CH 24 - Distributions From Retirement Plans Flashcards
How can you obtain a qualified or a non-qualified distribution from a Roth IRA, Roth 401(k), and 403(b) plan TAX FREE?
qualified = first wait the 5-year-tax period, PLUS a triggering event (59½, death, disability, $10K first time homebuyer)
non-qualified = withdraw the basis-first
Yes, a distribution from second Roth IRA is a qualifying distribution. However, the 5-year period starts when?
with first Roth IRA
What is one way to be certain you can avoid the 20% withholdings from an IRA distribution?
direct rollover into an IRA
All distributions from a qualified plan, 403(b), and 457 are eligible for rollovers, except _________ and _________.
periodic payments for 10 years or more (aka - annuity payments)
required minimum distribution (RDM)
Distributions from an IRA are NOT subject to the 20% withholding rule, but is subject to the _____ rule where the participant can “use the money” once a year.
60-day rule
Which of the following rollovers are NOT subject to the 20% mandatory withholding?
A) rollovers into a qualified plan
B) rollovers into IRAs
rollovers into an IRA
NUA = _______ – _______
market value – value when put into account
How is net unrealized appreciation in employer’s stock taxed?
As long-term capital gain when stock is sold.
This is when a recipient of a lump-sum distribution from a qualified plan elects to defer taxation on unrealized gain on the employer’s stock included in the distribution.
NUA
What is the first distribution year and the required beginning date for qualified plans, 403(b) plans, IRAs, and 457 plans?
first distribution year = the exact year when the client hits 70½.
required beginning date = April 1st following the year in which the participant reaches age 70½. Unless, it’s a qualified plan or 403(b), then it’s April 1st following the year of retirement.
The required minimum distribution date applies to those who are…
less than 5% owners of the company sponsoring a qualified plan or 403(b) plan.
Lifetime distribution periods are based on the life expectancy of a participant using a __________.
uniform lifetime table
How is the required minimum distribution calculated using the uniform lifetime table?
It divides the account balance from the previous year by the client’s life expectancy or the applicable distribution period.
How are lifetime required minimum distribution calculations affected when a beneficiary is involved?
Generally required minimum distribution remains the same regardless of the beneficiary.
What is the spousal exception in relation to the required minimum distribution calculation?
If the spouse is more than 10 years younger than the participant, then we use joint life and last survivor expectancy of the spouse (aka - actual life expectancy)
How does the required beginning date differ based on the TWO following types of distributions?
A) prior-to-death
B) after-death
prior to-death
- spouse can rollover
- non-spouse can begin by end of following year using a fixed period
- nonperson happens within 5 years
after-death
- spouse can rollover
- non-spouse uses a fixed period for distributions (life expectancy of beneficiary)
- nonperson will use remaining life expectancy
What are the postmortem planning tools when navigating the minimum required distribution rules? (3)
use Qualified Disclaimers in favor of contingent
payouts prior to Sept 30th date
use separate accounts with multi-beneficiaries
Concerning the substantially equal periodic payment exception from the Sec. 72(t) penalty tax, what if proper withdrawals are not in a consistent amount??
It could result in a penalty tax on all prior withdrawals.
