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CFP > Retirement > Flashcards

Retirement Flashcards

1
Q

Highly compensated employee HSE

A

5% owner

Or

$110,000 compensation 2011, $115,000 compensation 2012

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2
Q

Key employee

3 letters 3 rules

A 
5% owner
Or
$150,000 comp & >1% owner 
Or
$165,000 comp & officer
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3
Q

Top heavy DB or DC plan

A

60% of the sum of account balances are for key employees
Then
Accelerated vesting &
1) DC provide 3% match to non-key employees
2) DB provide minimum 2% benefit accrual

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4
Q

Characteristics of group life

A

Cost of coverage in excess of $50,000 is taxable to the employee
&
Employer gets a deduction for premiums paid

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5
Q

Qualifications for social security disability benefits

A

40 quarters & worked at least 20 of the last 40 quarters

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6
Q

Qualification for social security survivor benefits

A

40 quarters OR 6 of the last 13 quarters

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7
Q

Cash balance vesting schedule

A

NO grading maximum 3 year cliff

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8
Q

Defined contribution (401k) EMPLOYER contribution limit

A

25% of payroll
Maximum $250,000

Includes matching, non-elective, and profit sharing

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9
Q

50/40 test

A

ERISA testing requirement

At least 50 employees
OR
40% of eligible employes ** minimum 2 employees covered

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10
Q

10% penalty withdrawal prior to 59 1/2 ALL retirement plans exceptions

A

Death
Fully disabled
Medical expenses above 7.5% AGI

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11
Q

10% penalty withdrawal exceptions prior to 59 1/2 qualified plans

A 
Death
Fully disabled
Medical expenses above 7.5% AGI
Separation from service after age 55
QTRO
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12
Q

403b characteristics

A

Not qualified
Multiple agreement with 1 employer
Deferral limit $17,000 + $5,500 catchup (age 50+)
+ $3,000 long service rule 15 years+ must be HER org

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13
Q

457 plan

A

Deferred comp plan
2 types government or non- government
Non-government NO rollovers & NO loans
Deferral $17,000, NOT reduced by other retirement plans
Final 3 year catch up up to 2x annual limit ($34,000), does not include catchup

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14
Q

ISO incentive stock options

A

May not exercise more than $100,000 in one year
Qualifying disposition= exercise 2 years from grant + sale 1 year from exercise, qualifying create long term cap gain + AMT income
No qualifying disposition ORDINARY income, NO AMT
Can only be transferred at death, NO step up

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15
Q

NSO non qualified stock option

A 
No rules
Can be given to anyone, employee or non employee
Taxed as ordinary income W2 
NO time limitation
Never subject to AMT
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16
Q

Ten year forward averaging

A 
Born before 1935
Lump sum
10 yr average on ordinary income
Per 1974 portion taxed as LT cap gain
Only one per lifetime
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17
Q

Net unrealized appreciation NUA

A
  • Basis taxed as ordinary income
  • NUA taxed as long term cap gain ALWAYS
  • additional appreciation/depreciation taxed at sht term or long term depending on holding period
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18
Q

10% penalty exceptions for IRA

A

Death
Fully disabled
Med expenses above 7.5% AGI
1st time home buyer, up to $10,000
Qualified higher education (not room and board)
72t
Payment of medical ins premium while receiving unemployment

19
Q

Employer qualified plan loan provisions

A
  • $50,000 limit, reduced by previous loan balance
  • 50% of present value of vested balance or up to $10,000, if available
  • if balance is less than $10,000 can borrow 100%
  • quarterly payments required
  • must be repaid within 5 yrs, unless used for primary residence
20
Q

FICA tax rates

A

Social security taxable wage base $110,100

  • SS 10.4%
  • Medicare 2.9%
21
Q

The use of Life insurance in a qualified plan

A
  • DB , life insurance is not more than 100x expected monthly benefit
  • DC, cost/ premium must be less than 25% of all plan benefits
22
Q

RMD NO beneficiary

A

Death before RMD, 5 yr rule

Death after RMD, deceased life expectancy

23
Q

Stock bonus plan

A
  • Employer advantage, cashless contribution, helps cash flow
  • NUA advantage to employee
  • CAN integrate with SS
  • employee contribution diversify immediately
  • employer contribution, after 3 years of service, must be offered 3 alternative investments and the immediate right to diversify
24
Q

