Chapter 11: Retirement Plans

Question 1

Qualified Plan

Answer 1

A retirement or employee compensation plan established by the employer that meets IRS guidelines

Question 2

ERISA (Employee Retirement Income Security Act of 1974)

Answer 2

A federal law that sets minimum standards for most voluntarily established pension and health plans in private industry

Question 3

Defined contribution plans

Answer 3

Tax-qualified retirement plans in which annual contributions are determined by a formula set forth in a plan.

Question 4

Profit-sharing plans

Answer 4

Any plans whereby a portion of a company’s profits are set aide for distribution to employees who qualify

Question 5

Keogh Plans

Answer 5

Designed for self-employed individuals
Favorable tax treatment

Question 6

Simplified Employee Pension (SEP)

Answer 6

Qualifed retirement plan under which the employer contributes to an individual retirement account

Question 7

SIMPLE

Answer 7

Qualifed employer retirement plan
Small biz employers setup tax-favored retirement plans for their employees

Question 8

Traditional IRA

Answer 8

Personal qualified account
Tax-deferred income

Question 9

Traditional IRA Contributions/Withdrawals

Answer 9

Contributions are federal and state tax deductible.
Withdrawn as ordinary income.
70 1/2 - minimum amount must be withdrawn.
59 1/2 and below - 10% penalty

Question 10

Traditional IRA 10% Penalty exceptions (7):

Answer 10

1. Owner dies/becomes disabled.
2. Distribution is in equal payments over the owner’s lifetime
3. Higher education expenses for a dependent are necessasry
4. Purchase a first home with up to 10k down payment
5. Out of pocket medical expenses are in excess of 7.5% of adjusted gross income
6. Pay health insurance premiums when unemployed
7. Correct or reduce an excess contribution

Question 11

ROTH IRA

Answer 11

59 1/2 withdrawals are tax free
No age limits
Inheritable

Question 12

Qualified Withdrawals

Answer 12

Funds must be in the account for 5 years.
Age 59 1/2 minimum
Owner dies or becomes disabled
First home

Question 13

ERISA

Answer 13

Employee Retirement Income Security Act of 1974 (ERISA)
Protect the rights of workers covered under the employer-sponsored plan:
coverage, vesting, funding and contributions

Question 14

Participation standards for qualified employer plans

Answer 14

1. Age 21 must complete one year of service
2. If 100% vesting, then must complete 2 years of service

Question 15

Form 5500

Answer 15

Disclosure document that employee benefit plans use to satisfy annual reporting requirements under ERISA

Question 16

Alienation of benefits

Answer 16

Assignment of pension or retirement plan to another person

Question 17

3 Types of Defined Contribution Plans

Answer 17

1. Profit Sharing
2. Stock Bonus Plans
3. Money Purchase Plans

Question 18

Section 457

Answer 18

Government and state employees

Question 19

Keogh / HR-10

Answer 19

Self-employed individuals

Question 20

SIMPLE

Answer 20

For buisnesses that employ no more than 100 employees who receive at least $5000 in compensation in the previous year.

Question 21

Conduit IRA

Answer 21

A holding tank for funds that originally came from a qualified plan and are on their way to another qualified plan.