Other Retirement

Question 1

What is the shortcut to self-employment tax and when does it apply?

Answer 1

The shortcut is to multiply net earnings from self-employment by .1413 and you can use it when net earnings are less than the taxable social security wage base

Question 2

What is the shortcut to get the max retirement plan contribution for self-employed and when does it apply?

Answer 2

The shortcut is to multiply net earnings from self-employment by .1859 and that is only used when the plan contribution rate is 25%.

Question 3

What are the 2 main flags to use a SEP or SIMPLE?

Answer 3

1) easy to setup
2) minimal yearly administrative costs

Question 4

What are the 4 eligible designated beneficiaries for an inherited IRA?

Answer 4

• Surviving spouse
  -Minor Child of Decedent
• Chronically ill or disabled
  Other beneficiaries not more than 10 years younger than the decedent

Question 5

Do Roth IRA accounts require RMDs?

Answer 5

Not during the life of the owner. Non-spouse and non-eligible beneficiaries are subject to RMDs like a traditional IRA.

Question 6

If an estate is the beneficiary of an inherited IRA, how many years does the estate have to distribute the account?

Answer 6

5 years

Question 7

How does a secular trust differ from a Rabbi trust?

Answer 7

A rabbi trust does not trigger immediate recognition of compensation to the executive because the substantial risk of forfeiture is considered to exist because the funds in the rabbi trust are accessible by corporate creditors in the event of insolvency of the company.
A “secular” trust is not subject to the company’s creditors and results in immediate compensation recognition.

Question 8

How are nonqualified deferred compensation plans occasionally informally funded?

Answer 8

Cash value life insurance

Question 9

What is an excess benefit plan?

Answer 9

It is a plan that typically mirrors a qualified plan benefit formula but is NOT subject to funding or benefit amount limits, or an annual additions limit.

Question 10

What is a SERP?

Answer 10

A SERP typically promises to pay an executive additional compensation of a specified amount for a specified period, contingent on the executive achieving specific goals within the company.

Question 11

If an employer wants a plan where they can have currently deductible employer contributions and the benefits are not currently taxable to the employee, which type would you recommend?

Answer 11

A qualified, or tax advantaged plan

Question 12

If an employer wants a plan where benefits are not currently taxable to the employee/participant and the employer can limit participation to select individuals, which would you reccomend?

Answer 12

A non-qualified deferred compensation plan

Question 13

If an employer wants currently deductible employer plan contributions and to be able to pick and choose participants, which plan would you recommend?

Answer 13

Non-qualified section 162 bonus plan

Question 14

When does the employer receive a deduction in an NQSO and ISO

Answer 14

In an NQSO, the employer receives a deduction at exercise. In an ISO, the employer ONYL receives a deduction if it is a disqualifying disposition and taxation becomes the same as an NQSO. This occurs at the sale.

Question 15

What is the separation from service penalty exception and what plans does it apply to?

Answer 15

The employee separates from service during or after the year the employee reaches age 55 and it applies to qualified plans.

Question 16

What is the formula for social security benefit taxation?

Answer 16

1/2 social security benefits + tax exempt income + AGI = provisional income

Question 17

What are the 2 main points that qualify a former spouse for collecting an ex-spouses social security? What are the other 2 points?

Answer 17

Worker must have been married to the spouse for at least 10 years and currently be unmarried.

The other 2 points are that the divorced person must be at least aged 62 and that they must have been divorced for at least 2 years.

Question 18

What is the government pension offset for social security?

Answer 18

If the beneficiary claiming spousal benefits receives a government pension benefit for which social security taxes were not paid, the social security spousal retirement benefit will be reduced by 2/3 of the government pension amount

Question 19

What is the taxation on provisional income for someone Married filing jointly?

Answer 19

Up to 32,000: 0
32,000 to 44,000: 50%
44,000+: 85%

Question 20

What is the taxation on provisional income for someone who files single?

Answer 20

Up to 25,000: 0
325000 to 34,000: 50%
34,000+: 85%

Question 21

What is the taxation on provisional income for someone who files MFS?

Answer 21

Always 85%

Question 22

What is IRMAA and how could you reduce it?

Answer 22

It is an income-related monthly adjustment amount and it is a surcharge that some medicare benficiaries pay in addition to their part B and D premiums. The amount is based on a benficiary’s medicare specific modified adjusted gross income.

So to reduce it, you would want to reduce adjusted gross income maybe by contributing to a deductible IRA or making out a 401(k).

Question 23

What makes up Medicare specific MAGI?

Answer 23

AGI and tax-exempt income

Question 24

What is the downside of a qualified plan - tax advantaged plan?

Answer 24

The employer can’t limit participation to select individuals.

Question 25

What is the downside of a non-qualified section 162 bonus plan?

Answer 25

Benefits are currently taxable to the employee/participant.

Question 26

What is the downside of a non-qualified deferred compensation plan?

Answer 26

Not currently deductible employer contributions.

Question 27

What does it mean to “informally fund” a SERP?

Answer 27

fund using cash value life insurance