Chapter 14.4

Question 1

403b/Tax-Sheltered Annuity Arrangement

Answer 1

Used by certain tax-exempt organizations to provide retirement benefits for their employees. 403(b) plans cannot invest in limited partnerships.

Question 2

There are 3 types of employers that qualify to offer a 403(b) plan:

Answer 2

• Public Educational systems such as teachers and administrators
• Certain 501c 3 organizations such as religious, education, charitable organizations
• Certain employers of ministers

Question 3

Non-qualified deferred compensation plans

Answer 3

A non-qualified contract between an individual and their employer to defer compensation as agreed upon between the two parties. Such a plan is frequently used by highly-paid athletes and executives who enter into large compensation contracts. They are not subject to ERISA, and therefore the employer may discriminate to whom such a plan is offered in favor of highly paid employees. Business failures could lead to no payments as plan assets could be subject to the company’s creditors. The employee becomes a general creditor of the company if the business fails

Question 4

457(b) Plan

Answer 4

A type of deferred compensation plan for employees of a state or local government or a tax-exempt organization. Different rules apply to governmental vs non-governmental plans. Employers or employees can contribute up to $18,000 with a catch-up of $6,000.

**Private Non-Governmental 457 plans for hospitals, unions, and charitable organizations generally limit participation to a select group of management or highly compensated employees

Question 5

Payroll deduction plans

Answer 5

Non-qualified plans that allow an employee to voluntarily elect to have their employer take deductions(after-tax) from their paychecks to fund insurance, healthcare, or other items.

Question 6

Money Purchase Plan

Answer 6

A defined contribution pension plan which requires a fixed percentage of compensation to be contributed to each eligible employee, annually by the employer only. These plans are for businesses of any size, or individuals with self-employment income.

Question 7

501(c)(3) Entities

Answer 7

Non-profit organizations that are exempt from paying federal income tax