Retirement Chapter 6: Individual Retirement Accounts

Question 1

Are S-corporation distributions unearned income?

Answer 1

Yes; K-1 distributions

Question 2

Is informally funded deferred compensation earned income?

Answer 2

No because it is not constructively received

Question 3

What is included in earned income for IRA contributions?

Answer 3

1) salaries, wages, tips, professional fees, and bonuses
2) BoD fees
3) alimony and separate maintenance payments received under a divorce settlement pre-2019

Question 4

Profit sharing plans are ___ subject to minimum funding requirements while _____ ________ and _______ _______ plans are.

Answer 4

Not; money purchase; defined benefit

Question 5

Are hardship withdrawals available for 401(k) plans?

Answer 5

Yes

Question 6

Are loans from IRAs allowed?

Answer 6

No

Question 7

Generally, a loan from an IRA is disqualified and results in a “deemed distribution” of the account.

Answer 7

True

Question 8

If all or part of the IRA is pledged as security for a loan, the portion that is pledged is treated as a distribution.

Answer 8

True

Question 9

Can contributions be made after age 73?

Answer 9

Yes

Question 10

Can non-spouse beneficiaries of a qualified plan make a 60-day rollover?

Answer 10

No

Question 11

What is the ordering rules for Roth distributions?

Answer 11

1) Roth contributions are considered to be withdrawn first
2) converted amounts
3) earnings

Question 12

Regular contributions are distributed tax-free no matter when they are withdrawn (Roth).

Answer 12

True

Question 13

What is the only allowable circumstance under which Roth characterization is permitted?

Answer 13

When the taxpayer’s AGI exceeds the contribution threshold for that year

Question 14

Only a Roth and a Roth inherited by a spouse are not subject to the RMD rules.

Answer 14

True

Question 15

Are there income restrictions on conversions to Roth IRAs?

Answer 15

No

Question 16

A participant cannot roll over their Roth 401(k) account to a traditional IRA, a governmental 457, or any type of qualified plan without a Roth 401(k) type option.

Answer 16

True

Question 17

Employers may match Roth 401(k) deferrals but the match can be made in pre-tax dollars only.

Answer 17

False; pre-tax or Roth dollars

Question 18

How much can individuals contribute to an ABLE account?

Answer 18

Up to $18,000 annually

Question 19

Distributions from ABLE accounts used for qualified disability expenses are not included in gross income if the beneficiary becomes disabled before age __.

Answer 19

26

Question 20

The ABLE account is exempt from the $____ limit on personal assets for ________ and ___.

Answer 20

$2,000; Medicaid; SSI

Question 21

Are rollovers from 529 plans to ABLE accounts allowed?

Answer 21

Yes, without penalty provided the ABLE account beneficiary is the same as the 529 beneficiary or a family member. The rollover would count toward the annual contribution limit for the ABLE account.

Question 22

How many ABLE accounts may a disabled be a beneficiary of?

Answer 22

1

Question 23

ABLE account contributions are deductible.

Answer 23

False; they are not deductible.

Question 24

Substantially equal payments can start at any age, but they must be over the owner’s life expectancy.

Answer 24

True

Question 24

In what way are qualified plans and traditional IRAs most similar?

Answer 24

Required minimum distributions

Question 25

What types of plans may offer a “qualified Roth contribution program”?

Answer 25

401(k), 403(b), 457(b) sponsors. There are no income restrictions with a Roth 401(k)