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CFP Missed Concepts > Retirement > Flashcards

Retirement Flashcards

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1
Q

Name the 2 defined benefit pension plans

A

Defined benefit pension plan
Cash balance pension plan

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2
Q

Name the 2 defined contribution pension plans

A

Money purchase pension plan
Target benefit pension plan

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3
Q

Name the 7 profit sharing plan (defined contribution profits sharing plan)

A

Profit sharing plan
Stock bonus plan
Employee stock owed ship plan
401(k)
Thrift Plans
New comparability plans
Age-based profits sharing plans

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4
Q

In service withdrawals are permitted in this plan, what is it

A

Profit sharing
After 2 years of plan allows

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5
Q

In service withdrawals are not allowed under this plan, what is it

A

Pension plan, allele after 59 a a half

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6
Q

Plan provides a joint survivor annuity, what plan is it

A

Pension plan

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7
Q

This plan is not subejrct to mandatory funding

A

Profit sharing

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8
Q

Defined contribution
The plan has the legal rompas to pay:

A

Deferral of compensation and taxation

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9
Q

This plan does not allow for the assets to be invested more than10 % of employer securities

A

Pension plan

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10
Q

How much and a profits sharing plan invest in the employees securities

A

Up to %100

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11
Q

This plan provides past credit to employee for plan

A

Defined benefit

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12
Q

Defined contribution annual Contribution limit is

A

25% of total employee compensation

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13
Q

The annual Contribution of defined benefit plan is

A

Not less than promised amount to be paid ( calculated by actuaries)

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14
Q

Which plan has PBGC insurance

A

defined benefit

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15
Q

The paper the standard eligibility rules to be part of a qualified plan

A

Be age 21 and have 1 year of full time work (1000 hours)

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16
Q

What do part timers have to do to qualify for a qualified plan

A

Have had 3 years consecutively and be 21. MIT have accumulated after 1/1/21
Part time work (500 hours)

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17
Q

What is the special eligibility election that employers can take to extend the wait time for an employee to be part of a plan

A

Extend time to 2 years and be 21 of age. But vesting is immediately

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18
Q

What are the types of vesting schedules for defined contribution plans

A

2-6 graduated and 3 year cliff. If expanding eligibility to 2 years the vesting is immediate once The individual reaches 2 years

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19
Q

What type of vesting is a available for defined benefit plans

A

3-7 year graduated and 5 year cliff
And 2 year eligibility is immediate vesting on second year

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20
Q

What are top heavy plans

A

When more than 60% of benefit is for key employees

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21
Q

What are the requirements of funding for Non key employees when a plan is top heavy

A

Defined benefit : at least 2% x years of service x compensation factor
Defined contribution: 3% minimum match

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22
Q

What is the maximum covered compensation an employer can do under defined benefit plan and defined contribution plan

A

$305k

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23
Q

What is

A
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24
Q

What are the tests to determine is life insurance can be bought in a defined benefit plan

A

25 % test and the 100-1 Ratio test

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25
Q

What are the 2 tests thy the 25 % test covers for life insurance to pass in a defined benefit plan

A

If using term or universal policy, there is a limit up to 25% of the employers contribution for the participants to cover premiums
If using whole polish it is up to 50%

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26
Q

What does the 100-to-1 ratio test consist of for life insurance to be passed on a defined benefit plan

A

Employer can insure coverage up to the limit by finding it:
(Monthly retirement benefit x 100)

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27
Q

What defined contribution plans use little to no actually services

A

Target benefit and money purchase plans because they usually have separate accounts for participants where participants can find their own

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28
Q

What is PBGC

A

Insurance to cover defined benefit plans in case the account is not funded to pay up benefit

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29
Q

What are the PBGC limits

A

6,204 monthly benefit or 74,454 yearly benefit

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30
Q

What is social security integration

A

Provides extra benefit for those who have excess compensation of social security wage base

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31
Q

What method can be used by both defined benefit and contribution to calcaste the social security integration

A

Excess method by taking the excess covered compensation and multiplying it by .75% and multiplying that by years of service up to 35 years

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32
Q

What’s are they 3 formulas for defined benefit plans

A

Flat amount formula
Flat perfect age formula
Unit credit formula

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33
Q

What are cash balance plans

A

Individuals see their hypothetical individual accounts

34
Q

What does the cash balance formula consists of

A

Pay credit and interest credit
Pay credit is a combination of years of service and salary or integrated with social security
Interest credit is a hypothetical return on investment that the employers ensures it will be invested at

35
Q

What are characteristics of money purchase plans

A

Provides a fixed % of employees compensation
Benefits younger participants
Does not guarantee retirement benefit

36
Q

What are characteristics of target benefit plans

A

They use formula based on age and compensation to give each participants
Benefits older participants
Participants chooses investments

37
Q

What is the latest a profit planning can be established and funded

A

As Kate as the federal income due date plus extension
Sole proprietor is Oct 15 and Entities is Sept 15

38
Q

What is permitted disparity in profits sharing plans

A

Social security integration- Allows excess contributions to higher compensated employees above social security wage base up to max limit of $305,000 of covered compensation

39
Q

What method can the profit sharing plan use for social security integration l?

