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me cfp > Retirement/Education and EE Benefits > Flashcards

Retirement/Education and EE Benefits Flashcards

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CFP® flashcards
1
Q

what types of organizations are eligible for long service catch-up (403b)? and how much is it

A

HER health, education, religious. says it can be $3,000

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2
Q

Max amount for a plan loan

A

lesser of 50% of vested amount or $50,000 paid in quarterly (or more freuqnet) payments over five years, unless used for home purchase. reasonable interest rate must be carried

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3
Q

tax penalty for not taking full RMD amount

A

50%. EG $2,000 RMD and they take $1,000, the $1,000 not taken, 50% of the undistributed rmd is $500.

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4
Q

TF a rabbi trust is subject to the claims of employer’s creditors

A

T

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5
Q

TF a rabbit trust may not be held off shore as a result of American jobs creation act of 2004

A

T

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6
Q

TF you can opt out of a DB plan

A

False. This is important to know if they are an active participant or not.

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7
Q

Sources of statutory law about qualified retirment plans

A

IRC (internal revenue code), ERISA.

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8
Q

Determination letters are issued by the __ at the request of the __

A

IRS, plan sponsor.

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9
Q

compensation limit for SIMPLE IRAs, contribution limit.

A

$285,000 when non-elective contributions are made. Simple contribution limit is $13,500. (Age 50 and older can make a $3,000 catch up contribution too)

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10
Q

TSAs are also known as ___

A

403b retirement plan.

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11
Q

A Supplemental Executive Retirement Plan (SERP) vs excess benefit plan

A

SERP supplements with no salary level limits

Excess benefit plan also extends benefits above Section 415 limits but still adheres to maximum salary limitations.

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12
Q

Section 457 plans: plan sponsors include__ and __, not ___.

A

non-profit organizations, government entities, NOT churches.

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13
Q

Section 457 plans: In-service distributions are not allowed until age

A

70.5

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14
Q

VEBA

A

voluntary employees beneficiary association plan.

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15
Q

Only life insurance may be included in a QRP, no accident, severance, or health benefits. Are these pension contributions deductible by the employer?

A

Yes

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16
Q

Wage Replacement Ratio, what % of income is subtracted for a self-employed individual for Social Security and Medicare Taxes

A

15.30%

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17
Q

A plan which requires annual employer contributions equal to a formula determined by each participant’s salary is

A

money purchase plan. All pension plans are subject to minimum funding requirements. PSPs(including 401k plans) doesn’t require annual contributions.

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18
Q

Each participant must have a separate account to hold assets in which type of plans

A

DC plans

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19
Q

COBRA benefits are required of employers who have __ or more employees

A

20

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20
Q

Comparability plan is another name for a

A

profit sharing plan

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21
Q

Total salary reductions for qualified 401(k) and TSA is limited to __ per year in 2020

A

$19,500. Contributions to 401(k)s and 403(b)s are aggregated such that they may not exceed the total annual limit.

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22
Q

All assets in QRPs are part of the ___ of the account owner

A

gross estate

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23
Q

Generally, only contributions in a QRP up to ___ % of covered compensation can be deducted for a year.

A

25%

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24
Q

Employee contributions in a QRP are subject to ___ tax

A

Payroll

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25
Q

TF the IRS can get to assets in a qualified plan as well as spouses via a QDRO

A

True

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26
Q

50 year and older catch up contribution amount for a 401k

A

$6,500

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27
Q

Space available air travel for an airline employee provided as a fringe benefit is excludable from the taxable income of all covered employees TF

A

True. An exclusion applies to a service provided by an employer for an employee if it does not cause substantial additional costs. Generally this applies to excess capacity services such as airlines, buses, or trains.

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28
Q

ADP test

A

actual deferal percentage. related to 401k plans not unfairly benfitting highly paid employees

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29
Q

ADP is 4%, what is the maximum a highly compensated (greater than 5% owner) can contribute?

A

4% + 2%= 6% . To pass the test, the ADP of the HCE(highly compensated employee) may not exceed the ADP of the NHCE by more than two percentage points. In addition, the combined contributions of all HCEs may not be more than two times the percentage of NHCE contributions.

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30
Q

Social security benefits are reduced when taken early by how much for each month, how much for each month beyond that yearly amount

A

Reduced by 5/9 for each month, for the first three years that a worker retires early. Reduced by 5/12 for each month beyond three years.

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31
Q

Ex-wife is eligible for retirement benefits when married for at least __ year and ___ remarried

A

10, has not. Ex-wife can take benefits regardless of whether husband has begun benefits

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32
Q

DB plan that is not top heavy can be up to a __ year graded vesting schedule

A
  1. years 1-7: 0,0,20,40,60,80,100
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33
Q

For 2020 and later, there is ___ age limit on making regular contributions to traditional or Roth IRAs.

A

No

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34
Q

Can you deduct an IRA contribution if you are an active participant in an employer sponsored retirement plan?

