Retirement

Question 1

Money purchase contributions if key ee retires & replaced by lower pd ee

Answer 1

Company cont. decrease

Question 2

Investment returns up in MP plan

Answer 2

ER cont. no change

Question 3

MP plan forfeitures not reallocated

Answer 3

ER contributions down

Question 4

Forfeitures increase acct. balances

Answer 4

MP and profit sharing plan

Question 5

Top heavy DB plan & all DC plan vesting schedule

Answer 5

3 yr cliff
2-6 yr. graded
100% vested w/ 2 yr. eligibility

Question 6

non top heavy DB plan vesting schedule

Answer 6

5 yr. cliff
3 to 7 yr. graded
100% vested w/ 2 yr. elgibility

Question 7

SS disparity limits: DC plans

Answer 7

lesser of base percentage OR 5.7%

Question 8

SS disparity limits: DB plans

Answer 8

lessser of base percentage OR 26.25%

Question 9

ACP/ACP testing %s

Answer 9

NHCE: 0-2%= x2 to get HCE %
NHCE: 2-8%=+2 to get HCE %

Question 10

exceptions to 10% w/d penalty for IRAs

Answer 10

Med expenses in excess of 10% AGI
substantially equal pmts.
distributions to med. insurance preiums after sep. from employment

Question 11

SIMPLE IRA

Answer 11

less than 100 ees
easy to start and maintain
can match to limited extent
CANNOT have another plan

Question 12

SEP IRA

Answer 12

25% owner cont. & 18.59% SE cont.
immediate vesting
CAN be integrated with SS
21+, have to be paid $750, work 3/5 yrs.

Question 13

403(b)

Answer 13

for non profits
ERISA if ER contributes
$23k FICA deferral
can be subject to vesting

Question 14

money purchase PENSION plan

Answer 14

STABLE cashflow
fixed cont.
young ees
want to RETAIN ees
easy to admin
first $345k taken into account for cont.

Question 15

Target benefit PENSION plan

Answer 15

fixed cont.
older ees
stable cashflow
415 limit
actuary determines funds INITIALLY needed
ER doesn’t guarantee amt. will be paid.
inv risk: on EE

Question 16

profit sharing plan

Answer 16

FLEXIBLE cont.
- have to be recurring and substantial
$23k max
use when financial stability varies
adopt qual plan w/ incentive
young ees, well paid ees. sub. time to accumulate retirement savings
ER can contribute more than 25% of comp as long as it doesn’t exceed 415 limit

Question 17

stock bonus plan

Answer 17

invested in company stock
flexible contributions
benefits are ER stock
want to broaden ownership of stock
provide ees with tax advantaged means to get stock
want workers to feel sense of ownership

Question 18

DB PENSION plan

Answer 18

older employees and owners
guaranteed benefit
VERY stable cashflow
past service credits allowed
PBGC insurance
no mandatory withholding

Question 19

cash balance PENSION plan

Answer 19

ER guarantees cont. level and min. rate of return
less expensive than DB plans

Question 20

NSO grant taxability

Answer 20

when sub risk of forfeiture expires
when transfer of stock happens

Question 21

rabbi trust

Answer 21

informally funded
may fund trust from general assets of company
ER cont. to trust are NOT subject to payroll taxes until dist. to EE
assets may be used for purposes other than obligations to EE