Retirement

Question 1

Best Retirement plan to retain young key employees?

Answer 1

Money Purchase plan guarantees a contribution will be made each year.

Question 2

How much can HCE defer to 401k under ADP/ACP rules?

Answer 2

Average NHCE deferral + 2%

Question 3

How is NUA amount calculated for ESOP?

Answer 3

Market value - employee cost basis

At time of lump sum distribution

Question 4

Best retirement plan that offers flexible contributions and SS integration?

Answer 4

Profit Sharing Plan

Question 5

Can qualified plan of deceased spouse be rolled into survivor’s qualified plan?

Answer 5

Yes

Question 6

Secular trust or Rabbi trust for immediate deduction?

Answer 6

Secular trust

Question 7

Simple plan offer loans?

Answer 7

Not if IRA

Question 8

Can all qualified plans offer loans?

Answer 8

Yes, including DB

Question 9

Most stringent eligibility requirements with graded vesting?

Answer 9

21 years old and 1 year service

Question 10

Vesting for top heavy DC plan?

Answer 10

2 to 6 graded

Question 11

Social Security reduction of benefits

Answer 11

62- FRA $1 for every $2 earned over $21,240

Question 12

Social Security Taxation

Answer 12

MAGI + 1/2 of SS (include muni)
>25k for single then 50% taxable
>44K for MFJ, then 85% taxable

Question 13

Defined Benefit qualified plan facts (4)

Answer 13

Favors older employees
Max 265K benefit
Meets a specific retirement objective
Company must have stable cash flow

Question 14

Money Purchase- qualified plan facts (3)

Answer 14

Up to 25% employer deduction
Fixed contributions- need stable cashflow
Max 66k contribution

Question 15

Target Benefit- qualified plan facts (4)

Answer 15

Up to 25% employer deduction
Fixed contributions- need stable cashflow
Maximum 66K
Favors older workers

Question 16

Profit Sharing- qualified plan facts (4)

Answer 16

Up to 25% employer deduction
Flexible contributions (must be recurring and substantial)
Max 66K
Can have 401k provisions

Question 17

401k facts (3)

Answer 17

Qualified profit sharing or stock bonus plan
Max $22,500 deferrals
Additional $7500 catch up over 50

Question 18

Section 415 annual additions limit

Answer 18

100% of comp or $66k including contributions, salary deferrals, and plan forfeitures

Question 19

Safe Harbor Nondiscrimination 401k requirements (3)

Answer 19

Satisfies nondiscrimination tests with:
Employer matching ( $1/$1 on first 3% and .50/1 on next 2%)
Or non-elective contribution on all employees (3%)
Has Immediate Vesting

Question 20

Stock Bonus/ESOP qualified plan facts (3)

Answer 20

Flexible contributions
100% can be company stock
ESOP cannot be integrated with SS or cross tested

Question 21

Keogh Contribution Percentages (2)

Answer 21

Sole Prop and Partnerships
15% = 12.12%
25%= 18.59%

Question 22

Simple plan facts (4)

Answer 22

Fewer than 100 employees
Employer cannot have another plan
Immediate vesting
East to administer, salary reduction and employer match

Question 23

SEP (Simplified employee pension) facts (5)

Answer 23

No deferrals
25% for owner, Keogh % for self employed
Immediate vesting
SS integrated
21 years old, paid $750, worked 3 of 5 years

Question 24

Tax Deferred/ Sheltered Annuity TDA/TSA/ 403b facts (3)

Answer 24

For 501(c)(3) orgs and public schools
ERISA with employer contributions
$22,500 with $7500 catch up after 50

Question 25

IRA (SIMPLE, SEP, SARSEP) facts (5)

Answer 25

No loans No life insurance Immediate Vesting 591/2 not 55 for 10% penalty RMDs at 72

Question 26

Age and Service rules for qualified plans (3)

Answer 26

21 and one Special provision for 2 years but with immediate vesting Year of service = 1000 hours, or 500 hours with 3 years

Question 27

Highly Compensated Employee (2)

Answer 27

5% owner or $150k prior year

Question 28

Key Employee (3)

Answer 28

5% owner or Officer and $215k or 1% owner and $150k

Question 29

Vesting Fast (3)

Answer 29

DB Top Heavy or all DC Plans: 3 year cliff or 2-6 graded or 100% vested after 2 years

Question 30

Vesting Slow

Answer 30

Non top Heavy DB only 5 year cliff or 3-7 year graded or 100% after 2 years

Question 31

Defined Contribution SS integration Disparity

Answer 31

Lesser of base % or 5.7%

Question 32

Defined Benefit SS integration Disparity

Answer 32

Lesser of base % or 26.25%

Question 33

Life Insurance as Funding Vehicle in Retirement plans (4)

Answer 33

Ordinary life insurance- 50% of plan cost Term life- 25% Universal Life 25% DB plan uses 100 times expected monthly

Question 34

Rollovers not permitted (3)

Answer 34

Non-governmental 457 must transfer to 457 Hardship distributions RMDs

Question 35

10% penalty exceptions- Qualified Plans (9)

Answer 35

Death Disability Substantially equal periodic payments Distribution from service at 55 QDRO Medical in excess of 7.5% AGI Health Insurance if unemployed $5,000 w/d for birth/adoption Federal declared disaster

Question 36

Required Beginning Date for IRA (SEP, SARSEP, SIMPLE)

Answer 36

April 1st the year following age 73

Question 37

Required Beginning Date for Qualified Plans

Answer 37

April 1st year after 73 or retired 5% owner- April 1st year after 73

Question 38

IRA exceptions to 10% penalty (9)

Answer 38

Death SEP Disability First home $10,000 Qualified Education Expense Medical greater than 7.5% Health insurance if unemployed $5,000 for birth/adoption Federally declared disaster

Question 39

Roth IRA distribution order (3)

Answer 39

Contributions Conversions Earnings

Question 40

Roth Required Distribution (Death) (2)

Answer 40

Within 5-10 years of owner's death or Sole beneficiary is spouse, may delay till owner would be 73 or roll into their own

Question 41

Non-Qualified Deferred Comp Plans (2 types)

Answer 41

Salary Reduction Plan- uses part of salary Salary Continuation Plan- uses employer contributions

Question 42

Rabbi Trust- when to use

Answer 42

fear of merger, acquisition, or change of ownership

Question 43

ISO holding period

Answer 43

1 year from exercise date 2 years from grant before selling

Question 44

457 plan differences (4)

Answer 44

Catch up only for governmental plans Salary deferrals not aggregated with other plans non-governmental plans only rollover to another 457 no 10% early w/d penalty

Question 45

Which plans cannot be SS integrated? (3)

Answer 45

ESOP, simple , simple 401k