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Retirement Flashcards

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1
Q

How much can profit sharing plans invest in employer stock?

A

Up to 10% of plan assets

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2
Q

What is the rule of 72

A

Tells how long to double money.

Divide 72 by interest received.

Ex:7% return =72/7=10.28 = 10 years to double money

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3
Q

What is a 412i?

A

Defined benefit plan funded entirely with insurance and/or annuities

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4
Q

What is the ratio percentage test?

A

The retirement plan must cover a percentage of all NCHE that is 70% of the percentage of HCE

**body count test

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5
Q

What is the average benefit test?

A

Benefits for all NHCE must be at least 70% of those for HCE

**dollar count test

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6
Q

When are employees considered highly compensated?

A

Greater than 5% owner or

Earns more than 135k in the preceding year

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7
Q

When is an employee considered a key employee?

A

Greater than 5% owner

Officer and compensation greater than 200k

Greater than 1% owner and compensation greater than 150k

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8
Q

When is a plan considered top heavy?

A

More than 60% of its aggregate accrued benefits or account balances are allocated to key employees

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9
Q

What is the most stringent SERVICE requirement with ERISA?

A

2 year/100 percent schedule

This is answer for service requirement, NOT vesting

This is because this has 2 years of service requirements, where as vesting has 1 year

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10
Q

Who is also deemed a greater than 5% owner?

A

Spouse, parent, child, grandparent

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11
Q

ACP/ADP Testing

A

0-2% is times 2

3-8% is plus 2

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12
Q

Parent-subsidiary

A

One entity

The parent company owns at least 80% of one (or more) of the other

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13
Q

Brother-sister

A

Five (or fewer) owners of two or more entities own 80% or more of each entity

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14
Q

Affiliated service group

A

HALE

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15
Q

What is the integration level for a defined benefit plan

A

Level of compensation above which the excess contribution is made

May not exceed social security taxable wage base

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16
Q

Using the excess method what is the permitted disparity for a defined benefit plan?

A

Lesser of the base benefit percentage or 26.25%

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17
Q

What is the integration level for a defined contribution plan?

A

Any dollar amount up to the social security wage base

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18
Q

What is the permitted disparity for a defined contribution plan?

A

Lesser of base contribution percentage or the 5.7% formula for determining components of integrated DC plan

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19
Q

Are catch up deferrals capped at the 61k limit?

A

No, they are permitted in addition to the section 415 limit.

They do not affect deferrals, company contributions or max annual additions limit

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20
Q

What kind of retirement plan CANNOT be integrated with social security?

A

ESOP
SIMPLE
SIMPLE 401k

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21
Q

What does the section 415 limit apply to?

A

All defined contribution plans

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22
Q

What are the effects on contributions or benefits for top heavy DC and DB plans?

A

DB: 2% times years of service

DC: 3% of each non-key employees compensation

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23
Q

Can you take a loan from a 403B?

A

Yes

Must be adequately secured (plan assets or home)

