ABC Company is a family owned business that is established by Benjamin and Sarah. They are married and Frank is their son. ABC sponsors a profit sharing plan with employee deferral arrangement. The employee census information is in the chart below.

Employee	Age	Years of Service	Ownership	Salary	Employer Contribution	Employee Deferral
Benjamin	52	20	60%	$330,000.00	$ 33,000.00	$ 18,000.00
Sarah	49	20	30%	$ 210,000.00	$ 21,000.00	$ 18,000.00
Chad	30	8	5%	$ 80,000.00	$ 8,000.00	$ 10,000.00
Dave	32	12	3%	$ 180,000.00	$ 18,000.00	$ 15,000.00
Erin	25	5	0%	$ 140,000.00	$ 14,000.00	$ 15,000.00
Frank	22	4	2%	$ 50,000.00	$ 5,000.00	$ 8,000.00
Ginger	21	11 mon	0%	$ 40,000.00	$ 0	$ 0
Haley	21	23 mon	0%	$ 30,000.00	$ 3,000.00	$ 2,000.00
Irish	35	2	0%	$ 20,000.00	$ 2,000.00	$ 1,000.00
Jen	19	8 mon	0%	$ 20,000.00	$ 0	$ 0
				$ 1,100,000.00	$ 104,000.00	$ 87,000.00

Questions:

What is the covered compensation amount for this plan? (3 points)

Define Highly Compensated Employee. (2 point)

Who are the Highly Compensated Employees in this plan? Explain why. (4 points)

Does your answer to the question 3 change if the company makes the 20% election? Explain why. (4 points)

Define Key Employees. (2 point)

Who are the Key Employees in this plan? Explain why. (4 points)

Is this a Top Heavy Plan? Explain why. (3 points)

Does the plan pass Safe Harbor Test? Explain why. (3 points)

Does the plan pass the Ratio Percentage Test? (3 points)

The plan uses the least generous graduated vesting schedule. What is vested account balances of Erin, Frank, and Irish? (6 points)

What is the most that could be contributed to a profit sharing plan and deducted by ABC? (4 points)

How many employees must be covered by the company? (4 points)

If it were a Defined Benefit plan? (4 points)

A qualified plan with deferral arrangement must satisfy one of the two other tests in addition to qualified plan coverage tests. What are those two tests? (4 points)