Deck 3 Flashcards
Are company provided health insurance premiums deductible to owners of S-Corps or Sole Proprietorships?
No
What are section 125 rules?
Non-discrimination rules for cafeteria plans.
Must COBRA cover an employee who retirees at 65?
Must it cover an employee after death?
No—An employee who retires at 65 is eligible for Medicare.
Yes—Cobra must pay final medical expenses after an employee dies.
Are Cafeteria Plans 100% pre-tax (no withholding, no fed and state income)?
Are Cafeteria Plans section 125?
Yes, and yes.
Are service discounts between unrelated businesses provided through a reciprocity agreement includable in employee gross income?
No, as long as the discount doesn’t exceed 20%
Can an employer deduct premiums on life insurance when the benefit is over $50,000?
Yes. Just because it’s taxable to the employee doesn’t mean the employer can’t deduct it.
What are the 3 coverage tests for QP’s
What’s the * for DB plans?
Safe harbor: % of NHC covered ≥ 70%
Ratio %: % of NHC covered ÷ % HC covered ≥ 70%
Avg benefits Test: Benefit of NHC ÷ Benefit of HC ≥ 70%*
*DB. Plans must also pass the 50/40 test (Cover 50 people or 40%, every day of year)
What are the three tiers of ADP testing?
If NHC defer 0-2%, HC can defer double.
If NHC defer 2-8%, HC can defer 2% more.
If NHC defer > 8%, HC can defer 1.25x as much.
What’s the difference between a QNEC and a QMC?
What are they both trying to accomplish?
A QNEC goes to all employees (Qualified Non-elective Contribution)
A QMC goes to all participating employees (Qualified matching contribution)
Both are solutions for CODAs that fail ADP testing.
What are the three options for a safe-harbor 401k plan?
What do they all have in common?
3% non-elective contribution.
100% match up to 3% + 50% match up to 5 %
100% match up to 4%
All must be 100% vested.
What is the exemption for a simple trust?
Ie, the amount of income they don’t have to account for on their tax return.
$300.
Are S corp earnings subject to SE tax?
No.
Can you contribute the max amt to a 403b and a 457b in the same year?
Yes
In calculating college planning cost what are the three steps?
When do you use BEGIN mode?
- Inflate the tuition to the year the student starts.
- Calculate the total amount needed to pay the tuition for the desired # of years
- Inflation adjusted return
- BEGIN mode - Calculate the payment needed to get to the amount when the child is ready to go to college.
When you make an early withdrawal from a qualified plan in which you have basis, how does it come out?
How is it taxed and penalized?
- % of basis and earnings.
- Penalty and taxes are only on earnings.
- Basis has already been taxed.
What is an attorney in fact?
A person named in a POA document.
What is a SPRINGING DPOA?
One that activates only when the principle becomes incapacitated.
What does a pour-over provision do?
It moves assets into a testamentary trust
Can you disclaim part of an asset if you do it within 9 mos and in writing?
Yes.
What are Ademption, Abatement, and In terrorem?
Ademption is when you no longer have an asset left to someone in a will.
Abatement is when you no longer have the same amt. of an asset left to someone in a will.
In terrorem is a no contest clause.
What is a nuncupative will?
A dying declaration made in front of 2 witnesses.
If you want to change a will, is destroying your old one a better idea than making a wholesale change by codicil?
Yes, codicils are better used for additional property.
What is the random walk hypothesis?
The idea that changes in stock prices are independent of each other, and the market cannot be predicted by studying past movements and trends.
What filing status can you choose if your spouse dies and you remarry in the same year?
What filing status must your deceased spouse take?
MFS or MFJ
Deceased spouse must file MFS.
