Retirement Flashcards
Taxation Of SS Benefits
50%. 85%
Single. 25k. 34k
Married 32k. 44k
Then 50% or 85% x SS benefit = what is taxable
PBGC
Pension Benefit Guaranty Corporation
Insures DB and cash balance plans
Hardship Withdrawl
Subject to ordinary income tax and 10% penalty (can be waved)
Distribution equals total deferral amount and vested profit sharing contribution
Has to have 401k provisions
NUA
Net Unrealized Appreciation
Applies to ESOP (employee stock ownership plans)
20k basis taxed as ordinary income when moved out at retirement worth 200k. 180 is not taxed till sale (ltcg)
Price moves to 230k after 6 months and sold (180k LTCG , 30k stcg)
Ratio percentage test
70% of hce%
Age and service rules
21 years old and 1 year employed
1,000 hr in 12 months = 1 year
Ubti
Limited partnership interest
Subject to ownership attribution rules
Spouse, Children, grandchildren, and parents
Not siblings
Pension max strategy
Pure life annuity - Just worker higher pay out (risk of death)
Joint and survivor annuity - worker and spouse (higher payout)
Take delta between the two and buy a whole life policy
Social security
Fully insured 40 quarters
Currently insured only 6
Spouse of retired or disabled worker can get SS check if they are
62 or older
Has a child in care under age 16
Has a child age 16 and over and disabled before 22
Surving spouse can get a check if
They are 60 and older
Divorced spouse gets SS
10 years married
2 years divorced
Cannot get remarried
Dependent benefits
Under 19 still in high school
Over age of 18 disabled before 22
Pia
Retirement benefit at FRA
primary insurance amount
Spousal benefit
Wife gets half of spouses benefit
When he dies she gets stepped up to his benefit
FRA is 67
Discounts to SS
6.66
13.66
20
25
30
If you tap it early and go back to work
Under FRA every $2 you make over limit ~ 22,320 take $1 away from SS
Over FRA every $3 you make over limit ~ 59,520 take $1 away from SS
SS Disability
1 insured has to be under 65
2 disabled for 12 months , expected to be disabled for at least 12 months, expected to result in death
3 5 month waiting period
File and suspend
Doesn’t exist anymore
Forfeitures
Money that was not vested left behind
Multiple employer
Can have multiple plans and are all able to reach 69k max
If they are unrelated
Deferring is limited to specific plan max
Qualified Plans
ERISA
Eligibility: age and service
Top heavy rules
Vesting schedule
ADP/ACP
Cross testing (except ESOP)
Integrated with SS (except ESOP)
Rest on sheet
ADP/ACP TESTING
0-2. X 2
3-up + 2
Cross-testing (except ESOP)
“Age weighted”
Lesser of 1/3 of allocation rate for HCE or 5%
Avg benefits test
Avg benefits for NHCE must be at least 70% of those that are HCE
Top Heavy Plans
More than 60% of benefits or account balance are allocated to key employees
Subject to vest schedule if in a DB plan
DC plan doesn’t matter, needs to use fast vesting schedule
Catch up provisions
Over 50 years or older
7500
401k and Roth
403b
457 or (final 3 years 2 x 23,000)
3500
Simple plans
1000
Ira and Roth
HSA (55)
Loans from qualified plans
Max loan lesser of 50% of vested balanced or 50,000
Exception: Can take a 10,000 loan if you got it
Repay in 5 years or less, unless used for primary residence
Payment quarterly if messed entire balance is deemed taxable distribution, 10% penalty I’d under 59 1/2
Loan interest is deductible only if the loan is made for a participants primary residence and is secured by the primary residence (Not allowed for Key Employees)
Employees can restrict loans
Traditional Ira
7000
1000 catch up
Need earned income (fica money)
Roth
Earned income
7000 catch up 1000
Cannot deduct Roth contributions
Is there a limit on who can do a Roth conversion
No
Simple plan
Not subject to discrimination testing
Need to cover anyone who has earned 5,000 in any 2 previous years and expected to earn it this year
3 % 1for1 or 2 % automatic check on this
Penalty if cashed out under 2 years of starting: 25%
403 funding
Only mutual funds and annuities
UBTI
Unrelated business taxable income
Exceeds 1000 UBTI is subject to income tax
Income from LP or dividends from margin accounts are considered UBTI
Not real estate
Substantially equal payments ş72t
5 years or more till 59 1/2
53 - can take substantial and equal payments till 59 1/2
Penalty only for payments taken before 59 1/2
Ira rollovers
Almost any Ira can be rolled over into another Ira
Except: non governmental 457
60 day rollover rule
Ira related only
When custodian writes you a check
Needs to be done in 60 days
No withholding
Direct transfers
Plan to IRA
Required to withhold 20% if it is a check out to you: distribution
If its direct transfer to another firm it is not required to withhold
RMD
Qualified plans
403
457
Simple
Sep
SARSEP
IRA
STILL WORKING EXCEPTION
Not for IRA
In Qualified plan 403 or 457 if you are still working not 5% owner not RMD required
RMD calculations
Previous years ending balance / life expectancy#
Younger spouse more than 10 years allows for longer distribution period
RMD penalty
25% on whatever you didn’t take
QCD
Qualified charitable deduction
Only from Ira
No tat deduction is available
70 1/2 years old
QDRO
Qualified domestic relations order
Only for qualified plans and 457
NUA
Net unrealized appreciation
For your company stock only
Don’t roll company stock it into ira, rest if it is fine
Hold for one year after transfer ltcg
QJSA
Qualified joint and survivor annuity
Post retirement, death benefit for the plan participant spouse
Qualified pension plans are required to provide QJSA option
Currently the survivorship annuity must not be less than 50% or greater than 100% of the annuity payable
QOSA
Qualified optional survivor annuity
Requires a second joint and survivor annuity option in pension plans
Can you take RMD from one ira if you have multiple
Yes
Deferred compensation for sole owner of c corp
Can’t do it not allowed
