Retirement Flashcards

Question

DB Traditional DB plan

Answer 1

Only QP that guarantees a specific monthly pension Older higher earning can have substantial funding Accruing a benefit in any way is considered active participant for IRA rules If married must be joint and survivor and less spouse waives No predetermined Max for employer contributions and NOT subject to the 69k PBGC must satisfy 50/40 rule Expensive must have annual actuary

Answer 2

Guarantees a specific cash balance at stated normal retirement age Hypothetical participant accounts are for record keeping only.NOT participant directed Accrues a pay credit % of comp plus an interest credit. fixed or variable rate linked to an index Must use 3-year Cliff vesting Uniform benefit accrual for all employees Easier for participants to understand than a traditional DB Can convert guaranteed CB into a lifetime pension

Answer 3

*Limited investment choices mutual funds or annuities only Extra catch-up. 3k Special catch-up IF > 15 yrs @ same employer Over 50 can have BOTH the 3K and the 7500

Answer 4

Not aggregated with other salary deferrals for the max Not considered active participant for IRA deduction Special catch-up see below I think also no early withdrawal penalty Remember they can't contribute more than 100% of compensation Special catch-up in last 3 years of service at normal retirement age Lesser of Unused to deferrals from the past Up to 2x normal contribution limit ie 46k CanNOT use both the special catchup and the 50 plus in the same year

Answer 5

Also 457b can use unused deferrals

Answer 6

Amount needed day 1 retirement. Capital utilization like steps 1 and 2 of education Capital preservation. Then do another o Pv calc using the FV of step 2 as PV and the nominal or portfolio rate. Use years IN retirement as n. Then add this pv to step 2 pv Purchasing power Same thing except use inflation adjusted rate

Answer 7

Employees over 21 who -employed in 3 of last 5 years -Had $750 in 24

Answer 8

First do the owner because it's easy to forget the extra calcs Sch c - 50% of (C*.9235*.153) And watch if above se max Times 20% for owner Use the 25% for the employees Or if the rate isn't 25% take the rate / 1 + rate for owner

Answer 9

Less than 100 employees Ee 16k and 3500 Employer must contribute 2% on All or 3% match Eligible employees are all with compensation over $5,000 in any of the prior two years Early withdrawal is 25% in the first 2 years Immediate 100% vesting Like SEP

Answer 10

As long as the taxpayer has sufficient income and IRA contribution can always be made. The issue is how much if any can be deducted If not active participants, MAGI is not an issue unless mfj and spouse is active participant or MFS Ask. active participant? If not is spouse an active participant? Look at m a g i Different limits for if you are an active participant or if you're married to somebody who is an act of participant

Answer 11

Traditional. Only one allowed per year Participant has 60 days to deposit Mandatory 20% Federal withholding unless ira to ira If the withheld amount is not replaced or deposited it is considered a distribution and subject to tax and possibly 10% penalty Direct transfer rollover. No annual limit on the number Participant never takes possession of the funds No mandatory withholding tax

Answer 12

Roth IRA can only be rolled into another Roth IRA and only one in a 12-month period Traditional, simple and sep Can go to anything except a designated Roth 457b, QP like 401k, 403b Can go to anything Note to or from a simple generally only after 2 years prob bc of that 25% early wd in 1st 2 yrs

Answer 13

Substantially equal periodic payments

Answer 14

5-year-holding. Absolute requirement Starts 1/1 of the year for which the contribution is designated If 5 yr met AND Death, disabled, fthb lifetime 10k or 59.5 No tax or penalty

Answer 15

Remember basis comes out first If not over 59.5, EARNINGS are subject to tax and penalty. If over 59.5 no penalty Contributions have no tax and no penalty Conversion contributions have no regular tax but if distributed within 5 years of conversion might be subject to penalty

Answer 16

No penalty The question is if it's taxable Less than 5 years the earnings are taxable >=5 yrs earnings not taxable

Answer 17

Typically mirrors a qualified plan but without the limits/Max's SERP additional comp. Specific amount for specific period contributed on remaining or achieved goals The company can select which execs The goal is to avoid constructive receipt and current taxation Therefore there must be substantial risk of forfeiture Typically a vesting schedule Executives do not recognize income and employer does not get a deduction until it's no longer substantial risk of forfeiture

Answer 18

Funds are accessible by corporate creditors in the event of insolvency. Therefore substantial risk of forfeiture exist and constructive receipt is not triggered Strikes balance between safeguarding comp for the executive but not triggering constructive receipt Funds in the RT are not available to the corporation for other purposes Funds are safeguarded in the event of a merger or acquisition

Answer 19

Assets in the secular trust are NOT subject to a company creditors and result in immediate compensation recognition Substantial risk of forfeiture exist in Rabbi trust because the funds are accessible by corporate creditors

Answer 20

Looks like the same as a simple to me Appendix says matching of 3% or put in 2% of everyone's. That's a simple?! One question noted that it's different from a simple because the employer match can't go below 3%

Answer 21

EmployEE deferrals are aggregated between plans. Except 457b The AAL is NOT aggregated between plans Remember the AAL is the lesser of 69k or the employee's compensation

Answer 22

A fully insured traditional defined benefit plan is funded exclusively by cash value life insurance OR annuity contracts

Answer 23

Traditional pension is the only one that guarantees the final monthly pension amount

Answer 24

Benefit guarantees are desired Pbgc insurance coverage is needed Or stated goal is to skew benefits to older plan participants without many years until retirement If it needs to satisfy the 50/40 rule

