Qualified Plans

Question 1

What is a tax qualified retirement plan?

Answer 1

A retirement plan that meets the requirements set forth by the Internal Revenue Code, allowing for tax benefits.

Question 2

True or False: Contributions to tax qualified retirement plans are tax-deductible.

Answer 2

True

Question 3

Fill in the blank: The main benefit of tax qualified retirement plans is __________.

Answer 3

tax deferral on earnings until withdrawal

Question 4

Which of the following is NOT a type of tax qualified retirement plan? A) 401(k) B) IRA C) Roth IRA D) Savings Account

Answer 4

D) Savings Account

Question 5

What is the maximum contribution limit for a traditional IRA?

Answer 5

Lesser of 100% of earned income OR a flat dollar amount (tax law sets limits, the amount is adjusted annually for cost of living)

Question 6

True or False: Distributions from a tax qualified retirement plan before age 59½ may incur a penalty.

Answer 6

True

Question 7

What does ‘vesting’ refer to in the context of tax qualified retirement plans?

Answer 7

The process by which a participant earns the right to their employer’s contributions over time.

Question 8

Multiple Choice: Which of the following plans allows for both employee and employer contributions? A) 403(b) B) Traditional IRA C) Roth IRA D) All of the above

Answer 8

D) All of the above

Question 9

What is the purpose of the required minimum distribution (RMD) rules in tax qualified retirement plans?

Answer 9

To ensure that individuals withdraw a minimum amount from their retirement accounts starting at age 73.

Question 10

Short Answer: Name one advantage of contributing to a tax qualified retirement plan.

Answer 10

Tax-deferred gains and deductible contributions.

Question 11

The difference between a defined benefit pension and a defined contribution plan is that

Answer 11

defined benefit plans are designed to provide a specific benefit upon the employee’s retirement; defined contribution plans only specify how much an employee and employer can contribute.

Question 12

What is a profit-sharing plan?

Answer 12

Defined contribution plan that does not require an employer to make yearly contributions. Contributions are dependent on company profits. Max = 25% of company payroll.

Question 13

What are two advantages of 401(k) compared to an IRA?

Answer 13

higher contribution limits, employers may make matching contributions

Question 14

Keogh Plans (HR-10 plans) are qualified retirement plans

Answer 14

set up by self-employed persons, non-incorporated businesses such as sole proprietorships, and partnerships.

Question 15

Savings Incentive Match Plans for Employees (SIMPLEs) are

Answer 15

simplified retirement plans for small employers with 100 or fewer employees and no other type of retirement account.

Question 16

ERISA stands for

Answer 16

Employee Retirement Income Security Act. ERISA mandates Reporting and Disclosure information be provided to plan participants, beneficiaries, and Department of Labor and IRS.