Retirement addl cards

Question 1

Exceptions to early withdrawal penalties for IRAs and Qualified Plans

Answer 1

Both -
Death, Disability, Reach 59.5 yrs old, Med>10% AGI, S72t

Also for Qualified Plans
QDRO, Separate at 55+, or separate at 50+ in Pub Safety

Also for IRAs
higher ed exp, 1st time home purch up to 10k, Health ins premiums if unemployed

Question 2

What characteristics for a Key Employee

Answer 2

> 5% owner,
$150k comp and 1% ownership
$170k comp

Question 3

What is the 25% test

Answer 3

determines how much life insurance can be provided by a plan -
if term/ universal - aggregate premiums

Question 4

Pension Benefit Guaranty Corp characteristics

Answer 4

companies pay premiums to PBGC as insurance to cover promises to pay in event of under funding:

PBGC pays a limited benefit - $5011/mo / $60136/yr if the company cannot pay its commitments

insures all and only defined benefit plans - plans must pay flat rate premium per participant

does not insure contribution or profit sharing at all

Question 5

What are Actual Deferral Percentage and Actual Contribution Percentage tests

Answer 5

Ensure highly compensated employees are not heavily weighted
ADP limited to following table:
0-2% can be 2x NHC (e.g. 2% HC must have 1% NHC)
2-8% can be NHC + 2% (6% HC must have 4% NHC)
8%+ can be 1.25x NHC ( 20% HC must have 16%)
ADP is based on % of each (averaged together), while ACP is based on total dollars of each class

Question 6

4 remedies for failing ADP or ACP tests

Answer 6

1 - corrective distributions (pay back HC individuals)
2 - Recharacterization (make excess After tax (taxable))
3 - Pay QNEC - qualified non-elective contribution (addl pmts to ALL non-highly comp’d to get them in range)
3 - Pay QMC - qualified Matching contribution (contribute to those that paid in to get the NHC into range)

Question 7

characteristics of 10 year forward averaging

Answer 7

if born prior to 1/2/1936, can forward average the taxes wehn taking a lump sum distribution - tax is divided by 10 and applied against the 1986 tax rate. then, the result is multiplied by 10 to determine total tax due.
- benefit is lower tax rates
does not allow 10 yrs of payments, still must be paid lump sum when receiving distribution

Question 8

qualified transportation and parking exclusions from gross income

Answer 8

can deduct as deminimis benefits:
130/mo for commuter or bus pass, and
250/mo for qualified parking -
excess is included in employee income

Question 9

Cafeteria Allowable and DISallowed benefits

Answer 9

NOT ALLOWABLE Allowable
MSA accident/ health benefits
Athletic facilities adoption assistance
De Minimis benefits Dependent care assistance
Educational assistance Group term life coverage
employee discounts
lodging on employer premises
meals
moving expenses
no addl cost services
transportation benefits
tuition reduction
working condition benefits