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CFP Exam Study > Retirement > Flashcards

Retirement Flashcards

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CFP® flashcards
1
Q

Best Retirement plan to retain young key employees?

A

Money Purchase plan guarantees a contribution will be made each year.

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2
Q

How much can HCE defer to 401k under ADP/ACP rules?

A

Average NHCE deferral + 2%

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3
Q

How is NUA amount calculated for ESOP?

A

Market value - employee cost basis

At time of lump sum distribution

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4
Q

Best retirement plan that offers flexible contributions and SS integration?

A

Profit Sharing Plan

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5
Q

Can qualified plan of deceased spouse be rolled into survivor’s qualified plan?

A

Yes

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6
Q

Secular trust or Rabbi trust for immediate deduction?

A

Secular trust

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7
Q

Simple plan offer loans?

A

Not if IRA

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8
Q

Can all qualified plans offer loans?

A

Yes, including DB

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9
Q

Most stringent eligibility requirements with graded vesting?

A

21 years old and 1 year service

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10
Q

Vesting for top heavy DC plan?

A

2 to 6 graded

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11
Q

Social Security reduction of benefits

A

62- FRA $1 for every $2 earned over $21,240

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12
Q

Social Security Taxation

A

MAGI + 1/2 of SS (include muni)
>25k for single then 50% taxable
>44K for MFJ, then 85% taxable

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13
Q

Defined Benefit qualified plan facts (4)

A

Favors older employees
Max 265K benefit
Meets a specific retirement objective
Company must have stable cash flow

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14
Q

Money Purchase- qualified plan facts (3)

A

Up to 25% employer deduction
Fixed contributions- need stable cashflow
Max 66k contribution

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15
Q

Target Benefit- qualified plan facts (4)

A

Up to 25% employer deduction
Fixed contributions- need stable cashflow
Maximum 66K
Favors older workers

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16
Q

Profit Sharing- qualified plan facts (4)

A

Up to 25% employer deduction
Flexible contributions (must be recurring and substantial)
Max 66K
Can have 401k provisions

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17
Q

401k facts (3)

A

Qualified profit sharing or stock bonus plan
Max $22,500 deferrals
Additional $7500 catch up over 50

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18
Q

Section 415 annual additions limit

A

100% of comp or $66k including contributions, salary deferrals, and plan forfeitures

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19
Q

Safe Harbor Nondiscrimination 401k requirements (3)

A

Satisfies nondiscrimination tests with:
Employer matching ( $1/$1 on first 3% and .50/1 on next 2%)
Or non-elective contribution on all employees (3%)
Has Immediate Vesting

20
Q

Stock Bonus/ESOP qualified plan facts (3)

A

Flexible contributions
100% can be company stock
ESOP cannot be integrated with SS or cross tested

21
Q

Keogh Contribution Percentages (2)

A

Sole Prop and Partnerships
15% = 12.12%
25%= 18.59%

22
Q

Simple plan facts (4)

A

Fewer than 100 employees
Employer cannot have another plan
Immediate vesting
East to administer, salary reduction and employer match

23
Q

SEP (Simplified employee pension) facts (5)

A

No deferrals
25% for owner, Keogh % for self employed
Immediate vesting
SS integrated
21 years old, paid $750, worked 3 of 5 years

24
Q

Tax Deferred/ Sheltered Annuity TDA/TSA/ 403b facts (3)

A

For 501(c)(3) orgs and public schools
ERISA with employer contributions
$22,500 with $7500 catch up after 50

25
Q

IRA (SIMPLE, SEP, SARSEP) facts (5)

A

No loans
No life insurance
Immediate Vesting
591/2 not 55 for 10% penalty
RMDs at 72

26
Q

Age and Service rules for qualified plans (3)

A

21 and one
Special provision for 2 years but with immediate vesting
Year of service = 1000 hours, or 500 hours with 3 years

27
Q

Highly Compensated Employee (2)

A

5% owner or
$150k prior year

28
Q

Key Employee (3)

A

5% owner or
Officer and $215k or
1% owner and $150k

29
Q

Vesting Fast (3)

A

DB Top Heavy or all DC Plans:
3 year cliff or
2-6 graded or
100% vested after 2 years

30
Q

Vesting Slow

A

Non top Heavy DB only
5 year cliff or
3-7 year graded or
100% after 2 years

31
Q

Defined Contribution SS integration Disparity

A

Lesser of base % or 5.7%

32
Q

Defined Benefit SS integration Disparity

A

Lesser of base % or 26.25%

33
Q

Life Insurance as Funding Vehicle in Retirement plans (4)

A

Ordinary life insurance- 50% of plan cost
Term life- 25%
Universal Life 25%

DB plan uses 100 times expected monthly

34
Q

Rollovers not permitted (3)

A

Non-governmental 457 must transfer to 457
Hardship distributions
RMDs

35
Q

10% penalty exceptions- Qualified Plans (9)

A

Death
Disability
Substantially equal periodic payments
Distribution from service at 55
QDRO
Medical in excess of 7.5% AGI
Health Insurance if unemployed
$5,000 w/d for birth/adoption
Federal declared disaster

36
Q

Required Beginning Date for IRA (SEP, SARSEP, SIMPLE)

A

April 1st the year following age 73

37
Q

Required Beginning Date for Qualified Plans

A

April 1st year after 73 or retired

5% owner- April 1st year after 73

38
Q

IRA exceptions to 10% penalty (9)

A

Death
SEP
Disability
First home $10,000
Qualified Education Expense
Medical greater than 7.5%
Health insurance if unemployed
$5,000 for birth/adoption
Federally declared disaster

39
Q

Roth IRA distribution order (3)

A

Contributions
Conversions
Earnings

40
Q

Roth Required Distribution (Death) (2)

A

Within 5-10 years of owner’s death or
Sole beneficiary is spouse, may delay till owner would be 73 or roll into their own

41
Q

Non-Qualified Deferred Comp Plans (2 types)

A

Salary Reduction Plan- uses part of salary

Salary Continuation Plan- uses employer contributions

42
Q

Rabbi Trust- when to use

A

fear of merger, acquisition, or change of ownership

43
Q

ISO holding period

A

1 year from exercise date
2 years from grant before selling

44
Q

457 plan differences (4)

A

Catch up only for governmental plans
Salary deferrals not aggregated with other plans
non-governmental plans only rollover to another 457
no 10% early w/d penalty

45
Q

Which plans cannot be SS integrated? (3)

A

ESOP, simple , simple 401k

CFP Exam Study (6 decks)

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