Employee Benefits/Retirement Savings Flashcards
401k loan limitations
$50k max or 50% of vested account balance or accrued benefit
*A loan of up to $10k is allowed even if it exceeds 50%
Top Heavy Plans
If more than 60% of total plan benefits are in favor of key employees, a plan is considered top heavy. If plan is top heavy, employers required to make a minimum of 2% of compensation for defined benefit plans and 3% of compensation for defined contribution plans on behalf of non-key employees.
403b is also known as a what?
Tax-sheltered annuity (TSA)
In DB plan, what must be used to reduce the employer’s cost of the plan?
Forfeitures
Another term for a salary reduction plan?
Deferred comp plan
In a salary reduction plan, employee dives up a specified portion of current comp in return for a benefit paid by the employer. Benefit is equal to amount deferred plus interest. Also known as a deferred comp plan.
What tax will a freelance writer who writes for companies as an independent contractor have to pay?
Individual income tax plus self-employment tax.
Employer cannot maintain any other qualified plan simultaneously if they have what other plan in place?
SIMPLE
When considering when to start SS benefits, what are three key factors to consider?
Overall health of the person
Person’s financial need
Social Security earnings statement
Term that refers to a method of tracking the performance of a company stock?
Phantom Stock
It’s an additional benefit offered to a company’s employees and pays a cash award to employees based on the price of the company’s stock.
A nonqualified deferred compensation plan must be unfunded for the employee to do what?
Defer taxes
These plans are those in which employees earn money one year but are compensated in a future year.
Employees working less than ___ hours per week may be excluded from participating in an employee stock purchase plan (ESPP)?
20
What is the blackout period on elective deferrals following a hardship withdrawal on a 401k?
6 months
Max allowed service requirement for employers to set minimum age or service requirement that must be met before an employee is eligible to receive employer contributrions?
One year
Max age is 21.
However if contributions are 100% vested immediately, max allowed service req’ is two years.
In a DB plan, the insurance benefit must not be greater than what amount?
100x expected monthly retirement income benefit
Allocation formula associated with profit sharing contributions must be _____________ and ______________.
Definite and predetermined
Purpose of excess benefit plans
They make up for retirement benefits not permitted by the IRS.
Excess benefit plans are for highly compensated employees whose contributions to retirement plans are limited by the IRS. They are a type of nonqualified deferred compensation (NQDC) plan that provides supplemental retirement benefits to such employees.
Why might employee enrollment in a qualified retirement plan be postponed beyond one year of service?
If contributions are 100% immediately vested upon eligibility.
Partial loans and surrenders of MECs are taxed at what basis?
LIFO
Stock bonus plans provide tax deductions while having what effect on cash flow?
No effect
In what type of plan does an employee give up a specified portion of current compensation in return for a benefit paid by the employer?
Salary reduction plan
For a top heavy plan, what is the minimum contribution an employer must make on behalf of non-key employees for a DC plan?
3%
Unfunded deferred compensation plans - employee is not required to pay tax on deferred amounts until they are paid to the employee
Plans which employees earn money one year but are compensated in a future year
50/40 Test
Requires that a plan cover at least the lesser of 50 employees or 40% of all employees
SEP plan participant must be at least ____ years old.
21
Annual fee paid to a physician by each participant within a health plan?
Capitation
Excise tax on the amount of RMDs that should have been taken
50%
Complex Will
A will that includes estate tax planning measures
If benefits paid to an employee, the premiums paid for group disability coverage are deductible by the employer as an:
Ordinary and necessary business expense
Within ____ days the summary plan description must be provided to all plan participants upon the establishment of a qualified retirement plan.
120 days
Inherited IRA distro - eligible beneficiaries
“SportsCenter Does Make Bucks”
Spouse
Chronically ill bene
Disabled bene
Minor children
Bene not more than 10 years younger
What does TSA stand for?
Tax sheltered annuity
Pertains to 403b plans
SEP
100% ER funded
100% immediately vested
Max contrib 25% of covered comp / 20% for SE person / up to $61k
Discretionary contrib’s each year
Offered to all EE’s 21 yrs old, employed 3 out of last 5 yrs, & comp $650<
No loans
SIMPLE IRA
100% immediately vested
100 or fewer employees
ER & EE contrib’s
EE: $14k, $3k catch up for 50+
ER: 3% match
All employees w/ comp $5k+ in any prior 2 yrs
Withdrawals w/in first 2 yrs; 25% penalty
No loans
10% early withdrawal penalty
Qual’ed plans:
(1) Health Insurance
(2) Education
(3) Home purchase
IRAs:
(1) Separation of service
What are the tax-advantaged plans?
403b
457 plans
SEP
SIMPLE
SIMPLE plans are suitable for a company that wants….
To make currently deductible contributions
Does not want the contributions to be currently taxable to the participant
SIMPLE IRAs
25% penalty for withdrawals in the first 2 years
Not subject to ADP, ACP, top-heavy testing
No other plan can be offered by employer
Derails are subject to FICA (EE & ER) and FUTA (ER)