Answer 25

The company can borrow money to buy shares no other plan can do this Leveraged esop Trust borrows from the bank, trust uses loan to purchase employer stock, employer makes deductible contribution to the plan, trust pays the bank loan, bank releases the stock Was this for esop only??? If employer stock is not publicly traded participants must be given a put option to sell the stock back to the plan

Answer 26

25% of 345 is more than 69,000. So remember to limit these people's company contributions Gets tricky with TB and MP because there's only employer and your guard is down

Answer 27

Funded by employers only Funding is whatever it takes to get there While AAL does not apply remember the maximum annual pension is 275 And the maximum compensation that can be CONSIDERED in the benefit FORMULA is 345 Pension guarantees a benefit Cash balance guaranteed a certain cash balance

Answer 28

Remember for qualified plans there is NO PENALTY It can be taken in a lump - it does not have to be substantially equal periodic payments There WILL of course be tax on any pretax $ or earnings

Answer 29

Large cash value life insurance The company buys in the executive has access to the cash value Employer pays the premiums which are taxable to the employee as bonus comp Executive owns and names the beneficiary Death benefit is tax-free

Answer 30

Need 40 lifetime credits to be fully insured for retirement Equivalent to 10 years Can earn my maximum of 4 per year earn 1 for every $1,730

Answer 31

Average indexed monthly earnings Adjust to present day dollars Based on 35 best years of index earnings If you have less those years will be zero Used to calculate pia

Answer 32

Primary insurance amount The monthly retirement benefit at FRA Uses bend points to calculate the benefit

Answer 33

If start at 62, max reduction is 30% It's 5/12% for 24 mo 62-64 and 5/9% for 36 mo 64-67

Answer 34

Increase benefits by 2/3 %/mo =8%/yr 24% if go all the way to 70

Answer 35

Temporary reduction Prior to fra See tables. Over 22230 wh 1 for every 2 over First year rule. Use 1/12 for month. starts when they claim Could have partial years or even scattered months

Answer 36

First compute provisional income 0/50/85 32/44 mfj. 25/34 sing

Answer 37

Also know irmma calc is on magi plus tax exempt

Answer 38

Max benefit is 50% Currently married to worker -Worker must have filed for own benefit -Must have been married at least a year Divorced from worker -Worker must be at least 62 -Must have been married for at least 10 years, currently unmarried to anyone, divorce from worker at least 2 years And start when you are age 62 but the benefit is reduced No delayed credits past fra

Answer 39

Any age with child 75% Once age 60 100% Age 60 without child 100% For both of these current sp must have been married greater than equal to 9 months Or 10 years for ex The ex does not have to have been divorced for 2 years In both cases must be currently unmarried OR got married after age 60

Answer 40

Looks like each can receive 75% The child must be under age 16 or disabled Once the widowed is 60 it goes up to 100%

Answer 41

Do not have to take out of current employers plan if you're still working and less than a 5% owner Deadline for the first one is April 1st of the year following you turn age 73 Or IF a QP year of retirement if less than 5% owner Penalty for not taking is 25% Frequently tested is that if you delay that first one to April you're going to have two RMDs that year You can combine the value of all your IRAs and take it out of one BUT for QPs must take out of EVERY one

Answer 42

Qcd age is still 70.5 24 limit is $105,000 If mfj and enough money in each area you could both do it Up to 53k could go to a CRAT/CRUT Direct transfers only. Cannot go into a DAF Watch for one spouse to have a balance of less than 105k

Answer 43

Judgment decree or order for a qualified retirement plan to pay Child support Alimony Marital property rights to alternate payee (spouse, ex, child, other dep of participant) If not rolled over there is no penalty but there would be income tax If rolled over no tax now

Answer 44

If the plan provides more than 60% of the aggregate accrued benefits to key employees - or more than 60% of accrued account balances in a DC Key employees are one of these -Earn more than $220,000 -Own more than 5% -Own >1 %and earn over 150 Plan must use accelerated vesting or 3-year cliff Provide minimum benefits to non-key employees B b4 C like 2 B4 3 DB minimum defined benefit of 2% of comp times yrs up to 10 years DC min cont of 3% of covered Or if the DC for key is less than 3 non-key must receive at least equal to key

Answer 45

Like Ed funding We are using it all up. I eat if we die at exactly our life expectancy our account balance will be zero

Answer 46

Average deferral of HCE cannot exceed the greater of - 125% of nonHCE avg Or -Lesser of -2x non HCE avg -nonHCE avg +2% Example non-hce average 4% Greater of -5% is 125% -Lesser of 2x is 8% nonHCE +2% is 6% So hce max is 6%

Answer 47

Simples and esops

Answer 48

Only available for employEE contributions

Answer 49

As long as 90% of their taxable income is distributed shareholders annually the income is free from taxation for the reit At least 75% of their assets income must be derived from real estate equity or mortgages Mortgage REITs allow investors to receive a stream of income from the mortgage payments Equity REITs offer investors the potential growth of their investments through realized capital gains as well as the pass through from rental income

Answer 50

Sep over 21 and $750 in 24 and 3 of 5 years employed Simple All with compensation over 5,000 in any prior two years Remember the 25% withdrawal penalty in the first two years

Answer 51

Traditional profit sharing $50,000 or 1/2 of the VESTED balance 401k Same except if vested is less than 10,000 can borrow 10,000

Answer 52

An employer can contribute more than 25% to an individual's account. The 25% applies in aggregate to the total covered payroll

Retirement Flashcards

(81 cards)