Retirement Chapter 7: Other Tax-Advantaged Retirement Plans

Question 1

What are some true statements about SEP plans?

Answer 1

SEP contributions cannot exceed the lesser of 20% of eligible compensation (up to $345,000) or $69,000 (corporations only)

Contributions to a SEP cannot exceed 20% of the self-employed individuals eligible net earned income less the self-employment tax (like a Keogh)

Form 5305-SEP

ER contributions to the EE’s account must be immediately vested.

Question 2

Are SARSEP IRAs made with pre-tax dollars?

Answer 2

Yes; Salary Reduction SEP

Question 3

When is an EE generally eligible to participate in a SEP?

Answer 3

If the EE received a minimum of $750 in the current year of employment and worked for the ER during 3/5 of the preceding calendar years. Must be 21 y/o.

Question 4

Can SEPs be age weighted?

Answer 4

No

Question 5

Can SEPs be integrated with Social Security?

Answer 5

Yes

Question 6

A one-person sole proprietorship can install a SEP. It does not have to be a standalone plan.

Answer 6

True

Question 7

Can SEPs offer hardship withdrawal or loan provisions?

Answer 7

No; because a SEP makes contributions into individual IRA accounts

Question 8

What is the maximum deferral limit for a SIMPLE?

Answer 8

$10,000 indexed; $16,000; $3,500 special catch-up provision

Question 9

Can a SIMPLE plan invest in collectibles, annuities, or U.S. government issued gold coins?

Answer 9

Annuities may be used as a funding vehicle, but life insurance is not allowed in any IRA type arrangement.

Collectibles cannot be used as a funding vehicle.

U.S. gold-minted coins are acceptable.

For any IRA type plan, vesting is immediate.

Question 10

Anyone who is eligible to participate in a SIMPLE plan could receive a 2% nonelective contribution even if he/she were not deferring (this is an option an ER has).

Answer 10

True

Question 11

Under a SIMPLE IRA, the ER contributions represent $1-$1 matching contribution up to 3% of the EE’s compensation.

Answer 11

Compensation cap is not used?

Question 12

403(b) maximum deferral

Answer 12

lesser of $23,000 or 100% of compensation

Question 13

What investments are not permissible for 403(b) plans?

Answer 13

UITs, closed-end funds, or individual securities

Cash value life insurance must be an incidental benefit

Question 14

What contributions are always 100% vested to the EE?

Answer 14

Matching contributions for a SIMPLE/SIMPLE 401(k)

ER contributions for SARSEP and SEP

Question 15

Why don’t states generally sponsor 403(b)s?

Answer 15

A state or local government can be a qualified ER but only with regard to EEs who perform service, directly or indirectly, for an educational organization.

Question 16

Requirements for 403(b)?

Answer 16

501(c)(3)

non-profits organized for religious, charitable, scientific, literary, or educational purposes

churches, hospitals, private schools, colleges, and charitable institutions

regular faculty and curriculum and regularly enrolled student body

Question 17

Are churches eligible for 457s?

Answer 17

No