chapter 11 Flashcards
retirement or employee compensation plan established and maintained by an employer that meets specific guidelines spelled out by the IRS and consequently receives favorable tax treatment.
qualified plan
tax-qualified retirement plan in which annual contributions are determined by a formula set forth in the plan.
Defined contribution plans
plans whereby a portion of a company’s profits is set aside for distribution to employees who qualify under the plan.
Profit-sharing plans
pension plans under which benefits are determined by a specific benefit formula.
defined benefit plans
retirement savings plan sponsored by an employer.
401 (k)
retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers.
403 (b)
designed to fund retirement of self-employed individuals
keogh plans
type of qualified retirement plan under which the employer contributes to an individual retirement account set up and maintained by the employee
simplified employee pension
qualified employer retirement plan that allows small employers to set up tax-favored retirement savings plans for their employees
SIMPLE
federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
ERISA
personal qualified retirement account through which eligible individuals accumulate tax- deferred income up to a certain amount each year, depending on the person’s tax bracket.
traditional IRA
individual retirement account allowing a person to set aside after-tax income up to a specified amount each year.
roth ira
provide the tax-free distribution of earnings
qualified withdrawls
The earnings from the contributions become taxable.
nonqualified withdrawal
individual retirement account established with funds transferred from another IRA or qualified retirement plan that the owner had terminated.
rollovers
the right that employees have to their retirement funds.
vesting
involves the assignment of a pension or retirement plan participant’s benefits to another person
alienation of benefits
three primary types of defined contribution plans:
profit sharing plans, stock bonus plans, and money purchase plans.
They set aside a portion of the firm’s net income for distributions to employee’s who qualify under the plan.
profit sharing plans
Benefits are distributed in the form of company stock.
stock bonus plans
provide for fixed contributions with future benefits to be determined.
money purchase plans
provide a company’s workforce with an ownership interest in the company.
employee stock ownership plan
