Retirement Plans Flashcards
Which of the following statements about Roth IRA is correct?
- Distributions must begin at 70 1/2
- The Roth IRA was introduced in 1980
- Contributions are not taxable
- Only Individuals younger than 70 1/2 can contribute
- Contributions are not taxable
Unlike traditional IRAs. there is no prohibition on making contributions after reaching age 70 1/2, and distributions need not begin at age 70 1/2
Contributions to a simplified employee pension (SEP) are not included in the employee’s taxable income for the year as long as the contribution does not exceed
- 25% of the employee’s income, with no individual maximum
- 50% of the employee’s compensation up to a specified maximum amount
- 75% of the employee’s compensation
- 25% of the employee’s income up to a specified amount
- 25% of the employee’s income up to a specified amount
Contributions to a SEP are not included in the employee’s taxable income for the year, to the extent that the contribution does not exceed 25% of the employee’s compensation up to a specified maximum amount.
Which of the following statements best describes a Keogh (HR-10) plan?
- It is a qualified retirement plan for self-employed individuals only
- It is a nonqualified retirement plan for self-employed individuals & their eligible employees
- It is a nonqualified retirement plan for self- employed individuals only
- It is a qualified retirement plan for self-employed individuals & their eligible employees
- It is a qualified retirement plan for self-employed individuals & their eligible employees
A Keogh plan (or an hR-10) is a qualified retirement plan for self-employed individuals & their eligible employees if any.
Which of the following statements pertaining to tax-sheltered annuities (TSAs) is correct?
- TSAs are available to any worker not covered by an employer-sponsored retirement plan
- TSAs are available to employees of certain nonprofit organizations
- Alice, the vice president of a computer software company, can invest in a tax-sheltered annuity
- Fred, a schoolteacher participating in a tax-deferred annuity, will receive his benefits tax-free.
- TSAs are available to employees of certain nonprofit organizations
Participants do not pay current taxes on their contributions, but they will be taxed on benefits when they are received
Rodney, age 35, earned $40,000 last year & did not participate in an employer retirement plan. Rodney has a nonworking spouse, with whom he filed a joint income tax return. Which of the following statements is true?
- Rodney could establish an IRA for himself but not for his spouse because she is unemployed. However, because he is married, he could contribute & deduct up to twice the maximum for an individual IRA, or $10k
- Rodney could establish a separate IRA for himself & another for his spouse & could deduct a contribution of up to the current annual maximum, which is adjusted for cost of living
- Rodney could establish an IRA for himself & contribute any amount he wished to it
- Rodney could establish separate IRAs for himself & his spouse & could deduct a contribution of $10k to his IRA & $5k to his spouse’s IRA
- Rodney could establish a separate IRA for himself & another for his spouse & could deduct a contribution of up to the current annual maximum, which is adjusted for cost of living
The spouse deduction is available for qualified taxpayers for separate IRA accounts-one belonging to the taxpayer, the other to the spouse. The maximum deductible amount is adjusted annually.
Which of the following employees would NOT be eligible for a 403(b) plan?
- Employees of banks and credit unions
- Employees of a hospital
- Public school employees
- Employees of a Catholic church
- Employees of banks and credit unions
Many of the basic protections associated with qualified employer plans can be traced to
- Public law 15
- the McCarran-Ferguson Act
- the Social Security Reform Act
- the Employee Retirement Income Security Act
- Employees of banks and credit unions
The advantages of qualified retirement plans to employers include all of the following EXCEPT
- rewarding a few employees rather than many
- increased employee productivity
- allowing the employer to attract & keep talented employees
- favorable tax rules
- rewarding a few employees rather than many
Susan, age 52, withdrew $5k form her traditional IRA, which consisted entirely of pretax contributions, to purchase her first home. What are the tax consequences?
- Susan will not be assessed a 10% penalty if she pays back the funds within 60 days
- Susan must pay a 10% penalty on the withdrawal
- Susan will not be assessed the 10% on her early withdrawal
- Susan must pay a 10% penalty plus income tax on the withdrawal
Susan will not be assessed the 10% on her early withdrawal
What types of organizations are eligible for 403 (b) plans to benefit their employees?
- a Nonprofit organization such as public schools, churches & hospitals
- Manufacturing business with more than 1,000 employees
- Banks & credit unions
- Private corporations such as law firms & CPA firms
- a Nonprofit organization such as public schools, churches & hospitals
For tax purposes, retirement plans can be divided into which of the following 2 categories?
- Independent & funded
- Fixed & variable
- Qualified & nonqualified
- Whole & term
- Qualified & nonqualified
Which of the following statements regarding required minimum distributions is NOT correct?
- Annual minimum withdrawals are based upon the life expectancy of the owner
- Required minimum distributions must occur no later than 59 1/2
- There is a 50% penalty on taxes owed if minimum distributions are not taken
- The first minimum withdrawal can not be delayed until April 1 of the year following the owner turning 70 1/2
- Required minimum distributions must occur no later than 59 1/2
The combination of the current tax deduction for the employer plus tax deferral for the employee is possible with all of the following types of plans EXCEPT
- a 401(k)
- a stock bonus
- a money purchase
- a savings account
- a savings account
Which of the following statements regarding a traditional individual retirement account is nOT covered?
- a 10% penalty is assessed on any distribution from an IRA before age 59 1/2
- Distributions must begin form an IRA by April 1 of the year following the IRA’s owner’s attainment of age 70 1/2
- IRAs are available to anyone younger than age 70 1/2 with earned income, but deductible contributions are limited for individuals who are also covered under an employer-sponsored retirement plan
- a 10% penalty is assessed on any distribution from an IRA before age 59 1/2
Under a plan, employers
- must contribute to their eligible employees, but at a % of the employer’s choice
- must contribute the same % to their employees as they contribute to their own plans
- can choose to not to contribute to their employees
- have the option to choose the % amount & which employee they contribute to
- must contribute the same % to their employees as they contribute to their own plans
