dalton quiz misses Flashcards
Which of the following statements concerning the OASDHI earnings test for the current year is correct?
The earnings test does not apply after normal age retirement (but still applies at 62).
The monthly exempt amount is $3,490 ($41,880 annualized) in 2015 for those months in the year of normal retirement age BEFORE you actually reach normal retirement age.
The test uses only earned income.
No passive or portfolio income is used in calculating the earnings.
What is the early withdrawal penalty for a SIMPLE IRA plan during the 2-year period beginning on the date the employee first participated in the SIMPLE plan?
25% is assessed only during the first 2-year period of participating in the plan. This does not require that each contribution stay in the plan for two years, only that the participant be in the plan for two years.
Based upon the Internal Revenue Code, which of the following statement(s) is/are accurate?
I. Medical expenses paid as a benefit to a surviving spouse are excludable from gross income only to the extent they would have been excluded if they had been paid to the employee.
II. Highly-compensated employees may lose their tax-free status of medical benefits under a self-insured plan which is discriminatory.
III. A highly-compensated employee may be taxed on part of his or her medical expenses for which he or she is reimbursed under a discriminatory self-insured plan, even if the same benefits are available to all workers.
characteristics of defined contribution pension plans
Defined contribution pension plans must have a definite allocation formula based upon salary and/or age or any other qualifying factor.
Contributions may be made without regard to company profits and, because it is a pension plan, are fixed by the funding formula and must be made annually.
When would you advise a person not to wait to exercise a nonqualified stock option?
If all gain has been apparently made in a security, rather than lose the profit, and since there are no special advantages to holding non-qualifieds, it may be the time to exercise and to follow with an immediate sale.
Which individuals are currently entitled to retirement benefits based on a husband/ ex-husband’s SS account?
any ex-spouse married at least 10 years and has not remarried
Current spouse must be eligible for SS (by age) and husband must be already taking benefits himself
Characteristics of a target benefit plan
I. It favors older participants.
II. It requires actuarial assumptions at inception.
III. The maximum deductible employer contribution is 25% of covered compensation.
IV. The maximum individual allocation is the lesser of 100% of pay or $53,000 (2015).
Services provided on a discounted or free basis to employees are not includible in taxable income to the employee under which of the following circumstances?
I. The employer must incur no substantial cost in providing the service.
II. Services offered to the employees must be in the line of business in which they are working.
III. Services cannot be discounted more than 20% of the price that is available to customers.
IV. If there is a reciprocity agreement between two unrelated employers in the same line of business.
characteristics of social security benefits
Retirement Survivorship Survivorship Disability
Fully Insured Fully Insured Currently Insured ageBase
Participant 100% Deceased Deceased 100%
Child Under 18 50% 75% 75% 50%
Spouse w/ Child under 16 50% 75% 75% 50%
Spouse Age 65 50% 100% 0% 50%
Retirement Survivorship Survivorship Disability
Fully Insured Fully Insured Currently Insured Based on Age
Spouse Age 62 40% 0.83 0 40%
Child Under 18 50% 75% 75% 50%
Spouse Age 60 N/A 72% 0% N/A
Dependent Parent (age 62) 0% 75/82.5% 0% 0%
Characteristics of COBRA
Employers must provide COBRA if they have 20 or more employees.
A change in benefit status will trigger COBRA eligibility.
COBRA non-compliance carries a penalty of $100 per day per participant.
After 36 months, the maximum period for continuation of coverage terminates.
characteristics of HIPAA of 96
The Act limits “pre-existing look-back period” to 6 months.
Does not allow pregnancy to be considered pre-existing.
The Act limits the pre-existing conditions exclusion period to 12 months.
Characteristics of FSA
FSAs are funded with pre-tax dollars as part of a cafeteria plan.
Unused funds at the end of the year revert to the employer who is prohibited from returning the funds directly to the forfeiting employee.
Dependent care FSAs are limited to $5,000 per year.
Medical FSA funds can only pay for medical expenses.
Payment of child care expenses would be non-qualified expenses.
How is life insurance utilized to finance the obligation of an employer under a non-qualified deferred compensation plan?
A company can defer compensation that would otherwise be due an employee and use the amount to purchase life insurance on the employee in the company’s own name while paying the premiums for the policy.
Defined contribution pension plan characteristics
- must have a definite allocation formula based upon salary and/or age or any other qualifying factor.
- Contributions may be made without regard to company profits.
- contributions are fixed by the funding formula and must be made annually
Money Purchase Pension Plan and Target Benefit Pension Plan are defined contribution pension.
Target is a subset of MPP favoring older employees.
How do you determine an estate tax base?
this is asking about what is added back to get to the ESTATE TAX BASE, not what is included in the gross estate.
- Adjusted taxable gifts are added back to the taxable estate in determining the estate tax base at the date-of-gift value ($XXX) minus the annual gift tax exclusion ($14,000) to arrive at the add back amount.
- all gifts are included at transfer value, but application of the annual gift exclusion ($14k) may fully offset the gift.
