Retirement Flashcards
Best Retirement plan to retain young key employees?
Money Purchase plan guarantees a contribution will be made each year.
How much can HCE defer to 401k under ADP/ACP rules?
Average NHCE deferral + 2%
How is NUA amount calculated for ESOP?
Market value - employee cost basis
At time of lump sum distribution
Best retirement plan that offers flexible contributions and SS integration?
Profit Sharing Plan
Can qualified plan of deceased spouse be rolled into survivor’s qualified plan?
Yes
Secular trust or Rabbi trust for immediate deduction?
Secular trust
Simple plan offer loans?
Not if IRA
Can all qualified plans offer loans?
Yes, including DB
Most stringent eligibility requirements with graded vesting?
21 years old and 1 year service
Vesting for top heavy DC plan?
2 to 6 graded
Social Security reduction of benefits
62- FRA $1 for every $2 earned over $21,240
Social Security Taxation
MAGI + 1/2 of SS (include muni)
>25k for single then 50% taxable
>44K for MFJ, then 85% taxable
Defined Benefit qualified plan facts (4)
Favors older employees
Max 265K benefit
Meets a specific retirement objective
Company must have stable cash flow
Money Purchase- qualified plan facts (3)
Up to 25% employer deduction
Fixed contributions- need stable cashflow
Max 66k contribution
Target Benefit- qualified plan facts (4)
Up to 25% employer deduction
Fixed contributions- need stable cashflow
Maximum 66K
Favors older workers
Profit Sharing- qualified plan facts (4)
Up to 25% employer deduction
Flexible contributions (must be recurring and substantial)
Max 66K
Can have 401k provisions
401k facts (3)
Qualified profit sharing or stock bonus plan
Max $22,500 deferrals
Additional $7500 catch up over 50
Section 415 annual additions limit
100% of comp or $66k including contributions, salary deferrals, and plan forfeitures
Safe Harbor Nondiscrimination 401k requirements (3)
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
Stock Bonus/ESOP qualified plan facts (3)
Flexible contributions
100% can be company stock
ESOP cannot be integrated with SS or cross tested
Keogh Contribution Percentages (2)
Sole Prop and Partnerships
15% = 12.12%
25%= 18.59%
Simple plan facts (4)
Fewer than 100 employees
Employer cannot have another plan
Immediate vesting
East to administer, salary reduction and employer match
SEP (Simplified employee pension) facts (5)
No deferrals
25% for owner, Keogh % for self employed
Immediate vesting
SS integrated
21 years old, paid $750, worked 3 of 5 years
Tax Deferred/ Sheltered Annuity TDA/TSA/ 403b facts (3)
For 501(c)(3) orgs and public schools
ERISA with employer contributions
$22,500 with $7500 catch up after 50
IRA (SIMPLE, SEP, SARSEP) facts (5)
No loans
No life insurance
Immediate Vesting
591/2 not 55 for 10% penalty
RMDs at 72
Age and Service rules for qualified plans (3)
21 and one
Special provision for 2 years but with immediate vesting
Year of service = 1000 hours, or 500 hours with 3 years
Highly Compensated Employee (2)
5% owner or
$150k prior year
Key Employee (3)
5% owner or
Officer and $215k or
1% owner and $150k
Vesting Fast (3)
DB Top Heavy or all DC Plans:
3 year cliff or
2-6 graded or
100% vested after 2 years
Vesting Slow
Non top Heavy DB only
5 year cliff or
3-7 year graded or
100% after 2 years
Defined Contribution SS integration Disparity
Lesser of base % or 5.7%
Defined Benefit SS integration Disparity
Lesser of base % or 26.25%
Life Insurance as Funding Vehicle in Retirement plans (4)
Ordinary life insurance- 50% of plan cost
Term life- 25%
Universal Life 25%
DB plan uses 100 times expected monthly
Rollovers not permitted (3)
Non-governmental 457 must transfer to 457
Hardship distributions
RMDs
10% penalty exceptions- Qualified Plans (9)
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
Required Beginning Date for IRA (SEP, SARSEP, SIMPLE)
April 1st the year following age 73
Required Beginning Date for Qualified Plans
April 1st year after 73 or retired
5% owner- April 1st year after 73
IRA exceptions to 10% penalty (9)
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
Roth IRA distribution order (3)
Contributions
Conversions
Earnings
Roth Required Distribution (Death) (2)
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
Non-Qualified Deferred Comp Plans (2 types)
Salary Reduction Plan- uses part of salary
Salary Continuation Plan- uses employer contributions
Rabbi Trust- when to use
fear of merger, acquisition, or change of ownership
ISO holding period
1 year from exercise date
2 years from grant before selling
457 plan differences (4)
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
Which plans cannot be SS integrated? (3)
ESOP, simple , simple 401k
