Retirement and Income Planning Flashcards
Are 457 plans aggregated with deferrals into other plans?
No
What is the catch-up contribution for 457 plans (over age 50)?
$7,500
What is the catch-up contribution for 403(b) plans (over age 50)?
$7,500
A “fully insured” traditional DB plan is funded exclusively by:
cash value life insurance or annuity contracts
What is the shortcut for 25% SE for contributing to a retirement plan?
18.59%
Are employer contributions mandatory for a SEP IRA?
no
What is the only retirement plan that does not consider “active participation” for IRA deductibility purposes?
457 plans
In a DB plan, what constitutes “active participation” for IRA deductibility purposes?
simply being eligible
Can you have a SIMPLE IRA if you have another retirement plan established already?
no
How many employees are required for an employer to be eligible to establish a SIMPLE IRA?
no more than 100 employees
Are employer contributions mandatory for a SIMPLE IRA?
yes
What are the minimum employee coverage requirements for a SIMPLE IRA?
all employees who:
- have compensation of at least $5,000 in any 2 prior years
- are expected to earn at least $5,000 in the current year
What are the minimum employee coverage requirements for a SEP IRA?
all employees who:
- are at least 21 years old
- employed with the company in the 3 of last 5 years
- earns at least $750 in compensation
What is the catch-up contribution amount for a SIMPLE IRA?
$3,500
What is the maximum employee deferral amount for a SIMPLE IRA?
$16,000
Can an employee defer into a SEP IRA?
no
Which qualified plan must use a 3-year cliff vesting schedule?
cash balance
All DB plans must have which kind of payout, unless waived?
joint and survivor
What is the shortcut percentage for SE tax when the SS wage base is below $168,600?
14.13%
What is the % for Medicare tax?
2.9%
What is the maximum rate that an SE employer can contribute to a DC plan?
25%
In a SIMPLE IRA, withdrawals within 2 years of enrollment are subject to what kind of penalty?
25%
What is the maximum contribution that an employer can make to a SEP each year?
25% of payroll but no more than $69,000
What is the catch-up contribution limit for a SIMPLE IRA?
$3,500
How many traditional rollovers are allowed in a year?
1
How many days does a participant have to deposit funds into an IRA or a different employer plan once a traditional rollover has paid?
60
How many direct transfer rollovers can a participant make each year?
no annual limit
A traditional rollover from a qualified plan requires how much federal income tax to be withheld?
20%
In an inherited IRA, the spouse can be treated how?
as the owner
If a spouse chooses to be treated as the owner in an inherited IRA, when can they defer RMDs until?
age 72
Can a spouse beneficiary of an inherited IRA combine it with their own IRA?
yes
For a non-spouse beneficiary of an IRA, how long do they have to withdraw funds from the IRA?
10 years
Do Roth IRAs require RMDs, even if inherited?
never
If a minor receives an inherited IRA, how long do they have to withdraw the funds?
their 10-year clock begins at age of maturity
Who are eligible designated beneficiaries?
- spouse
- chronically ill person
- disabled person
- minor children
- individuals not more than 10 years younger than the IRA owner
Who can spread distributions over their lifetime from an inherited IRA?
eligible designated beneficiaries
Who does the 10-year rule apply to when it comes to inherited IRAs?
- non-spouse beneficiary
- see-through trusts
- successor beneficiaries
A non-qualified distribution within 5 years of a Roth conversion may be subject to:
a 10% penalty
What is are the special catch-up rules for 401(b) plans?
- available for employees with a minimum 15 years with employer
- $3,000 catch up per year
- may be used with the catch-up of $7,500 in the same year
Do Section 403(b) plans require RMDs?
yes, age 73
Are Section 403(b) deferrals aggregated with other plans?
yes
The monthly retirement benefit at FRA
PIA
AIME is based on the ____ best years of indexed earnings
35
_____ is used to calculate PIA
AIME
OASDI % goes up to what amount?
$168,600 (SS limit)
What is the Medicare payroll tax %?
1.45%
How many SS credits can a person earn in one year?
4
How many SS credits is considered fully insured?
40
One quarter of coverage is earned for each $_____ of earned income
$1,730
What amount of working years does AIME look at?
the best 35 years of working income
What is the earliest age a worker may claim SS?
62
Are COLAs applied to permanently reduced SS benefits?
yes
What is the reduction for the first 36 months of SS taken early?
5/9%
What is the reduction for the next 24 months (after the first 35 months) of SS taken early?
5/12%
What is the maximum reduction that a person can face for taking their SS benefits early?
30%
What is the longest you can delay taking SS benefits?
age 70
How much does a DRC add per year of not taking SS benefits?
8%
If a person’s FRA is 67 and they delay SS until 70, what is the maximum % increase in benefits they can receive?
