Retirement Flashcards
DB/DC Salary Cap = _________
Simple IRA Salary Cap = ______
DC Max Contribution = ____
DB Max Contribution = ______
Tandem = _________
$330,000
$516,667
$66,000 ($73,500 if 50+)
Stuff it like a pig
Wrong answer
IRA Keys (SIMPLE, SEP, SARSEP)
_____ loans
____ life insurance
_____ vesting
_____ creditor protected (state specific)
_____ for no 10% penalty
Must take RMDs at ____ (even if not owner)
No loans
No life insurance
Immediate vesting
May not be creditor protected
59.5 for no 10% penalty
Must take RMDs at 73 (even if not an owner)
Single taxpayer’s income plus half of the SS benefits is more than _______, up to 50% of the benefits will be included in taxable income.
Single taxpayer’s income plus half of the SS benefits is more than _______, up to 85% of the benefits will be included in taxable income.
$25,000 / 34,000
MFJ taxpayers’ income plus half of the SS benefits is more than _______, up to 50% of the benefits will be included in taxable income.
MFJ taxpayers’ income plus half of the SS benefits is more than _______, up to 85% of the benefits will be included in taxable income.
$32,000 / 44,000
What type of income is added to AGI when determining taxation of SS benefits?
Municipal bond interest
Tax-exempt interest is added to AGI to get MAGI.
Defined Contribution
- up to 25% employer deduction
- fixed contributions
- stable cash flow needed
Money-Purchase Pension
Defined Contribution
- up to 25% employer distribution
- fixed contributions
- stable cash flow needed
- favors older employees
Target Benefit Pension
Defined Contribution
- up to 25% employer deduction
- flexible contributions (must be recurring and substantial)
- 401(k) provisions $22,500 (FICA) (hardship withdrawals)
- SIMPLE 401(k) exempt from creditors
Profit Sharing Plan
Defined Contribution
- up to 25% employer deduction
- flexible contributions
- 100% of the contribution can be invested in company stock.
- Cannot be integrated with SS or cross-tested
Stock Bonus Plan
Other retirement plans
- for small employers (100 or fewer employees)
- requires employer match (immediate vesting) (no forfeiture)
- Salary reduction limit up to $15,500 (FICA)
- Company cannot have another plan
SIMPLE IRA
Other retirement plans
- No salary deferrals
- up to 25% contribution for owner (w-2) / up to 18.59% contribution for self-employed
- account immediately vested. No forfeiture.
- can be integrated with SS
- special eligibility: 21+ years old, paid at least $750, and worked 3 of the 5 prior years
SEP IRA
Other retirement plans
- May have up to 25 employees and 50% of the eligible employees must defer
- must have been in existence before 12/31/1996 (grandfathered)
- Salary deduction limit $22,500 (FICA)
- New employees may participate if established before 12/31/1996
SARSEP
Other retirement plans
- For 501(c)(3) organizations and public schools
- subject to ERISA only if employer contributes
- salary reduction limit up to $22,500 (FICA)
- ER contributions may be subject to vesting schedule
403(b)/TSA/TDA
Which benefit plans are insured by the PBGC?
Defined benefit plans and cash balance plans
__________ who do not follow certain standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made thru improper use of plan assets.
Fiduciaries
(e.g. trustee)
What are the 3 types of plans that cannot be integrated with SS?
ESOP, SIMPLE, SIMPLE 401k
A 60-day distribution from a qualified plan ______ disqualify an IRA from another 60-day distribution within one year.
does not
Regarding RMDs, when a spouse is more than 10 years younger, the joint life tables can be used, and this allows for _______ mandatory distributions.
lower
With regard to IRA contributions, if neither spouse is an active participant in an employer plan, the AGI limits _______ apply.
DO NOT.
A _____________________ is the right to purchase a specified number of shares of the employer’s stock at a given time and a given price. No taxation occurs as long as a substantial risk of forfeiture exists.
Nonqualified stock option (NSO)
An incentive stock option (ISO) tax-favored plan for compensating executives by granting options to buy company stock. Only the first __________ worth of ISOs granted to any employee that vest in one calendar year is entitled to favorable ISO treatment. Excess is treated as a ________________. The corporation granting the ISO does not ordinarily receive a tax deduction for it at any time. ISOs are NOT deferred compensation.
$100,000
nonqualified stock option
ISOs ______ subject to regular tax when exercised but NSOs ______.
are not / are
When exercising ISOs, attention should be paid to AMT.
The ISO holding-period rules must be satisfied to prevent a disqualifying disposition.
Hold the exercised ISO shares more than _____ from the date of exercise before selling them.
Hold the exercised shares more than ______ from the grant date before selling them.
Violating either part of the rule results in a disqualifying disposition. For tax purposes, the ISO becomes an NSO.
one year
two years
If the ISOs are sold in the same calendar year as the ISOs were exercised, the bargain element is ________ compensation, subject to _________.
If the ISOs are sold within 12 months of exercise but in the following calendar year, the bargain element is ________ income and not subject to _________.
taxable / FICA and FUTA
ordinary / FICA and FUTA.
Is a 457 plan eligible for a rollover to an IRA?
Only if the 457 is a governmental plan.
Nongovernmental plans can only be rolled into another 457 plan.
Are 457 plans subject to qualified plan minimum distribution rules?
Yes
Under a 401(k) hardship withdrawal rules, an employee can request an amount equal to ______________.
an amount equal to elective deferrals plus an amount equal to vested profit sharing contributions
In an ESOP funded with both company stock and mutual funds, what should you do to reduce phantom income exposure upon retirement and beginning distrubtions?
Take only a 72t distribution rather than a full distribution in the first year of retirement AND roll the whole account into an IRA.
The IRA rollover of the entire account, which includes the employer stock and 72t distribution, eliminates phantom income. However, the NUA tax break is lost.
A SIMPLE 401(k) is an ERISA plan and ________ be exempt from creditors.
Will
True or False: If a top-heavy plan fails to correct its top-heavy status for 3 years in a row, the DOL can terminate the plan.
FALSE. The plan will continue to be qualified but subject to top-heavy rules.
T or F: If a defined benefit plan is top-heavy for a given year, it must provide a more rapid vesting schedule than generally required.
TRUE
Life insurance benefits must be merely incidental to the primary purpose of a defined contribution plan. Therefore the aggregate premiums paid for a participant’s insured death benefit for universal life must be at all times less than ____% of the plan cost for that participant.
25
Term insurance is 25%, but ordinary life is 50%. DB uses the 100 times rule.
Under 72(t), the one-time election allows participants to switch from the _______________ method to the ____________ method.
annuity or amortization method / RMD method
If a person is 73 or older, can the whole IRA be converted to a Roth?
Not without taking an RMD. Once the RMD is withdrawn, then the remaining balance can be converted.
A company cannot grant more than $_______ of ISOs (based on the exercise price) that vest in the same year to any one employee if favorable ISO treatment is desired.
100,000
Any excess, once exercised are treated as NSOs for tax purposes.
