Retirement Flashcards
1
Q
Are money-purchase pension plans DC or DB plans?
A
Defined contribution
2
Q
Are cash balance pension plans DC or DB plans?
A
Defined benefit
3
Q
Are 457 plans qualified or nonqualified?
A
Nonqualified
4
Q
How many credits to be fully insured for Social Security?
A
40 credits
5
Q
Employment categories not covered by Social Security
A
- Railroad employees (but are eligible for medicare)
- A child, under age 18, employed by a parent in an unincoroprated business
- Religious employees if they claim an exemption
- Members of tribal councils (native americans)
6
Q
The spouse of a retired or disabled worker is eligible for SS if he/she:
A
- is age 62 or above or
- has a child in care under age 16 or age 16+ and disabled
7
Q
Surviving spouse of a deceased insured worker qualifies for SS payments if:
A
- If the widow(er) is age 60+
- At any age if caring for a child under age 16 or disabled before age 22
8
Q
Surviving dependent of a deceased insured worker qualifies for SS if the child is:
A
- Under age 19 and a full-time elementary or secondary school student (not college!) or
- age 18 or over but has a disability which began before age 22
9
Q
Taxation of SS benefits
A
If a person’s income plus 1/2 SS benefits is more than MAGI $25k single/$32k MFJ, 50% of benefits will be included in benefits
If a person’s income plus 1/2 SS benefits is more than MAGI $34k single/$44k MFJ, 85% of benefits will be included in benefits
10
Q
Does MAGI for taxation of SS benefits include muni bond interest?
A
Yes!!! MAGI = AGI + Munis
11
Q
Maximum employer deduction for money-purchase pension plan
A
up to 25% employer deduction
12
Q
Are contributions in a money-purchase pension fixed or flexible?
A
Fixed
13
Q
Is stable cash flow needed in a money-purchase pension plan?
A
Yes
14
Q
Maximum employer deduction in a target benefit plan pension
A
Up to 25% employer deduction
15
Q
Are contributions fixed or flexible for target benefit pensions?
A
Fixed
16
Q
Is stable cash flow needed in a target benefit pension plan?
A
Yes
17
Q
Do target benefit pension plans favor older or younger employees?
A
Older
18
Q
Maximum employer deduction for profit-sharing plan
A
Up to 25%
19
Q
Are contributions fixed or flexible for profit-sharing plans?
A
Flexible (must be recurring and substantial)
20
Q
Maximum employer deduction for stock bonus plans
A
Up to 25% employer deduction
21
Q
Are contributions fixed or flexible in a stock bonus plan?
A
Flexible
22
Q
Can stock bonus plans be integrated with SS or cross-tested?
A
No
23
Q
Maximum employer size that can have a SIMPLE IRA
A
100 employees or fewer
24
Q
Vesting schedule for SIMPLE IRA contributions
A
Immediate vesting
25
Salary reduction limit for SIMPLE IRA
$15,500
26
Can a company with a SIMPLE IRA have another retirement plan?
No
27
Is employer match required in a SIMPLE IRA
Yes
28
SEP IRA maximum employer contribution
- Up to 25% for owner (W2)
- Up to 18.59% for self-employed
29
Vesting schedule for SEP IRA
Immediately vested
30
Can SEP IRAs be integrated with SS?
Yes
31
Eligibility to be in a SEP IRA
21+ years old, paid at least $750, and worked 3 out of the 5 prior years
32
SARSEP maximum employer size
Up to 25 employees, and 50% of employees must defer
33
SARSEPs must have been in existence before ___
1997
34
SARSEP salary deduction limit
$22,500 (FICA)
35
Are 403(b) plans subject to ERISA?
Only if employer contributes
36
Can employees contribute to a SEP IRA?
No, employer contributions only
37
Can 403(b)s have a vesting schedule?
Yes, employer contributions may be subject to vesting schedule
38
Are 403(b)s qualified?
No, but they act like they are
39
Defined benefit pension plan maximum limit on projected annual benefit
Lesser of $265k or 100% of the participant's comp averaged over 3 highest earning years
Only the first $330k of compensation can be taken into consideration
40
How can forfeitures be used in a defined benefit retirement plan?
Forfeitures must be used to reduce employer contributions
41
42
What is guaranteed by the employer for a cash balance pension plan?
Contribution level and minimum rate of return
43
Maximum annual addition that an employee can receive in a money purchase plan
lesser of 100% of salary or $66k
44
Target benefit pension maximum contribution
Lesser of $66k or 100% compensation
45
Maximum contribution to profit-sharing plan
Maximum of 25% of all participants compensation. Only the first $330k of each employees comp can be taken into account for purposes of this limit
46
Can employees contribute to profit-sharing plan?
No, unless there is a 401(k) option
47
Age and amount for catchup contribution in 401(k)
Age 50, $7500
Catch-up contribution is not included in calculating employer deduction limits (25% comp) or contribution limits ($66k or 100% comp)
48
What type of plan can hardship withdrawals come from?
