Retirement Flashcards

Question

SIMPLE IRA Plan

Answer 1

**Easier/cheaper to administer for smaller business (< 100 Employees required)** * Employer cannot maintain any other plan * Pre-Tax contributions up to 16K/yr with 3.5K catch-up (2024) * Employer Contributions **MUST DO** 2% Automatic Contribution or 3% Match * Participants fully vested (Distribution within first two years may incur 25% penalty in addition to standard 10% for IRAs) * Can have any investment options * No integration with S.S

Answer 2

**Typically used by self-employed or small business** * Employer contribute Max of 25% of compensation or 69K (2024) **--> CAN MAKE CONTRIBUTIONS UNTIL EXTENSIONS DEADLINE** * NO Salary Deferrals - Employer contributions ONLY * Account immediately vested * No catch-up, ROTH contributions, and contributions MUST BE EQUAL percentages to all owners * Can be integrated with Social Security * Deduct to 25% Contributions for Owner (W-2); Treated like Keogh Contributions for Self-Employed * **Calculation:** (x%/1+x%) x (Profit -1/2 SE Tax) * **Special Eligibility:** 21+ years old, paid at least $750 (2024) and worked 3 or prior 5 years

Answer 3

* If both spouse (or single person) is NOT active participant in employer plan → Deductible * Employer plans that affect participant status include almost all plans EXCEPT 457 * If one spouse is active, the other spouse (not active) and combined AGI less than 230-240K (2024) → Deductible * If both spouse active, AGI below 77-87K (single), 123-143K (MFJ), < 10K (MFS) (2024) → Deductible * **NOTE:** DC account or benefits to DB Plans → ACTIVE

Answer 4

* Death * Disability (Permanent & Long-Term preventing Any Occupation) * Terminal illness * Substantially equal periodic payments following separation from service (SEPP) - 72(t) (Amortization, Annuitization, Required Minimum Distributions) * Medical Expenses ->7.5% of AGI * 5K withdrawal for birth/adoption * Emergency Personal Expense (1K/year) * Federal declared Disaster (limited) * Distributions to Military called for Active Duty * Distributions following separation from service at age 55 (Rule 55) * Distributions in accordance with QDRO (to any alternative payee) → Court ordered for 401(K), Alimony/Child Support

Answer 5

* Death * Disability (Permanent & Long-Term preventing Any Occupation) * Substantially equal periodic payments following separation from service (SEPP) - 72(t) (Amortization, Annuitization, Required Minimum Distributions) * Medical Expenses >7.5% of AGI * 5K withdrawal for birth/adoption * Emergency Personal Expense (1K/year) * Federal declared Disaster (limited) * Distributions to Military called for Active Duty * First House Expense up to 10K (Buy, Build, Rebuild new house for you) * Qualified Education Expense (For you, spouse, kids, ect) * Distributions used to pay insurance premiums after separation from employment (must file unemployment and received for 12 weeks)

Answer 6

**Absolute Requirement for “qualified” ROTH IRA distribution is 5-year holding period** (STARTS FIRST DAY OF YEAR YOU MADE CONTRIBUTION – JAN 1st even if contributed on Dec 31st) 1. Any contributions (not conversions) 2. Conversions (5 years OR 59½) 3. Earnings (5 years AND 59½)

Answer 7

* Distributed within 5 years of owner’s death * Distributed over 10 years (stretch eliminated) * Sole beneficiary is spouse, may delay distributions until owner would have reached 73 or treat as own ROTH (roll it over)

Answer 8

* Later of April 1st following the year in which individual turned 73 or retired * Subsequent distributions made by Dec 31st of each year thereafter * 5% owner RBD is same as IRA/SEP RBD

Answer 9

* April 1st of year following the year in which individuals turns 73 * Subsequent distributions made by Dec 31st of each year thereafter

Answer 10

**For self-employed (Sole Proprietor and Partnerships)** * Offers both Defined Benefit (DB) & Defined Contribution (DC) Plans * Max Annual Contribution lesser of 25% of salary or 69K (2024) —> Catch-up Eligible **--> CAN MAKE CONTRIBUTIONS UNTIL EXTENSIONS DEADLINE** * Self-employment tax must be computed and ½ deduction of self-employment tax must be taken BEFORE determining Keogh deduction (20% for max) * Tax Deferred Growth * Require Annual Reporting Example 1: $155148 (0.25/1.25) = **$31,029.60** Example 2: $155148 (0.10/1.10) = **$14,104.36** Example 3: $186634 (0.25/1.25) = **$37,326.88**

Answer 11

* For 501(c)(3) organizations and public schools * Subject to ERISA if employer contributes * Salary reduction limit of 23K + 7.5K catch-up for 50+ (2024)

Answer 12

* Elective Deferrals to multiple plans are always aggregated (2024) * 401K/403(b)/SARSEP → 23K + 7.5K catch-up * SIMPLE and other SIMPLE → 16K + 3.5K catch-up

Answer 13

**Benefits must be “incidental” to the primary purpose of plan. “Incidental Tests:”** * Aggregate premiums paid for death benefits are less than % at all times (Ordinary LI → 50%, Term LI → 25%, Universal Life → 25%) * Insured death benefit must be <= 100 times expected monthly benefit

Answer 14

* Transfers to another 457 plan remain only option for non-governmental tax exempt organizations * Hardship distributions cannot be rolled into any other qualified plan. * Required minimum distributions

Answer 15

**Depends only on the employer's unsecured promise to pay and can be DC or DB** **Salary Reduction Plan:** Uses portion of employee’s current comp. To fund ultimate comp. Benefit (pure deferred) **Salary Continuation Plan:** Refers to a type of non-elective nonqualified deferred compensation plan that provides deferred amount payable in the future.Uses employer contributions to fund ultimate benefit **Stock Appreciation Rights:** Generally, no actual shares are set aside, nor are shares of stock necessarily actually distributed. The value of employer stock is measured by which benefits are valued. **Excess Benefit Plan:** Makes up the difference between the qualified plan benefits top executives are allowed under IRC Section 415 and the benefit permitted for rank and file employees **NOTE:** Earnings of plan assets set aside in currently taxable investments to informally fund a nonqualified deferred compensation plan DO NOT provide the employer with an offsetting tax deduction (deductible when amount is includible in the EE’s income)

Answer 16

* 2 years from grant and 1 year from exercise date before selling ISOs → **LTCG:** BASIS GIVEN - Sold * Violating either rule results in Disqualifying Disposition (NSO) * Non-qualified stock option (NSO): **OI:** BASIS GIVEN - Exercised; **LTGC:** Exercised - Sold

Answer 17

**Non-Qualified Defined Compensation Plans of Government Agencies, States, Cities, Towns, and Controlled Tax Exempt Organizations (NOT CHURCHES)** * * Deferral limited to 23K or 100% of compensation (2024) * 7.5K catch up allow to 50+ and ONLY government plans (2024) → **SPECIAL 3-year CATCH UP BEFORE FRA** * Early distributions from government 457 are NOT subject to penalty * Salary deferrals NOT aggregated with other plans * Non-governmental plans can ONLY be rolled into another 457 plan (Government plans rolled into another government 457, tax-advantaged employer-sponsored plan, qualified plan or IRA) * Non-governmental plans ONLY available to management and HCE

Retirement Flashcards

(41 cards)