Ch. 22 Keogh Plan Flashcards Preview

Employee Benefit Final > Ch. 22 Keogh Plan > Flashcards

Flashcards in Ch. 22 Keogh Plan Deck (12):
1

Keogh Plan

covers a sole proprietor or partner who works in their own business

2

When is it indicated?

1. self-employed
2. owner of unicorporated business
3. shelter self-employment income from tax
4. has self-employment income and salary

3

Prototype plans

designed by banks, insurance companies, mutual funds or other institutions

4

6 advantages

1. contributions deducted from gross income and tax deferred
2. investment income tax deferred
3. 10 year averaging
4. more liberal than IRA contributions
5. non-owner employees must participate
6. possible business tax credit of $500

5

4 disadvantages

1. cost and complexity of qualified plans
2. cost related to nondiscrimination rules
3. penalty and tax on early withdrawals
4. follow the qualified plan distribution rules

6

Types of Keogh plans

1. defined contribution plan
2. 401k plan
3. money purchase plan
4. defined benefit plan

7

How are Keogh plans different from other qualified plans?

Special rules regarding earned income and life insurance

8

for self-employed, what does earned income take the place of?

compensation

9

What is earned income?

the net income from the business after all deductions

10

How is life insurance treated?

can be used as an incidental benefit that covers a self-employed person

11

What portion of life insurance premium is tax deductible for self employed

amount that exceeds the pure protection value

12

How much of life insurance for regular employees is deductible

entire cost