Module 1 - Intronto Retirement Plans Flashcards
What are the five components of total rewards?
Compensation
Well-being
Benefits
Development
Recognition
What are the objectives of employer, sponsored retirement plans?
Generate high value with employees
Engage employee performance
Offer maximum tax benefits
Provide employee opportunity to build retirement savings
Stay Competitive
Employee retirement includes retirement, income needs, and sources of income
What is the percentage of pre-retirement gross income that an employee will need as income replacement during retirement ?
60% to 90% this amount can vary depending on employees income strategy for retirement
Considering the four pillar approach to retirement income sources
What are the four primary sources of income?
Post retirement employment
Social Security
Employer, sponsored plans
Personal savings
What’s the purpose of employer sponsored retirement plans?
Provide retirement income to employees
Result in deferral of income
Tax classifications (qualified, or nonqualified)
Qualified versus nonqualified, employer, sponsored retirement plans
What is a qualified plan?
Meets IRS requirements and offers tax advantages to employer, and/or the employee
Retirement plans that meet the requirements of EIRS a and the IRS 
Compliance provides additional confidence and protections to the plan, for example
Assets are separated from general assets into a trust
Required annual NDT
Compliance with annual contribution limits
Annual and periodic legal filings
Qualified versus nonqualified plans, what’s a nonqualified plan?
Provide benefits and access of those possible within qualified plans however, the benefits did not receive the same favorable tax treatment as qualified plans
Value of nonqualified plans may be lost if the organization declares bankruptcy
Nonqualified plans are generally limited to the top 10% of the workforce
Nonqualified plans allowed deferral of significantly more pretax earnings without annual filings and contribution limits
Restrictions on timing and accessing funds and subject to forfeiture in the event of financial insolvency
Governed by IRS section 409 a
What IRS section governs nonqualified retirement plans
IRS section 409 a
List examples of nonqualified plans by name
Top hat plans
Supplemental executive retirement plans
Excess benefit plans
Does a SERP require employer funding
No
What is ERISA
The federal act regulating private employer, pension, and welfare programs, covers eligibility reporting a disclosure requirements, fiduciary standards for the financial management of retirement funds, tax incentives for funding, pension plans, and establishes the pension benefit guarantee corporation PBGC
What governmental authority administers ERISA
Department of labor
What are three types of qualified retirement plans?
Defined contribution plans
Defined benefit plans
Hybrid plans
Define defined contribution plans
Provides future income based solely on
The amount contributed to the participants plan
 Combination of savings, profit-sharing, money, purchase, employee stock ownership plan
- In these cases, retirement is unknown until retirement
What is the defined benefit plan?
The retirement benefit is clearly defined
Examples:
Final highest average pay
Career average pay
Flat benefit
Define hybrid plans
Exhibit characteristics of both defined benefit, and defined contribution plans
Example
Target benefits
Cash balance
Pension equity
Floor offset
Why does the government through the IRS incentivize qualified plans
Reduces pressure on government social programs, social Social Security
En that retirement plans benefit all employees
Encourages employees to plan for their retirement
What are advantages of qualified plans?
Employer contribution plans are deductible
Participant taxation is deferred until the distribution of benefits
What are advantages of qualified plans?
Employer contribution plans are deductible
Participant taxation is deferred until the distribution of benefits
Who determines if a retirement plan is qualified
IRS
In order for a plan to qualify, an organization must submit a plan document for approval by the IRS
What risk exist associated with the plan document
Planes can occur serious penalties for not following the plan document and associated communications both in writing and timing errors
What are the two main considerations regarding an employer plan objective?
Balance financial risk
Establish Company culture
Considering the impact of Defined benefit plan performance
Discuss who is responsible for investment decisions
The employer is responsible for making investment decisions and has the solve responsibility for ensuring the benefit plan has assets future
If investment performance is better than expected, employer, benefits
Investment performance is worse than expected must make up the difference
Considering the impact of plans performance discuss funding of direct contribution plans
The employee has the risk both upside and downside for the investment and performance of funds
Investment performance is better than expected the employee has more of a benefit
Investment performance is lower than expected employee has less of a benefit when they retire
Why is it important to align retirement plan objectives with organizational strategies?
To ensure they support the organizations strategies
To encourage employees to plan for retirement
To ensure employer, contributions or tax deductible
To provide additional income, security employees
To ensure they support the organizations strategies
Which of the following best describes a typical post retirement change that may affect an individuals requirement income needs
Retirees are no longer paying Social Security taxes
Medicare covers 100% of healthcare expenses
Distributions from retirement accounts are not classified as taxable income
The effective income tax rate does not apply to retirees
Retirees no longer pay Social Security taxes
Which of the following is a mandatory retirement contributory program?
Employer sponsored DB plan
Social Security
Employer sponsored DC plan
Individual retirement account
Social Security
Which statement best describes a qualified plan
Offer certain tax advantages to employer and employee
Increases pressure on government social programs
Provides benefits that do not meet nondiscrimination rules
Provides a guarantee value at retirement from the workforce
Offers certain tax advantages to the employer and or the employee
The amount of a benefit paid to a participant in a direct contribution retirement plan is dependent on, which of the following
Benefits promised by employer
Asset held in common pool
Actuarial assumptions
Employees contributions to plan
Employees contributions to plan
