Retirement – 46 Flashcards
(46.2) QUALIFIED retirement plans must meet statutory (___) requirements regarding eligibility, coverage, vesting, funding, communication with employees, etc.
ERISA
(46.2) Retirement plans that are not, strictly speaking, qualified plans, but these plans obtain most of the same tax advantages as qualified plans, while being subject to less stringent regulation.
simplified employee pension (SEP)
savings incentive match plan for employees (SIMPLE)
(46.2) Tax-deferred annuities, also called ___, are similar to qualified plans. Because the employer is a ___ organization, the plan sponsor does not receive income tax advantages.
- TDAs, TSAs, or Sec. 403(b) plans
- tax-exempt
(46.4) If the employer adopts a __ plan, the employer commits to making contributions to the plan every year, without fail, because contributions are mandatory.
pension
(46.4) If the employer establishes a __ plan, the commitment is only to make contributions at the discretion of the employer.
profit-sharing
(46.4) Profit-sharing plan: While the employer is required to make ___ contributions to the profit-sharing plan, contributions can vary and may even be eliminated in some years.
substantial and recurring
(46.4) In-service withdrawals are permitted after __ years with profit-sharing plans, but are not permitted until __ with pension plans.
- two
- normal retirement age
(46.4) Profit-sharing plans have __ limits on investment in employer stock.
no
(46.4) Pension plans limit employer stock to __% of the plan assets.
10%
(46.5) Type of retirement plan: The plan specifies that the employer will contribute a percentage of each employee’s compensation.
Defined-contribution plan
(46.5) Type of retirement plan: The plan specifies the amount of benefits that must be paid at retirement and an actuary must determine the annual contributions needed to provide the benefit.
Defined-benefit plan
(46.5) Defined-Contribution Plans - Sec. 414: Maximum of an employee’s compensation considered
$260,000
(46.6) Money-Purchase Plan: Employer is required to make a contribution on behalf of each eligible employee, in an amount determined by __ stipulated in the plan, which is usually a specified percentage of the participant’s compensation.
the contribution formula
(46.6) Money-Purchase Plan: An employer may deduct contributions up to __% of participant payroll. No more than the lesser of __% of compensation or $___ may be allocated to the account of any one participant during the plan year.
- 25%
- 100%
- $52,000
(46.6) Money-Purchase Plans are allowed to make distributions to employees who are age __ or older, even if they have not yet separated from service.
62
(46.6) Described as an “age weighted” money-purchase plan.
Target Benefit Plans
(46.7) Target Benefit Plans: Contributions is allocated in such a way as to allow __ participants to accumulate funds faster.
older
(46.7) ___ plan does not guarantee the retirement benefit.
Target Benefit Plans
(46.7) How often are actuarial services required for a Target Benefit Plan?
only once
(46.7) How often are actuarial services required for a defined-benefit plan?
annually
(46.7) Target Benefit Plans: Employer contributions made in accordance with the minimum funding standards are tax deductible up to __% of participant payroll. The limit on annual deductions to a participant’s account is the lesser of __% of compensation or $___.
- 25%
- 100%
- $52,000
(46.7) The major difference between the money-purchase and the target benefit plans is that the employer contributions for each employee in a ___ plan are determined using actuarial calculations and assumptions.
target benefit
(46.8) Acceptable allocation formulas in profit-sharing plans are?
- compensation formulas
- service formulas (units per year of service)
- age-weight formulas
(46.8) Employer contributions to a profit-sharing plan are tax-deductible up to a maximum of __% of participant payroll. Additions to a participant’s account is limited to the lesser of __% of compensation or $__.
- 25%
- 100%
- $52,000
(46.8) Profit-Sharing Plans: If an employer has many participants, allocations to some employee accounts may exceed __% of their compensation.
25%
(46.9) The __ plan can be a salary reduction plan or a “cash or deferred arrangement.”
401(k)
(46.9) What does CODA stand for?
cash or deferred arrangement
(46.9) 401(k) Plans: Under a __, employees can defer salary to be contributed to their individual retirement accounts
salary reduction plan
(46.9) 401(k) Plans: Under the __, employees can elect either to receive a contribution or bonus in cash or take the retirement contribution under the plan.
cash or deferred arrangement (CODA)
(46.9) Employee contributions to a 401(k) plan are __% vested at all times. Employer contributions are not __.
- 100%
- mandatory
(46.9) 401(k) Plans: All employer contributions (matching and nonmatching) must vest according to a ___.
2- to 6-year graded vesting schedule
OR
3-year cliff schedule
(46.9) 401(k) Plans: Employees are limited to salary reduction contributions of $___. For employees aged 50 and older, catch-up contributions of an additional $___.
- $17,500
- $5,500
(46.9/10) Employer contributions to a 401(k) profit-sharing plan are tax-deductible up to a maximum of __% of participant payroll. No more than __% of compensation or $__ (whichever is less) may be allocated to the account of any one participant.
- 25%
- 100%
- $52,000
(46.10) 401(k) Plans: An employer can contribute __% of participant payroll, in addition to __, because __ do not count toward the amount of the employer contribution.
- 25%
- salary deferrals
- salary deferrals
(46.10) Defined-Contribution Plans: Maximum employer deductible contribution
25% of participant payroll (only the first $260,000 of each employee’s compensation is considered)
(46.10) Defined-Contribution Plans: Maximum addition to each employee’s account
Lesser of 100% of compensation or $52,000
(46.10) Salary deferrals to a 401(k) plan reduces employee’s __ income. Amounts deferred are still subject to __ taxes.
- taxable
- payroll
(46.10) 401(k) plans (with the exception of __ plans) may include provisions for profit-sharing allocations which may be integrated with Social Security.
SIMPLE 401(k)
(46.11) __ can establish a solo 401(k) plan provided they have no employees other than their spouses.
Sole proprietors and partnerships
(46.11) Solo 401(k): The business can contribute up to __% participating payroll (__% for the self-employed individual) with no more than $__ or __% of compensation to one individual.
- 25%
- 20%
- $52,000
- 100%
(46.11) The Solo 401(k) plan will allow the sole proprietor to contribute more than compared to a ___ plan.
SEP or SIMPLE plan
(46.11) Roth 401(k) contribution: Unlike Roth IRAs, there are no __ limitations on the ability to designate a contribution as a Roth contribution.
AGI
(46.11) Roth 401(k) contribution: The election to treat salary deferrals as Roth contributions applies only to __ contributions.
employee
(46.11) Roth 401(k) contribution: Not subject to income taxes, assuming the plan has been in place for at least __ years and the distribution is after __.
- five
- age 59 1/2, death, or disability