Retirement

Question 1

Defined Benefit Pension (qualified plan/ERISA)

Answer 1

1. Favors Older Employee/ Owner 50+
2. Certain Retirement benefit (can meet a set retirement objective)
3. must have VERY STABLE CASH FLOW
4. Past Service Credits allowed - perfect scenario: older owner, behind on retirement , company makes a lot of $ (If this is not the scenario pick Target Benefit)

Question 2

Defined Contribution

Answer 2

Usually a % of salary 
Qualified Plan/ ERISA
Vesting Schedule 
Admin Costs 
Exempt from creditors 
integrated with Social Security

Question 3

Money Purchase Pension

Answer 3

1. Up to 25% employer deduction
2. fixed contributions
3. Stable Cash Flow
   (Usually not correct answer unless SEP is not avaiable)

Question 4

Target Benefit Pension

Answer 4

1. Up to 25% employer deduction
2. Fixed Contributions
3. Stable Cash Flow
4. Favors Older Employees

Question 5

Profit Sharing

Answer 5

1. Up to 25% Employer deduction
2. flexible contributions
3. 401k provisions (FICA) (hardship provisions)
4. SIMPLE 401k is exempt from cerditors

Question 6

Stock Bonus Plan

Answer 6

1. Up to 25% employer deduction
2. flexible contributions
3. 100% of the contribution can be invested in company stock
4. ESOP cannot be integrated with Social Security or cross-tested

Question 7

SIMPLE IRA

Answer 7

1. SIMPLE 401k is exempt from creditors
2. For small employers (100 or less)
3. Requires employer match (immediate vesting)
4. Salary reduction limit up to $13,500 (FICA)
5. Company Cannot have another plan

Question 8

SEP IRA

Answer 8

Up to 25% contribution for owner (w-2)
Account immediately invested
can be integrated with social security
special elibibility: 21 + paid at least $600 and worked 3 of the 5 prior years

Question 9

SARSEP

Answer 9

1. May have up to 25 employees and 50% of the eligable employees must defer
2. must have been in existence before 12/31/96
3. Salary deduction limit $19,500

Question 10

403b

Answer 10

1. for 501(c)(3) organizations and public schools
2. subject to ERISA only if employer contributions
3. Salary reduction limit up to $19,500
4. employer contributions may be subject to vesting schedule

Question 11

412 (i)

Answer 11

Defined benefit plan funded entirely with insurance products. Exempt from minimum funding standard.
Only appropriate when there is a need for life insurance. The plan allows for a large contribution but the plan return is diminished.

Question 12

SEP Contribution Limit

Answer 12

lesser of 25% of compensations (max comp is $290,000) or $58,000

Limit like a Keog for self employement tax (18.59% for 25% and 12.12% for 15%)