only true statement.

Based on the analysis above, it seems that

I is false (refunds total $9,000)

II is false (HCE1 excess is $7,000)

III is true.

I don't see a need for AIRE to post an errata. If you disagree or I'm looking at the wrong question, please let me know. Much appreciated.

[D Lewis]

I don't have the practice test, but either you don't have the correct number, or you have a different version. Possibly they fixed the question.

Look at the orginal post, yours looks like a similar question, but the facts and numbers are different, and the answers are different. For instance in the original post "B" was "II only" and yours "B" is "III only".