A

Excess method
Generally higher (5.7%) than the base rate

40
Q

What is CODA

A

Allows employees contributions to qualified plan

41
Q

What is the vesting on profit sharing plans

A

2-6 graduate or 3 year cliff

42
Q

What are the distributions rules on profit sharing plans

A

Only upon termination, death, disability or retirement .
May permits in service withdrawals after 2 years

43
Q

What is CODA

A

Cash or deferred arrangement/ 401(k)
Cabe be Attached to profit sharing plans and stock bonus plans
Allows employee to do contributions to qualified plans

44
Q

What entities are allowed to have a CODA

A

Corporations, partnerships, propietership, LLC, tax - exempted

45
Q

How long must an employee quiet to be part of a CODA plan?

A

No more that one year

46
Q

What is the vesting of employees and employer contributions

A

Employees are 100% vested already
Employers are either 3 year cliff or 2-6 graduates

47
Q

Employees contributions are limited to what $ amount

A

$20,500
Catch. Up of $6,500 for 50 and older

48
Q

The employee limitations are also subject to what other kinds of non qualified plans

A

403(b), 457 and SARSEP

49
Q

What are thrift plans

A

Allows to make additional contribution from the employee side over the limitation of $20,500 after taxes and after the ADP test

50
Q

So Roth 401(k) requiere RMD

A

Yes

51
Q

What is the employee contribution limitation for Roth 401k

A

20,500 plus catch up contribution of 6,500 if 50 and older

52
Q

Can you do a traditional ORA. Conversation to a Roth 401k

A

No, only to Roth IRA

53
Q

Are there income limitation to a Roth 401k

A

No, as long as it’s earned income

54
Q

What are the income limitations for a Roth IRA

A

MFJ- 204k - 214k
MFS - 0 - 10k
S - 129k - 144k
Of modified AGI / AGI

55
Q

What are the limitations of the employer contributions

A

Still 25% of covered compensation
I’m total both employee and and employers deferrals can’t go over of $61,000. Or 67,500 of 50 and older
Employees contributions do not affect the 25% limit on employer’s contribution

56
Q

What is the DP test

A

A discriminatory test to make sure HC are not being favored Over NHC

57
Q

According to the ADP schedule of the ADP for NHC employees is 1% - 2% then

A

The permissible ADP for HCE is 2 times the ADP for No employees

58
Q

According to the ADP schedule of the ADP for NHC employees is 2% - 8% then

A

The permissible ADP for HC is 2% plus ADP for NHC

59
Q

According to the ADP schedule of the ADP for NHC employees is 8% or over then

A

The Permissible sabble ADP for HC is 1.25 times ADP of NHC

60
Q

Plan sponsors can choose data from last year to conduct ADP test or this year. Why could using current year be better

A

It allows for HC to be compensated more and there is more ways to fix any failures of passing

61
Q

What can an employee do if it fails the ADP test

A

Corrective contribution
Recharacterization
Qualified non elective contribution
Qualified matching contribution

62
Q

What does a corrective distribution entail when trying to pass the ADP test

A

Return funds to employees plus any earnings on excess of limit of HC employees
Must be done after by 2 month and a half of plan year end or 10% penalty on excess

63
Q

What does the recharaterization entail when trying to pass the ADP test

A

Changing pre tax contributions for after tax
Must be done by 2 and a half after the plea year ends or 10% penalty on excess

64
Q

What does qualifies non elective contribution mean when trying to pass the ADP test

A

Contribute to all eligible NHC employees to increase their ADP
Contributions are 100% vested since they will seem to be coming from employee

65
Q

What entails the qualified matching contribution when trying to pass the ADP test

A

Additional Matching contributions are given to NHC employees who already did a deferral contribution

66
Q

What is the ACP test

A

The actual contribution percentage

67
Q

What is a safe harbor 401k plan

A

Offer a non-elective contribution of at least 4% for all employees
However to comply employer can do
1. 3% non elective contribution at 100% vested or
2. Match 100% up to 3 % employee deferral and 50% of any additional deferral up to 5 %

68
Q

What is a negative election

A

When employees can choose to opt out of doing deferrals. Automatically they are enrolled in deferrals

69
Q

Loans in 401(k) and 403(b) are permitted if the amount

A

Is half of the vested plan benefit up to 50k
If the plan benefit is less or equal to 20k, amount allows is 10k o the greater vested amount

70
Q

How long can lain be repaid for x number of years

A

5 years through payroll deductions

71
Q

What are allowable reason to take a distribution from a 401(k)

A

Retirement, death, separation of service and attainment age 55, attainment age 59 1/2, termination of plan and no other plan is established, certain hardships

72
Q

What type of contribution are Included in hardship distributions

A

Employee deferral contributions and qualified non elective co tribute on and qualified matching contribution may also be included

73
Q

Name the exceptions to avoid 10% early penalty for Qualified Plans (10)

A

Death, disability, substantial periodic payments, medical expenses in excess of 7.5 of agi, QDRO, qualified public safety employee who separate of services and is 50 years, attainment of 55 and separation of service, to pay tax levy, dividend paid within 90 days of plan year end from ESOP

74
Q

Name the exceptions to avoid 10% early penalty for IRA (8)

A

Fort home, heath insurance, death, disability, higher education, medical expenses, equal periodic payments, reach of age 59 1/2

75
Q

What is NUA?

A

Net unrealized appreciation

76
Q

How do you calculate NUA

A

FMV At date of distribution sale of stock - value of stock at date of employer stock contribution= NUA

77
Q

How is ESAPS established

A

Established as trusts

78
Q

Can ESOPS sellers defer gains if they sell the stock and how

A

Yes, by reinvesting in qualifies securities within 12 months

79
Q

What type of employer can establish ESOPS

A

S corp and C corp

80
Q

What is a Keogh plan?

A

A qualified plan for a self-employed person

CFP Missed Concepts (6 decks)

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