401(k) and 403(b) only
49
Maximum contribution for a 15% plan (self-employed/Keogh)
15% plan = 12.12%
50
Maximum contribution for a 25% plan (self-employed/Keogh)
20% plan = 18.59%
51
For QUALIFIED plans, what age can someone retire and not pay early withdrawal penalties on distributions?
Age 55
52
ACP/ADP non-discrimination testing shortcut
If average NHCE deferrals are 0-2%, multiply by 2
If average NHCE deferrals are 2-8%, add 2
53
Cross-tested/new comparability plan forumula
NHCEs must receieve either 5% or 1/3 of the HCE's percentage contribution, whichever is lower
54
Which plans can be integrated with Social Security?
- Defined benefit
- Cash balance
- Money purchase
- Target benefit
- Profit sharing
- Stock bonus
- SEP
55
Which plans cannot be integrated with Social Security?
- ESOP
- SIMPLE
- 401(k) SIMPLE
56
Average benefits test
The average benefits of all NHCEs must be at least 70% of that for HCEs
57
What is a highly compensated employee?
- Greater than 5% owner or
- Any employee earning in excess of $150k per year
58
What is a key employee?
- Greater than 5% owner or
- An officer and compensation > $215k or
- A greater-than-1% owner and compensation > $150k
59
Do HCEs affect discrimination or vesting in a plan?
Discrimination
Affects the ADP/ACP test and the ratio/average benefits test
2nd letter in highly and 2nd letter in discrimination is i
60
Do key employees affect discrimination or vesting in a plan?
Vesting
Affects whether a plan is top-heavy
2nd letter in key and 2nd letter in vesting is e
61
Minimum benefits and contributions for non-key employees in a top-heavy plan
DB - benefit must provide at least *2%* of compensation
DC - minimum employer contribtuion must be no less than *3%*
62
Permitted vesting schedules for a top-heavy DB plan
- 3-year cliff
- 2-6 year graded
- 100% vested with 2-year eligibility
63
Permitted vesting schedules for a top-heavy DC plan
- 3-year cliff
- 2-6 year graded
- 100% vested with 2-year eligibility
64
Permitted vesting schedules for a non top-heavy DC plan
- 3-year cliff
- 2-6 year graded
- 100% vested with 2-year eligibility
65
Permitted vesting schedules for a non top-heavy DB plan
- 5-year cliff
- 3-7 year graded
- 100% vested with 2-year eligibility
66
Parent-subsidiary controlled group
One entity (parent company) owns at least 80% of one (or more) of the other entities
67
Brother-sister controlled group
Five (or fewer) owners of two or more entities own 80% or more of each entity
68
Affiliated service group
A service organization and a professional organization
69
Percentage limits for life insurance to be incidental in a DC plan
Aggregated premiums paid for participant's insured death benefit
- Ordinary life (whole life) - 50%
- Universal life - 25%
- Term life - 25%
70
Limits for life insurance to be incidental in a DB plan
The participant's insured death benefit must be no more than 100 times the expected monthly benefit
71
Do business owners need to take RMDs on their qualified plan?
Yes, if they are over 5% owners
71
Can 457 plans be rolled over?
Government 457 plans can be rolled into another type of retirement account, but non-government 457 plans cannot
72
Are RMDs required on IRAs if still working?
Yes!
72
How much can be donated via QCD?
$100k annually
73
Age eligible to make QCDs
Age 70.5 and older (not 73)
74
Qualified plan loans
Total loans cannot exceed the lesser of 50% of vested plan balance or $50k
A special rule allows participants with small accounts to borrow up to $10k without regard to percentage limitation (assuming $10k is available in the account)
75
Permitted disparity for a DB plan
Lesser of base benefit percentage or 26.25%
76
Permitted disparity for a DC plan
Lesser of the base contribution percentage or 5.7%
77
What is pension max?
Elexting a singlke life annuity and using part of the higher monthly benefit to purchase life insuranxe on the employee's life
78
What are the slower vesting schedules?
- 5-year cliff
- 3-7 year graded
79
What type of entities are able to sponsor a 403(b) plan?
- Churches
- Private schools
- State colleges
- Hospitals
Governmental employers are not allowed to sponsor a 403(b), only nonprofits
80
What type of entities can sponsor a 457 plan?
- Private schools
- State colleges
- Governmental employers
- Hospitals
Churches cannot sponsor a 457, but they can use a 403(b) plan
81
The one-time election out of substantially equal payments allows a participant to switch from?
Annuity to RMD method
82
Which type of retirement plans require QJSA (Qualified Joint and Survivor Annuity) for the plan participant spouse?
Qualified Pension Plans
83
In a Rabbi Trust, the participants has the same rights as ___?
An unsecured creditor
