Chapter 9 Life Flashcards
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
Defined plan
Keogh plan
403(b) plan
Individual Retirement Account (IRA). An IRA may be established by an employee, regardless of any other retirement plan.
Which plan is intended to be used by a sole proprietor and the employees of that business?
Keogh Plan.
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
59 1/2. Traditional Individual Retirement Account (IRA) withdrawals are normally subject to a tax penalty if they are made before the owner reaches age 59 1/2.
Premature IRA distributions are assessed a penalty tax of
10%
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes. A plan sponsor must withhold 20% of the distribution in federal taxes on a rollover. Once the rollover takes place to a new custodian, the remainder of the distribution is made.
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding. A participant must complete a rollover to another qualified plan within 60 days or the distribution is considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsor must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.
