Five views of retirement plans Flashcards
Qualified versus nonqualified plans
When must each be established?
Qualified plans by end of the annual tax filing, including extensions
Nonqualified plans can be established anytime
Qualified versus nonqualified plans
When must the funding be completed?
Qualified plans by the due date of return, including extensions
Nonqualified plans anytime
Qualified versus nonqualified plans
What are the tax benefits for the employer employee in each type of plan?
Qualified plans: employer deduction and employee deferral
Nonqualified plans : employee deferral only
Qualified versus nonqualified plans
Which ones are subject to ERISA in full?
Qualified plans are subject to ERISA
Nonqualified plans are not
Qualified plans versus nonqualified plans
Which ones are subject to discrimination testing and other testing
Qualified plans are subject to testing and discrimination testing
Nonqualified plans are not subject to either
Qualified versus nonqualified plans
Which one of the two more flexible?
Qualified plans are limited in their flexibility
Nonqualified plans are flexible
Pension plans versus profit sharing plans
Each plan has a legal promise to do what
Pension plan has a legal promise to pay pension
Profit-sharing plan has a legal promise to defer taxes
Pension plan VS profit sharing plan
Do they have mandatory annual funding?
Pension plan has mandatory annual funding
Profit sharing plan does not, but funding must be substantial and reoccurring (at least 3 out of 5 years)
Pension plans vs profit sharing plans
When are in-service withdrawals permitted?
Pension plans at 59 1/2 or over
Profit sharing plans permitted after two years
Pension plans vs profit sharing plans
Plan investment and employer securities is limited to what
10% for pension plans
100% for profit sharing plans
Defined benefit vs define contribution plans
Who takes on the investment risk?
Employer does in a defined benefit
Employee does a defined contribution
Defined benefit vs define contribution plans
Our funds commingled or separate accounts
Commingled in a defined benefit
Separate accounts for defined contribution plans
Defined the benefit vs defined contribution plans
Which one is protected by PBGC?
Defined benefit plan
Exception is for professional firms with 25 or fewer employees
Defined benefit vs defined contribution plans
What are the 2024 limits for each plan?
The annual benefit in a defined benefit plan cannot be greater than $275,000 a year
The annual additions to a defined contribution plan must be the lesser of 100% or $69,000
Defined benefit vs defined contribution plans
Which one generally benefits older or younger employees
Defined benefit, generally benefits older
Define contribution, generally benefits younger employees
