Customer Accounts - Retirement Plans

Question 1

Retirement plans for individuals

Answer 1

IRAs and Keoghs

Question 2

Employer established Retirement Plans

Answer 2

ERISA accounts. Profit sharing plans, defined contribution, defined benefit, tax deferred annuity (403b), payroll deduction savings plan

Question 3

Exempt from ERISA

Answer 3

US Government and state employee plans

Question 4

Tax qualified

Answer 4

contributions have not been taxed. All ERISA accounts are tax qualified.

Question 5

IRA contribution limit

Answer 5

lesser of 100% of income or $6000. 50 and older extra $1000 catch up contribution.

Question 6

IRA deductibility

Answer 6

if the employee has another pension plan then the tax deductible amount is phased out for higher earning people. ROTH IRA is also subject to phase out.

Question 7

IRA contributions

Answer 7

can be made until age 70 1/2. excess contributions have a 6% penalty tax until removed. Insurance, art and collectibles are not allowed.

Question 8

premature distribution

Answer 8

normal income tax plus 10% penalty tax

Question 9

RMD

Answer 9

Joint and last survivor table - sole beneficiary is spouse who is more than 10 years younger. Results in smaller RMD.
Uniform Life Table - spouse is not the sole beneficiary and spouse is less than 10 years younger.
Single Life Expectancy - used by sole beneficiary of account. Yields largest RMD.

Question 10

RMD not taken

Answer 10

50% penalty tax

Question 11

IRA rollover

Answer 11

once per year. must be completed within 60 days. 20% must be withheld as tax credit. Unlimited trustee to trustee transfers and no withholding.

Question 12

Keogh Plans (HR10)

Answer 12

retirement plans for self employed. contribution max is 25% of “after Keogh deduction” earnings up to $56,000. Full time employees must be included. employer contributes same % for employees. distributions are fully taxable.

Question 13

ERISA

Answer 13

non-discrimination test- all employees must be treated equally.
vesting - employees “earn” benefits over a reasonable time. Benefits vest over 5 years.
Fiduciary responsible - plan assets have to be segregated from other company assets.
permitted investments - whole life isn’t permitted or speculative strategies that don’t meet “prudent” man rule.

Question 14

2 basic categories of pension plans covered under ERISA

Answer 14

defined contribution plan and defined benefit plan

Question 15

Defined Contribution (money purchase) plans

Answer 15

contributions are based on a percent of company profits or employee earnings. Max contribution is 25% of income up to $56,000.

Question 16

Defined Benefit Plan

Answer 16

contributions are made to fund a given benefit at retirement. An actuary is used to determine the plan contribution made each year.

Question 17

Profit sharing plan

Answer 17

a type of defined contribution plan. contributions are based on company profits with the actual contribution amount decided by the employer. Max contribution is 25% of salary up to $56,000. All earnings are tax deferred.

Question 18

Tax deferred annuities (403b)

Answer 18

for employees of non-profit organizations are allowed to contribute to “tax qualified” annuities. Contributions are tax deductible and earnings are tax deferred. Max contribution 19% of salary, up to $19,000.

Question 19

Payroll deduction savings plan (401k)

Answer 19

employers match employee contributions. A type of defined contribution plan. Max contribution $19,000.