ESOP, employee stock ownership

A
  • can NOT integrate with SS
  • ESOPs must invest in company stock, NUA advantage
  • diversification requirement: at age 55 or over at least 10 years of service, transfer up to 25% of account to any of 3 alternative investments….offered over 6 years, in last year 6, 25% increased to 50%
25
Q

Simple IRA

A

not qualified, NO loans
25% penalty for early withdrawal in first 2 years of the plan
Employer may have no more than 100 employees who earn at least $5,000
No other plan can be provided
$11,500 deferral + $2,500 catchup (over 50)
Employer required to match 3% of contribution, no salary cap
Or
Employer required non elective 2% of salary, $250,000 cap

26
Q

Simple 401k

A

Qualified plan, loans can be made available
Employer has no more than 100 employes making over $5,000
No other plan may be provided
Employee deferral $11,500 + $2,500 catchup
Employer required to match 3% employee contribution, up to $250,000 cap
Or
2% non elective, based on salary, $250,000 cap

27
Q

Cross-tested profit sharing plan

A

Eligible employees are put into different groups
The business can allocate a larger portion of the contribution to select groups
Allowable disproportionate allocations if:
Non- discriminatory test is passed
Min contribution of 5% non highly compensated
Or
Highest allocation to high compensation no more than 3x

28
Q

Brother sister test

A

5 or fewer people own at least 80% of voting power

The same 5 people or fewer own more than 50% of the control

29
Q

Owner Keogh plan contribution

A

1) Net business profit less 7.65%= self employment income subject to tax
2) self employment tax
SS $110,100 x 10.4% = a x 59.6%= A
Med total x 2.9%= b x 50%. = B
3) A + B= C
4) net business profit - C = net earnings
5) net earnings x (%/1.%) = contribution

30
Q

Controlled group retirement benefit coverage

A

Parent -subsidiary (80%ownership) or brother sister relationship
-all employees who meet ERISA eligibility requirements in a controlled group MUST be included when testing for coverage

31
Q

Non qualified deferred comp

A

Pure deferred comp funded by employee
Supplemental plans funded by employer:
Excess benefit plan makes you whole (matching for salary above $250,000)

32
Q

IRA deduction limit
Single
Married filing jointly
Spousal IRA

A

Single. $58,000 - $$68,000

Married filling jointly. $92,000 - $112,000

Spousal IRA. $173,000 - $183,000

33
Q

Roth IRA phase out
Single
Married filling jointly

A

Single. $110,000 - $$125,000

Married filing jointly. $173,000 - $183,000

34
Q

SEP

A 
Inclusion rules
1) employed 3 out of past 5 years
2) income of at least $550
3) at least  age 21
Employer contribution only, up to 25% of income, not to exceed $45,000
35
Q

Ratio percentage test

A

The % of non highly compensated employees benefiting from the retirement plan MUST be at least 70% of the HCE benefiting from the plan

36
Q

IRA contribution deadline

A

Contributions must be made by April 15 of year following the tax year to which they relate, NO extensions

37
Q

Incidental life insurance benefits of dc plan

A
  • Current term benefit cost must be less than 25% of the cost of all plan benefits
  • Current ordinary life benefit cost must be less than 50% of the total benefit cost
38
Q

Unit benefit formula

A

Benefit is expressed as a % of compensation per year of service
- favorable to employees with many years of service

39
Q

Attained age level method

A

Actuarial method of DB plan cost:

Does NOT credit prior years of service, prior to plan installation

40
Q

Entry age normal

A

Actuarial method of DB cost:

DOES credit prior years service, prior to plan installatio

41
Q

Social security integration DC plan

A
  • For the amount over $110,100
  • Permitted disparity is the lesser of 5.7% or base % contribution
  • The excess benefit percentage would be the disparity+base%
42
Q

Social security integration DB plan

A
  • for the amount over $110,100
  • The permitted disparity is the lesser of 26.25% or base contribution
  • the excess benefit percentage would be 26.25% + base
43
Q

All,defined Benefit plans must meet 50/40 test and 1 of 2 others

A

1) ratio % test: (HEAD count) % of non highly compensated employes benefiting from the plan must be 70% of the highly compensated employees benefiting from the pan
Or
2) average benefits test:( DOLLARS) the plan must provide an average benefit % for non highly comp employees that is at least 70% of the avenge benefit % for highly comp employees

CFP (5 decks)

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