A

Yes. (Single Filers
A single filer with no employer-sponsored retirement plan can deduct the full amount of a traditional IRA contribution.2 However, if you are covered by a retirement plan at work, then these income restrictions apply:

A full deduction is available if your modified AGI is $65,000 or less.
A partial deduction is available for incomes between $65,000 and $75,000.
No deduction is available for incomes greater than $75,000.3
Married Filing Jointly
Couples who are married filing jointly can take the full IRA deduction if neither spouse is covered by a retirement plan at work.2 If one spouse participates in a plan, then these income restrictions apply:

A full deduction is available if your modified AGI is $196,000 or less.
A partial deduction is available for incomes between $196,000 and $206,000.
No deduction is available for incomes greater than $206,000.2
The income thresholds are less advantageous if both spouses participate in retirement plans at work:

A full deduction is available if your modified AGI is $104,000 or less.
A partial deduction is available for incomes between $104,000 and $124,000.
No deduction is available for incomes greater than $124,000.3
Married Filing Separately
Taxpayers who are married filing separately are subject to drastically lower income thresholds if either spouse participated in an employer-sponsored retirement plan. If your income is less than $10,000, you can take a partial deduction. Once your income hits $10,000, you are not entitled to any deduction. There are no income limits if neither spouse has a work sponsored plan.)

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35
Q

Concerning the OASDHI, The monthly exempt amount is ___in 2020 for those months in the year of normal retirement age BEFORE you actually reach normal retirement age. The test uses only earned income. No passive or portfolio income is used in calculating the earnings.

A

$4,050 ($48,600 annually)

36
Q

What is the minimum number of total employees that must be covered by the defined benefit plan on a daily basis to comply with the coverage rules?

A

The 50/40 rule requires that defined benefit plans cover the lesser of 50 employees or 40% of all eligible employees.

37
Q

The earliest age for social security retirement benefits is

A

62

38
Q

To qualify under the incidental benefit rules, the entire premium for universal life cannot exceed___ of the total benefit, and ___ for whole life insurance.

A

25%. 50%

39
Q

Any pension contributions used to purchase life insurance inside a qualified plan __ deductible to the employer.

A

are

40
Q

COBRA benefits are required of employers who have __ or more employees.

A

20

41
Q

The maximum matching contribution for a SIMPLE IRA is always ___ of the employees’ compensation for the entire calendar year.

A

3%

42
Q

Target benefit plans are treated in the same manner as profit-sharing plans for purposes of calculating deductible employer contributions. Thus, tax-deductible employer contributions cannot exceed __ percent of the total compensation of all employees covered under the plan

A

25%

43
Q

Distributions under a QDRO from a QRP __ taxable to the taxpayer actually making the disbursement from his/her account.

A

are not

44
Q

For a QRP, IRC 72(t) allows Substantially Equal Payment Plans (SEPP) to escape the 10% penalty as long as the payments continue for the longer of ___ years or until age ___.

A

5 , 59.5

45
Q

TorF. For a QRP, no in-service withdrawals are exempted from the 10% early withdrawal penalty.

A

True

46
Q

Sick pay plans ___ be discriminatory among clearly definable classes, must be in written form, and may require full-time employment to participate.

A

can.

47
Q

There is __ prohibition against carry-over in sick pay plans, therefore, a worker who is unable to work in December, may be paid in January according to the plan provisions.

A

not a

48
Q

If an employer with a top heavy plan wants to avoid the required reduction based on Section 415 limits, he or she must contribute at least __ of each non-key employee’s compensation to the plan.

A

3%

49
Q

ESOPs must permit participants, who are aged __ or older and who have at least 10 years of service, the opportunity to diversify their accounts.

A

55

50
Q

The mandatory 20% income tax withholding requirement __ apply to distributions of employer stock from an ESOP.

A

does not

51
Q

COBRA non-compliance carries a penalty of __ per day per participant.

A

$100

52
Q

IRC Section 415(d) provides for a cost of living adjustment to ___ in 2020.

A

$57,000. (
The types of contributions subject to the limit include:

elective contributions (pre-tax or Roth) made to 401(k), and salary reduction SEP plans;
after-tax employee contributions;
employer matching contributions;
employer profit-sharing contributions; and
any employer contributions.)

53
Q

Cash balance plans are defined benefit plans due to the __ and benefit formula, not simply a contribution amount.

A

guaranteed investment returns

54
Q

While cash balance plans provide guaranteed rates of return, they __ 100% guaranteed by the PBGC (PBGC has coverage limits).

A

are not

55
Q

Cash balance plans use __-year cliff vesting only.

A

3

56
Q

Non qualified distributions from a designated Roth account associated with a 401k are subject to tax on a ___ basis.

A

pro rata. (pro-rata basis. Her total account is the 15,000 invested and the 5,000 of income for a balance of $20,000. Since 75% (15,000/20,000) of the value in the account consists of basis and the remaining 25% consists of earnings (5,000/20,000), that same ratio of basis to income will apply to the $12,000 distribution. It is not a qualified distribution because she has not held the account for at least five years.)

57
Q

Because he will not turn 71 until next year, his attained age at the end of the year is still ___

A
  1. (For RMD divisor calculation)
58
Q

Can I make catch-up contributions to my SEP?