24%
Does income earned prior to claiming SS benefits count for taxation withholding?
no
What is the “first year rule” when it comes to earned income and SS benefits?
benefits can be paid in any month in which the earned income is less than 1/12th of the applicable yearly limit (1/12th of $22,320 (2024) or 1/12th of $59,520 (2024) in the year of FRA)
Claiming benefits while having earned income from age 62 to the year in which full retirement age (FRA) is attained:
$1 of Social Security benefits is withheld for every $2 earned in excess of $22,320 (on tax tables)
Claiming benefits while having earned income in the year in which full retirement age (FRA) is attained:
$1 of Social Security benefits is withheld for every $3 earned in excess of $59,520 (on tax tables)
What is the maximum percentage of SS benefits that will be exposed to income tax?
85%
Is tax-exempt income counted in the taxation of SS benefits?
yes
What is the inclusion for provisional income for taxation of SS benefits formula?
1/2 SS benefits + tax-exempt income + AGI
For a single earner, $_______ or less is not exposed to taxation for SS benefits
$25,000
For MFJ, $____ or less is not exposed to taxation for SS benefits
$32,000
For MFJ, between $_____ and $______ will be 50% taxable for SS benefits
$32,000 and $44,000
For MFJ, $______ or more will be taxed at 85% for SS
$44,000
For Single, between $______ and $______ will be 50% taxable for SS benefits
$25,000 and $34,000
For Single, $______ or more will be taxed at 85% for SS benefits
$34,000
If a spouse has dual eligibility, what amount of benefits do you receive?
the higher of the 2 - NOT combined
For divorced spouses, the spouses must be how old in order to claim?
62
For divorced spouses to claim on each other, how long must they have been married?
10 years
For divorced spouses to claim on each other, does the other spouse have to have filed to start receiving benefits in order for the other spouse to receive benefits?
no
For a current spouse to claim on their spouse, what are the requirements?
- worker must have filed for his/her own benefit
- must have been married for at least 1 year
- must still be currently married
For you to claim on your divorced spouse’s benefit, can you get married again?
no, you must be unmarried
Are benefits for a current spouse subject to the maximum family benefit rules?
yes
Are benefits for a divorced spouse subject to the maximum family benefit rules?
no
What is the Government Pension Offset for SS benefits?
if beneficiary claiming spousal benefit receives a government pension benefit for which Social Security taxes were not paid the Social Security spousal retirement benefit will be reduced by two-thirds of the government pension amount
What is the extra Medicare tax %?
.9% above $200,000 S/$250,000 MFJ (on tax table)
How old do you have to be to file for Medicare?
65
What is Medicare Part A?
hospital
Is there a premium for Medicare Part A?
no
There is a flat deductible that covers days 1-____ for Medicare Part A hospital stays
60
What is Medicare Part B? Is it required?
doctor (non-hospital); not required
Is there a premium for Medicare Part B?
yes
After the deductible is met for Medicare Part B, who pays what?
Medicare - 80%
patient - 20%
What is the main difference with Medicare Part C and Medicare Part B in terms of premiums?
Medicare Part C has much lower premiums than Part B
What is the main disadvantage to Medicare Part C?
doctors must be in network; uses “gatekeeping” strategy like HMOs
What is Medicare Part D?
prescription drugs
The survivor benefits is ____% of someone’s PIA
100%
A survivor benefit can begin at what age?
60
What age can you get remarried if you are a widow and wanting to collect survivor’s benefits?
60
You can only collect a divorced survivor’s benefit if you were married for at least ___ years
10
If the survivor is caring for a child of a deceased worker under the age of ___, the child qualifies for a survivor’s benefit
16
SS pays a lump sum benefit to either the surviving spouse OR the child of the decedent in the amount of:
$255
Taxpayers who make a QCD must be at least _____ years old on the day of distribution
70 1/2
A QCD may only be initiated using the ______ transfer method
direct
What is the maximum $ amount of a QCD that can be made?
$105,000
The full QCD is reported on Form _____
1040 (it will be reported as “zero” with QCD next to the line)
NUA applies to ______ held in a qualified plan
employer stock
Employer basis as part of a lump sum distribution in a NUA situation is taxed how?
ordinary income
If a spouse receives a QDRO and chooses to NOT roll the money over to an IRA, what are the tax implications?
ordinary tax applies, no penalties
Does the payor of a QDRO pay tax on the distribution?
no
Allows the recipient of a grant of restricted stock to pay taxes at the time of the grant based on the value of the stock at the time of the gran
Section 83(b)
A test that states that a qualified plan must cover at least 70% of the non-highly compensated employees
Safe Harbor Test
A test that states that a qualified plan must cover a percentage of non-highly compensated employees equal to at least 70% of the percentage of highly compensated employees covered
Ratio Percentage Test
A qualified plan test that states that the percentage of benefits received by non-highly compensated employees must equal at least 70% of the percentage of benefits received by highly compensated employees
Average Benefits Test
In either integration method, the maximum increase in benefits produced by the integration formula used cannot exceed:
26.25% (3/4 of 1% x 35 years)
A qualified plan is considered top-heavy if more than what percentage of accrued benefits or account balances are allocated to key employees?
60%
The minimum age spousal social security retirement benefits may be claimed is:
62
What are the 3 tax-advantaged retirement plans?
SIMPLEs, SEPs, and 403(b)s
