chapter 19 Flashcards
Who is eligible to contribute to a qualified annuity?
Public school employees [403(b)] and certain non-profit organization employees [501(c)3]
What is the penalty for making excess contributions to an IRA?
6% of the excess
True or False: Excess contributions made to an IRA will still be deductible and will grow tax-deferred.
False. Excess contributions are non-deductible and will not grow on a tax-deferred basis.
IRA contributions must be made in what form?
cash
What are some of the investments that are not suitable for IRA contributions?
Collectibles, insurance, and metals (except U.S. gold and silver coins)
Anyone with __________ income may contribute to an IRA.
earned income
Rollovers must be completed within ____ days.
60 days
Only one rollover is allowed per rolling ____ months.
12 months
True or False: To avoid a late withdrawal penalty, IRAs have a required minimum distribution (RMD) provision.
True
What is the late withdrawal penalty?
50% of the amount that should have been taken (an actuarial amount).
How is a Roth IRA contribution different from a Traditional IRA contribution?
The Roth IRA contribution is always made on an after-tax basis.
Early withdrawal without penalty is allowed for what reasons?
Death, disability, qualified higher education expenses, or first-time home buyer ($10,000 limit)
ERISA gave the U.S. Government jurisdiction over ___________________ plans.
private pension
According to ERISA, are there any standards that must be followed regarding how money is invested?
Yes. The plan’s trustee must abide by the Uniform Prudent Investor Act.
Does ERISA permit the writing of covered calls in retirement plans?
yes
Describe the employees who must be eligible to contribute to an ERISA qualified plan.
Employees who are 21 years or older with one year of full-time service
What retirement plans are available to the self-employed?
Keogh Plans and SEPs
May an employee of a corporation who contributes to a corporate pension plan also contribute to a Keogh plan?
Yes, provided the Keogh contribution is solely based upon the employee’s self-employment income
May an individual with a Keogh Plan also fund an IRA?
Yes, but since the Keogh is a qualified plan, the IRA contributions may not be tax-deductible.
_____ Plans are college savings plans with high contribution limits set by the state sponsor.
529
Describe the tax treatment of contributions made to a 529 Plan.
They are after-tax contributions that may possibly grow tax-free.
A savings plan which funds both elementary and higher education is referred to as the ____________________________.
Coverdell ESP