Chapter 11 Flashcards
What is a 401(k) Plan?
A retirement savings plan sponsored by an employer that allows an employee to save and invest a portion of her paycheck before taxes are taken out. Taxes are paid upon withdrawal.
What is a 403(b) Plan?
A retirement plan for certain employees of public schools, specific tax-exempt organizations, and certain religious organizations.
What is a Defined Benefit Plan?
A pension plan where benefits are determined by a specific benefit formula.
What is a Defined Contribution Plan?
A tax-qualified retirement plan where annual contributions are determined by a formula, and benefits vary with contributions and length of service.
What is the Employee Retirement Income Security Act of 1974 (ERISA)?
A federal law that sets minimum standards for voluntarily established pension and health plans in private industry to protect individuals in these plans.
What is a Keogh Plan?
A retirement plan designed for self-employed individuals, offering favorable tax treatment for contributions.
What is a Non-Qualified Withdrawal?
A withdrawal from a plan that exceeds the total contributions, making the earnings taxable as ordinary income.
What is a Profit-Sharing Plan?
A plan where a portion of a company’s profits is set aside for distribution to qualifying employees.
What is a Qualified Plan?
A retirement or employee compensation plan established by an employer that meets IRS guidelines and receives favorable tax treatment.
What is a Qualified Withdrawal?
A tax-free distribution of earnings from a Roth IRA, requiring funds to be held for at least five years and meeting specific conditions.
What are Rollovers?
The establishment of an individual retirement account (IRA) with funds transferred from another IRA or qualified retirement plan.
What is a Roth IRA?
An individual retirement account allowing after-tax contributions, with tax-free earnings and withdrawals after age 59 1/2.
What is a Savings Incentive Match Plan for Employees (SIMPLE)?
A qualified, tax-favored employer retirement plan available to small employers with fewer than 100 employees.
What is a Simplified Employee Pension (SEP) Plan?
A type of qualified retirement plan where the employer contributes to an individual retirement account maintained by the employee.
What is a Traditional IRA?
An individual qualified retirement account allowing tax-deferred income accumulation up to a certain amount each year, based on tax bracket.