Limits apply-cannot exceed lesser of 50k or 50% of vested plan benefits

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24
Q

What is section 404

A

Can only receive contribution of 25% of compensation or 6,000

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25
Do loans from a qualified plan have to be secured?
Yes! With plan assets or other collateral acceptable to plan administration
26
What are the qualified triggering events for Roth IRA earnings distributions?
59.5 Death Disability First home-10k
27
Do substantially equal payments qualify for an exception if the 10% early withdrawal penalty for IRAs?
Yes
28
Can you invest in gold coins in an IRA?
Yes
29
What kind of 457 can be followed into an IRA
Only governmental
30
Where can nongovernmental 457 be rolled over to?
Only non governmental 457s
31
Are section 457s subject to QDROs?
Yes
32
What is the service requirement for SEPs?
3 out of 5 prior years 21 Years old $650 income
33
What is the penalty for distributions taken within 2 years of an employees first participation in a SIMPLE
25%
34
What kind of retirement plan is not subject to FICA and FUTA?
SEP
35
Do participants have a say in the investments in the profit sharing plan
If there is negligence with the investments, the participants cannot sue bc the plan was funded solely with employer money
36
When is a distress termination for a defined benefit plan allowed?
Employer is in bankruptcy liquidation proceeding Employer is in a bankruptcy reorganization proceeding Employer can prove to the PBGC that plan termination is necessary to pay debts
37
What is a voluntary termination for a DB plan
Also called standard termination Occurs when there are sufficient assets to fund accrued benefits
38
Who can initiate involuntary termination of a DB plan
Only the PBGC
39
When must qualified plans be adopted?
Safe harbor 401k- before beginning of plan year 401k-before first deferral can be made Simple 401k-anytime on or after Jan 1st but no later than Oct 1st
40
What investments are subject to UBTI?
Limited partnership Dividends from margined account Real Estate-only if debt is used to purchase the property
41
What plans cannot provide for death benefits paid from life insurance
IRAs
42
What kind of retirement plan can hold a second to die policy
Only a profit sharing plan
43
Definition of financial hardship
Immediate and heavy Presumes no other resources can be reasonably available to meet need
44
What is the required begin date for distributions
April 1st
45
Does legal separation/divorce prevent penalty from plan distributions
No, must state has QDRO
46
Is partial/temporary disability exempt from early withdrawal penalty?
No, only total permanent disability
47
Who can you name as beneficiary on a money purchase plan
Spouse
48
With a QDRO is there penalties or a deduction?
No penalty 20% required withholding when direct distribution has been paid
49
Rabbi trust keys
Available to general creditors Unsecured Informally funded
50
When would rabbi trust be used
Takeover/acquisition/merger Hostile new management Expensive Litigation
51
Secular trust keys
Irrevocable Secured-not available to creditors Is a funded non qualified deferred compensation plan Assets are taxed year placed in trust
52
What is the bargain element?
Spread between the exercise price and the market price
53
Can an ISO be gifted
No, this will turn it into an NSO. Can only be transferred due to death If transferred-taxed to person who originally received ISO as ordinary income
54
What is an 83b election?
Employee elects to recognize the tax at the time of the award instead of at time of exercise Applies to ISO/NSO
55
If a company goes through a merger/acquisition, will a rabbi trust automatically trigger constructive receipt?
No, it MIGHT trigger constructive receipt
56
What happens if more than $100,000 of ISOs vest in the same year they are granted
The first 100k is treated as ISO | Excess treated as NSO
57
What factors affect a target benefit plan participants retirement benefit?
Age of plan participant Participants compensation each year Investment performance of plan assets Actuarial assumptions used to determine the contributions to the plan
58
When may an employee avoid receipt of taxable income when participating in a funded non qualified deferred compensation plan?
When there is no substantial risk of forfeiture relative to the compensation that was deferred
59
Maximum age to collect social security dependent benefits (assuming no disability)
18 or 19
60
Child’s age after which a parent can no longer claim child “in care” benefits under social security
16
61
Are employee 401k plan elective deferrals subject to FICA or FUTA?
Yes
62
Are employee contributions to HSA subject to FICA or FUTA?
Yes
63
Are distributions from non qualified deferred compensation plans subject to FICA or FUTA?
Yes
64
Are contributions to non qualified deferred compensation subject to FICA or FUTA?
No
65
What are annual additions?
Lesser of 100% of compensation or 61k
66
Can a hardship withdrawal come from a profit sharing plan?
No, must have 401k provisions
67
Can an s corp offer an ESOP?
Yes
68
How is the NUA gain taxed?
LTCG rates no matter hold time
69
What do keogh plans cover
Business organizations that are not incorporated
70
What is a coda-cash or deferred arrangement?
401k
71
What is the difference between an age weighted plan versus one integrated with social security
Age weighted - owners age is 50 or older - owners income is over 200k per year - rank and file employees are younger than the owner Integrated with SS - owners age is 50 or under - owners income is under 200k per year - rank and file employees are making 90k or less
72
Are contributions with 457 and other retirement plans aggregated?
No, bc 457 plans are non qualified deferred comp
73
Life insurance suitability for retirement plans for DC and DB plans
``` DC Plan-percentage test Aggregate premiums paid must be less than following percentages of the plans cost contributions Whole life-50% Universal life-25% Term Life-25% ``` DB Plans-100 times limit Death benefit may be no more than 100 times of the expected monthly benefit
74
What are the tests for substantial risk of forfeiture
- the employees relationship to other stockholders and the degree of their potential control - employees relationship to corporate officers
75
Do corporations receive a tax deduction when granting ISO?
No *if it becomes an NSO it would get a deduction
76
Is an ISO subject to withholding, FICA, FUTA?
No bc no income is recognized If ISO is defined as compensation, it would be subject to all 3
77
Do non governmental 457 allow for a catch up contribution?
No-it acts like non qualified deferred comp
78
For kids under 18 with earned income that is employed by a parent in an unincorporated business, what taxes do they pay?
If their earned income is less than standard deduction the do not pay FICA or self employment tax
79
What type of retirement plans can offer disability insurance?
All qualified retirement plans
80
Can a surviving spouse railroad employee get a social security widows benefit and receive railroad retirement benefits?
No!
81
What is the maximum contribution to a defined benefit plan in 2022?
There is no dollar limit-stuff it like a pig
82
Under 401k hardship withdrawal rules, an employee can request an amount equal to what?
Amount equal to elective deferrals | Amount equal to vested profit sharing contributions
83
What is a way to eliminate phantom income for ESOP distributions?
- Roll whole account into IRA | - take 72t distribution rather than full distribution
84
What are the special purposes for conversions where you can take money out within 5 years and not pay taxes or a penalty?
``` Death Disability First home-10k Medical expenses Health insurance premiums Birth/adoption Equal periodic payments Higher education costs 59.5 ```
85
What kind of structure can a NQDC plan have?
Defined benefit or defined contribution
86
Are attorneys fees allowed as a deduction from your gross estate to arrive at your AGE?
No
87
For use unrelated property what is the deduction received when given to charity
The lesser of the basis or FMV on the date of the donation
88
How to calculate tax liability to avoid underpayment penalty for someone who makes over 150k
Use LESSER of 110% last years payment 90% this years payment
89
Can you receive widow benefits after you remarry?
Only if you remarried after age 60
90
Do you include an ILIT to calculate your net estate?
No
91
When if ever can a corporation that issues ISOs receive a tax deduction for the ISO?
If the ISO is disqualified
92
Can a safe harbor plan have a vesting schedule?
No, it vests immediately
93
If a defined benefit plan is voluntarily terminated is it fully funded?
Fully funded at normal retirement age but not necessarily at premature termination
94
What does VEBA (voluntary employee benefits association) cover?
Death benefits Medical benefits Unemployment benefits NOT: Retirement benefits or Deferred compensation benefits
95
Is an ISO considered compensation?
No
96
Are contributions to a deferred compensation plan considered compensation?
No UNLESS it is constructively received
97
Can a 401k plan with no match or company contribution be integrated with social security
No
98
Can s corps offer non qualified deferred compensation plans?
No
99
If someone passes and never elected their NUA treatment, would their beneficiaries be able to use it?
Yes, the beneficiaries could elect NUA treatment and then would have 20% withheld from the basis

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