Answer:
b. 1 only.
Explanation:
the ratio percentage test = ratio of non-HCE / ratio of HCE ≥ 70%
ratio percentage test = (100/140) / (7/10) = 0.71/0.7 = 1.02 or 102% ≥ 70% ✓ passed
the average benefits test = 1.5% / 3% = 0.5 or 50% ≤ 70% X failed
This means that the highly compensated employees receive disproportionately high benefits from the plan.