retirement Flashcards
2 categories of retirement plans
qualified plans and non qualified plans
qualified plans
plans that meet federal requirements and recieve favorable tax treatment
considered a deductible business expense
plan is top heavy if
more than 60% of the plan assets are attributable to key employees as of the last day of the prior plan year
non qualified plan
doesnt meet the specific requirements that are set forth by the federal government
ERISA
meant to protect the rights of workers who are covered under an amployer-sponsered plan.
if employees have reached 21 and 1 year of service they must be allowed to enroll in a qualified plan
form 5500
disclosure document that employee benefit plans use to satisfy annual reporting requirements under ERISA
Vesting
represents the right that employees have to the retirement funds that have been contributed by their employer. employees are always immediately vested for the contributions they make on their own behalf.
alienation benefits
involves the assignment of a pension or retirement plan participant’s benefits to another person
defined contribution plan
primarily funded by the employee and this amount represents the participant’s vested amount. the final amount that’s available to a participant depends on the total contribution amount, plus interest and dividends
3 types of defined contribution plans
pofit sharing plans, stock bonus plans, and money purchase plans.
profit sharing plans
established and maintained by an employer and allow employeesto participate in the profits of the company.
Funds withdrawn
from a profit sharing plan may be subject to a 10% tax penalty in addition to income taxes if they are made before the age of 59.5
stock bonus plan benefits
distributed in the form of company stock
money purchase plans
provide for fixed contributions with future benefits to be determined
defined benefit plan
establishes a definite future benefit, predetermined by a specific formula
tax-sheltered annuities
may be established for the employees of a specified non-profit charitable, educational, religious, and other 501(c) (3) organizations, including teachers.
keough plan
qualified retirement plan that’s designed for unincorporated business
SIMPLE plans
available to small businesses that employ no more than 100 employees who recieved at least $5,000 in compensation from the employer during the previous year
may be structured as an IRA or as a 401k cash or deferred arrangement.
IRA funds
not taxed until they’re taken out at retirement
anyone earning income can open a traditional IRA and contribute the lesser of the contribution limit or 100% of compensation each year
maximum allowable annual contribution to a traditional IRA and roth IRA is $6,000 for a person younger than 50 and $7000 50 or older
deduction factors
whether an employer-sponsered retirement plan covers the participant or the amount of income the participant earns
traditional ira
owners must begin to recieve payment from their accounts by no later than April 1st following the year in which they turn 72
