Retirement Flashcards
Spouses benefits
Retired or disabled-62 or cares for child 16 or younger unless disabled
Died-60 unless has kids under 19 but not in college
Divorced must have been married 10 yrs and not remarried
SS TAX LIMITS
Single 25k 50%
34k 85%
MFJ
32k 50%
44k 85%
Defined Benefit pension plan limits
345k annual comp limit taken into consideration
275k benefit limit
Defined benefit forfeitures
Must be used to reduce employer contributions
Defined benefit pension
Favors older employees
Guaranteed retirement benefits
Stable cash flow from biz
Past service credits allowed
DB unit benefit formula
(Given % x years of service) X average comp
Cash balance pension plan
Qualified employers pension plan-provides annual employer contributions at a specified rate to individual accounts
Guaranteed minimum returns
Use when company can’t afford a DB pension plan
Smaller company’s w/ high wage earners
Insured by PBGC
Money purchase
Defined contribution
Employer adds flat % of comp
Employer can deduct 25% of payroll
Only 345k of comp can be taken into account
100% salary or 69k limit (lesser)
When to use
Stable work force
Simple
Must have cash flow
For futures can be used to reduce employer contributions
Target benefit pension plan
Actuary determines initial contribution level with fixed mandatory contributions from employer
Older employees
69k or 100% comp
Employee assumes investment risk
Forfeitures can be reallocated
Factors that determine age weight target benefit plan
DOB
length of service
Assumed investment return
Annual comp
Years to retirement
Targeted retirement benefit
Profit sharing plan
Defined contribution
Flexible for employer
Recurring and substantial
Use when employer profits vary year to year
Incentive for employees to make profits
Employees are young
Employer can deduct 25%
$345k salary cap
401k plan
CODA
cash deferral arrangement
Participants can add to the plan
$23k
Deferral subject to fica & futa
50+ is 7500 catch up contribution
23k max contributing
69k total or 100% salary
Contribution includes deferral catch so max 30,500
Keogh calculations
15% plan, multiple profit by 12.12
25% plan, multiple profit by 18.59
Simple
Pretax 16k contributions
50+ 3500 catch up
No 345k cap
100 employers or less
25% simple penalty for 2 years then 10%
401k simple exempt from creditors
Sep salary reduction & withdrawal
23k + 7500 catch up
Can do early withdrawal 10% penalty
Doesn’t require hardship like 401k
Highly compensated employees
Greater than 5% owner
Excess of 155,000
Key employee
Greater than 5% owner
OfficER and comp greater than 220k
Greater then 1% owner and 155k salary
Vesting schedule for match
2-6 yr
NHCE percentages for HCE
1=x2
2-8=+2
Top heavy
If more than 60% of benefits are allocated to key employees
Top heavy=faster vesting
Key vest
Fast vesting
Top heavy db plans and all DC plans
3 year cliff or 2-6 graded or 100% with 2 year eligibility
Fast vesting
Top heavy db plans and all DC plans
3 year cliff or 2-6 graded or 100% with 2 year eligibility
Slower vesting
5 year cliff
3-7 graded or 100% with 2 year eligibility
72t
Minimum is 5 years
Greater of 5 years or until participant is 59.5
