Qualified Plans

Question 1

What are the general requirements for qualified plans?

Answer 1

The plan must be for the exclusive benefit of the employees and their beneficiaries, must be formally written and communicated to the employees, and cannot discriminate in favor of the prohibited group. The plan must be permanent, approved by the IRS, and have a vesting requirement.

Question 2

Who can contribute to a traditional IRA?

Answer 2

Individuals or married couples with earned income, up to the age of 70 1/2.

Question 3

What are the main differences between a traditional IRA and a Roth IRA?

Answer 3

Contributions are after tax and can continue beyond the age 70 1/2. Distributions do not have to begin at age 70 1/2.

Question 4

Who is eligible for a Keogh (HR-10) Plan?

Answer 4

A self-employed individual or a partner working part or full time who owns at least 10 % of their business.

Question 5

What is the maximum number of participants in a SIMPLE plan?

Answer 5

100 employees.

Question 6

How are the income payments from a 403(b) plan taxed?

Answer 6

Funds contributed are excluded from the employee’s current taxable income, but are taxable upon withdrawal.

Question 7

What qualifies an individual to contribute to an IRA?

Answer 7

Earned income.

Question 8

If a retirement plan or annuity is qualified,

Answer 8

It satisfies the requirements of the Internal Revenue Service for favorable tax treatment.

Question 9

Which of the following retirement plans is for nonprofit, charitable, educational or religious organizations?

Answer 9

Tax-sheltered Annuity 403(b).

Question 10

Which of the following is NOT a requirement for a qualified plan?

Answer 10

It must be temporary.

Question 11

All of the following persons who do not have an employer sponsored retirement plan would be eligible to set up contributions to a Traditional IRA EXCEPT

Answer 11

Arlene, age 72, a nurse.

Question 12

Which of the following is an example of a nonqualified retirement plan?

Answer 12

Section 457 deferred compensation.

Question 13

Retirement plans can be broadly divided into which of the following categories?

Answer 13

Qualified and nonqualified.

Question 14

What is the requirement for a number of employees in a SIMPLE plan?

Answer 14

No more than 100.

Question 15

What is the primary purpose of a 401(k) plan?

Answer 15

Accumulation of retirement income.

Question 16

If a company has a simplified employee pension (SEP) plan, what type of plan is it?

Answer 16

A defined contribution plan for a small business.

Question 17

For a retirement plan to be qualified, it must be designed for the benefit of

Answer 17

Employees.

Question 18

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Answer 18

Profit-sharing plan.

Question 19

Which of the following would be most likely to start a tax-sheltered annuity?

Answer 19

Public school teachers.

Question 20

Which of the following is an IRS qualified retirement program for the self-employed?

Answer 20

Keogh/HR- 10

Question 21

In a traditional IRA plan, at what age may the plan owner begin withdrawing funds?

Answer 21

59 1/2.