Question

Farrell Co. has a qualified retirement plan. They have 20 highly compensated employees, all of whom take part in the plan, and 100 non-highly compensated employees. How many non-highly compensated employees must participate in the plan for the plan to pass the Ratio Percentage test?

a.) 20
b.) 100
c.) 70
d.) 50

Answer 1

At least 70 non-highly compensated employees must participate in the plan for it to pass the Ratio Percentage test.

Step-by-step explanation:

In order for Farrell Co.'s qualified retirement plan to pass the Ratio Percentage test, a certain percentage of the non-highly compensated employees must participate in the plan. The test requires that at least 70% of the non-highly compensated employees participate. Therefore, the answer is 70 employees (70% of 100 non-highly compensated employees).