Retirement

Question 1

Workers Eligibility SS Benefits

Answer 1

RETIRED and over 62: retirement benefits

Disability benefits: under 65, 12 months disabled, 5 months waiting period

Question 2

Spousal Eligibility SS Benefits

Answer 2

Spouse of RETIRED or DISABLED works gets benefits if:
- 62 and over
- child in care under 16 or disabled

Surviving spouse: 60 and older

Divorced Spouse:
- married for 10 years, age 62, been divorced for 2 years
- child under 16 or disabled child

Question 3

Money Purchase Pension Plan selection

Answer 3

• flat percentage contribution
• stable work force (wants to retain key young employees)
• simpler to administer
• stable cashflow and profit to make fixed contributions

Question 4

Target Benefit Pension Plan selection

Answer 4

seeks ADEQUATE retirement benefits for OLDER employees

Question 5

Profit Sharing Plan selection

Answer 5

• FLEXIBLE employer contribution
• profits vary year to year
• incentive to motivate employees to make the company profitable
• employees young, well paid, and time to save funds

Question 6

Stock Bonus Plan / ESOP selection

Answer 6

• company wants to broaden stock ownership (ESOP is 1 shareholder of the S Corp)
• NUA

Question 7

SEP selection

Answer 7

• alternative to a qualified plan profit sharing plan that is easier and less expensive to install
• contributions can vary year to year

Question 8

DB/DC Salary Cap

Answer 8

$305,000

Question 9

SIMPLE IRA Salary Cap

Answer 9

$499,667

Question 10

DC/DB Max contributions

Answer 10

DC: $61,000

DB: over $61,000 (DB of $245,000)

Question 11

Keys for IRA, SIMPLE, SEP, SARSEP

Answer 11

• No Loans, life insurance, or creditor protection
• Immediate vesting
• 59.5 no 55 to avoid 10% penalty
• MUST take RMD at 72

Question 12

Integrated with Social Security vs. Age Weighted Plan

Answer 12

Integrated with Social Security (wage based)
- Owner is 50 or under
- Owner income is under $200,000
- Rank and File Employees making $90,000 or less

Age Weighted Plan (age based)
- Owner is 50 or older
- Owner income is over $200,000
- Rank and File Employees are YOUNGER than owner

Question 13

Cross Testing (new comparability plan)most generous to:

Answer 13

Older owner/employee

Question 14

Parent-Subsidiary

Answer 14

One entity owns at least 80% of the other entities

Question 15

Brother-Sister

Answer 15

Five or fewer owners of two or more entities own 80% or more of each entity

Question 16

Affiliated Service Group

Answer 16

a service organization and a professional organization

Question 17

Direct Distribution to a Qualified Plan Participant

Answer 17

participant received the distribution DIRECTLY, the plan must withhold 20% and the participant has 60 days to transfer it to an IRA and stay there for 1 year or it will be taxed

Question 18

Qualified Charitable Distribution (QCD)

Answer 18

• must be 70.5 or older
• up to $100,000

Question 19

Qualified Plan Loans

Answer 19

• cannot exceed LESSOR of 50% vested benefit or $50,000
• small accounts can take $10,000 (if available)

Question 20

QDRO

Answer 20

• CANNOT override plan provisions
• DO NOT apply to IRAs

Question 21

Roth IRA: contributions, conversions, earnings

Answer 21

contributions: can always withdrawal

conversions: 5 yr rule OR 59.5/special purpose
- if fails: 10% penalty

Earnings: 5 yr rule AND 59.5/special purpose
- if fails one: Income tax
- if fails both: 10% penalty and income taxable

Question 22

ISO tax implications

Answer 22

$20 grant, $100 exercise, $200 sale

Grant: no tax event

Exercise: AMT, no tax

Sale: $200 - $20 = $180 LTCG

MUST have EGG: sale 1 year from exercise and 2 years from grant

Question 23

NSO tax implications

Answer 23

$20 grant, $100 exercise, $200 sale

Grant: no tax event

Exercise: 100 - 20 = $80

Sale: $180 LTCG

Question 24

Pension Beneficiary

Answer 24

Spouse is always the beneficiary and controls the funds. Spouse needs to sign off to change beneficiary.

Question 25

NUA

Answer 25

Basis is taxed at distribution

Capital gain taxed only when the employee sells