Ch. 23 Simple IRA

Question 1

Simple IRA

Answer 1

employer-sponsored plans in which employer and employee contributions are made to IRAs that are owned by employees

Question 2

What did the simple IRA replace?

Answer 2

SAR-SEP

Question 3

When is it indicated?

Answer 3

1. employer wants a simple and easy plan

2. unincorporated

Question 4

How many employees must an employer have?

Answer 4

100 or fewer

Question 5

How much does an employee have to earn to be counted?

Answer 5

$5,000

Question 6

Simple IRA does not have a percentage limit, but rather a ____ limit

Answer 6

dollar

Question 7

5 advantages

Answer 7

1. plan adoption by completing a form
2. portable benefits
3. employees 100% vested
4. benefit from positive investment
5. funding through salary deferrals

Question 8

4 disadvantages

Answer 8

1. unlikely to provide an adequate retirement for employees who enter the plan at older age
2. annual contributions limited
3. employer cannot maintain another qualified plan
4. not eligible for 10 year averaging

Question 9

What is the annual employee contribution limit?

Answer 9

$11,500 plus $2,500 if the employee is 50 years old or older

Question 10

An employee and employer can make contributions to a simple IRA even if the employee is over the age of ___

Answer 10

70 1/2

Question 11

an individual cannot make ______ contributions to their own traditional IRA after reaching age 70 1/2

Answer 11

after-tax

Question 12

Distribution penalty increased to ____ during the first ____ years

Answer 12

25%; 2