A

No, SEPs are funded by employer contributions only. Catch-up contributions apply only to employee elective deferrals. However, if you are permitted to make traditional IRA contributions to your SEP-IRA account, you may be able to make catch-up IRA contributions.

59
Q

As of 2020, an employer must do one of the following for ___:

  1. Contribute 100% of an employee’s contribution up to 1% of his or her compensation, along with a 50% matching contribution for the employee’s contributions above 1% (and up to 6%); or
  2. Deliver a non-elective contribution of 3% of compensation to all participants.
A

Qualified Automatic Contribution Arrangements (QACAs).

60
Q

Alpha is the fund’s actual return minus the ___, as measured by CAPM.

A

risk adjusted expected return

61
Q

In a well diversified portfolio, ___ can be used to measure risk.

A

beta

62
Q

standard deviation serves as the best measure of a portfolio’s risk level when a portfolio is

A

not well diversified

63
Q

A non-qualified deferred compensation plan have have a DB or DC structure TorF

A

True

A NQDC plan could be a SERP, an excess benefit plan, bonus plan, severance pay plan

64
Q

SIMPLE IRAs are available only to companies that have __ or fewer eligible employees

A

100

65
Q

Nondeductible IRA contributions are made with __

A

after-tax dollars

66
Q

A 401k plan is top heavy when on the last day of the prior plan year, the value of the plan accounts for key employees is more than __% of the total value of the plan assets

A

60%

67
Q

If a 401k plan is top heavy, the employer must contribute up to _% of compensation for all non-key employees still employed on the last day of the plan year

A

3%

68
Q

Surviving spouse with child-in-care benefits terminate when the child reaches age __ unless the child is disabled

A

16

69
Q

A profit sharing plan can make discretionary employer contributions. TorF

A

True

70
Q

The annual contribution required under a ___ plan is the amount necessary to provide the ultimate retirement income benefit.

A

defined benefit

71
Q

A __ is exempt from ERISA and can therefore help to meet the retirement needs for executives in companies.

A

non-qualified plan

72
Q

72t requires equal payments for a minimum of __ years or until age __ whichever is longer. This allows the client to avoid IRS early withdraw penalties.

A

5.

59. 5

73
Q

You qualify for spousal benefits if: Your spouse is already collecting retirement benefits. You have been married for at least __. You are at least 62 (unless you are caring for a child who is under 16 or disabled, in which case the age rule does not apply).

A

a year

74
Q

Who qualifies for Social Security spousal death (widow) benefits?
Be at least 60 years old.
Be the widow or widower of a fully insured worker.
Have been married at least __ to the deceased.
Not be entitled to an equal or higher Social Security retirement benefit based on your own work.

A

9 months

75
Q

Who is eligible for Social Security Parent’s Insurance Benefits?
In order to qualify for this benefit program, you must meet all of the following requirements:

Be at least age 62
Have not married after the deceased worker’s death (unless an exception applies)
Received at least ___ of your support from the deceased worker at certain points in time
You legally adopted the insured worker before he or she turned 16; or
You became the deceased’s stepparent by a marriage entered into before the deceased turned 16.
Not be entitled to retirement insurance benefit equal to or exceeding the amount of the parent’s original benefit.
Filed proof of support within the required time limits.

A

one-half

76
Q

When you qualify for Social Security disability benefits, your children may also qualify to receive benefits on your record. Your eligible child can be your biological child, adopted child, or stepchild. A dependent grandchild may also qualify.

To receive benefits, the child must be unmarried and be:

under age 18; or
18-19 years old and a full-time student (no higher than grade 12); or
18 or older and have a disability that started before age ___.

A

22

77
Q

TorF a revocable living trust avoids probate

A

True

78
Q

__ gift tax is paid by the donee.

A

zero

79
Q

The joint and survivor immediate annuity provides an immediate income stream which will be tax-advantaged because a portion of each payment will be considered recovery of ___

A

basis

80
Q

For a joint and survivor immediate annuity, the payment stream stop at the __ death leaving a value in the estate of __

A

second, zero

81
Q

A private annuity will provide payment for as long as he lives based on his life expectancy, but if he dies before his life expectancy, he may not receive __ . However, his children will acquire the property at a discounted price.

A

full value

82
Q

An FLP transfers future growth at minimal present cost while retaining __

A

control

83
Q

A coverdell ESA __ impact the child’s ability to qualify for financial aid. A Roth of the parent ___

A

will.

will not

84
Q

Which of the following are considered for financial aid?

  • retirement assets
  • personal property such as vehicles
  • non-retirement savings and investment account of parents and the student
A

non-retirement savings and investment accounts of parents and the student AREconsidered

85
Q

529 college savings plans allow for __-year gift tax averaging, where lump sum contributions to a 529 plan are treated as occurring ratably during a __-year period, starting with the tax year in which the contribution is made.

A

five

86
Q

A form __ is required by both spouses when one uses a five-year frontloading strategy for 529 funding.

A

709

87
Q

`TorF 529 grows tax-free.

A

True

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