CFP Retirement

Question 1

SEP Contributions

Answer 1

Up to 25% of covered compensation; max of $61,000

Question 2

SIMPLE Contributions EE

Answer 2

$14,000 (3,000 catch up age 50+)

Question 3

SIMPLE Contributions ER

Answer 3

Match 100% for first 3% contributed (can go as low as 1% in 2 of 5 years) OR contribute 2% flat for all eligible employees

Question 4

SEP ER

Answer 4

Employer can decide whether to make contributions year-to-year

Question 5

SIMPLA ER

Answer 5

Must match or contribute 2% of each eligible employee’s compensation

Question 6

SEP Coverage

Answer 6

All employees at least 21, employed last 3 of 5 years & $650 of compensation

Question 7

SIMPLE Coverage

Answer 7

All employees with $5,000 compensation in any prior 2 years and expected to earn $5,000 in current year

Question 8

SEP Contributions

Answer 8

ER contributions only

Question 9

SIMPLE Contributions

Answer 9

EE salary reduction and ER contributions

Question 10

SEP deadline

Answer 10

can be established and funded up to the due date of employer’s tax return including extensions

Question 11

SEP eligibility

Answer 11

any employer with one or more employees

Question 12

SIMPLE eligibility

Answer 12

any employer with 100 or fewer employees

Question 13

SEP loans?

Answer 13

no

Question 14

SIMPLE loans?

Answer 14

no

Question 15

SIMPLE penalty

Answer 15

25% in first 2 years

Question 16

Section 83(b) Election for Restricted Stock

Answer 16

allows the recipient of a grant of restricted stock to pay taxes at the time of grant as opposed to the time of vesting (basis established at time of tax)

Question 17

Restricted stock

Answer 17

taxed as compensation income to the recipient based on the value of the stock when it vests

Question 18

Qualified Plan Nondiscrimination testing

Answer 18

cannot discriminate against non-highly compensated employees…
Must pass either Safe Harbor Test; Ratio Percentage Test; or Average Benefits Test

Question 19

Safe Harbor Test

Answer 19

Plan must cover at least 70% of the non-highly compensated employees

Question 20

Ratio Percentage Test

Answer 20

Plan must cover a percentage of non-highly compensated employees equal to at least 70% of the percentage of highly compensated employees covered

Question 21

Average Benefits Test

Answer 21

The percentage of benefits received by non-highly compensated employees must equal at least 70% of the percentage of benefits received by highly compensated employees

Question 22

Qualified Plan Social Security Integration

Answer 22

Provides additional contribution/benefit for income above the integration level (SS wage base)
- Excess Integration or Offset Integration

Question 23

Excess Integration (Qual Plan w/ SS)

Answer 23

DC Plans or DB Plans
Base contribution rate made for all plan participants up to integration level; additional contribution rate is applied to compensation ABOVE the integration level (up to $305k comp limit)
Either double the base or base + 5.7% (lesser of)

Question 24

Offset Integration (Qual Plan w/ SS)

Answer 24

DB Plan ONLY
Fixed amount or a formula amount reduces the plan formula to represent the existence of SS retirement benefits

Question 25

Highest integration formula for qualified plans w/ SS integration

Answer 25

26.25% (3/4th of 1% for 35 years)

Question 26

Solo 401(k)

Answer 26

Traditional 401(k) plan covering a business owner with no employees, or that person and their spouse
Same rules as any other 401(k)
EE deferral: 100% covered comp or $20,500 ($6,500 catch up)
ER NONELECTIVE contribution: 25% of covered comp; SE must adjust compensation

TOTAL cannot exceed $61,000

Question 27

Top-Heavy Qualified Plans

Answer 27

When plan provides more than 60% of the aggregate accrued benefits (DB) or 60% of the aggregate account balances to key employees (DC)

Question 28

Key Employees

Answer 28

Officers with earnings more than $200k
Owners more than 5%
Owners earning more than $150k that are more than 1% owners

Question 29

What happens to a top-heavy qualified plan?

Answer 29

Must use accelerated vesting
For non-key employees…
DB: 2% of compensation x years of service (up to 10)
DC: 3% of covered compensation