Retirement Live Review

Question 1

Social Security Coverage Exceptions

Answer 1

Railroad WOrkers (but they do have medicare)
child, under 18, working for parents in an unincorporate dbusiness

Question 2

taxation of social security benefits

Answer 2

All use MAGI
50%
25,000
32,000 (MFJ)
85%
$34,000
44,000

Question 3

Section 415

Answer 3

Max limit on the projected annual benefit a DB can provide
$275k OR 100% of comp averaged over his/her three highest earning consecutive years
(Still only takes the first $345k into consideration)

Question 4

Unit benefit formula

Answer 4

most frequently used
service and salary to determine benefit
example: 1.5% x 30 years of service x 100k (average annual comp)

Question 5

cash balance pension plan

Answer 5

ER guarantees contribution level AND minimum rate of return on each participants’ account

Question 6

what plans does the PBGC insure

Answer 6

DB and cash balance plans

Question 7

money purcahse pension plan

Answer 7

actually a DC plan

Question 8

max annual addition for a money purchase pension plan

Answer 8

$69k or 100% of salary (the lesser of)

Question 9

target benefit pension plan

Answer 9

EE assumes the investment risk
no annual actuarial determination for contributions
However, an actuary determines the initial contribution level with fixed mandatory contributions
Limit for contributions is the lesser of 100% of comp or $69k even if the actuary says they need to contribute more

Question 10

is a profit sharing plan a qualified plan?

Answer 10

yes

Question 11

Profit sharing plan keys

Answer 11

individual accounts
contributions are flexible (but must be recurring and substantial)

Question 12

ER contributions for profit sharing plans

Answer 12

deduct a max of 25% of all participants comp
only first $345k of each employee’s comp can be taken into account

Question 13

hardship withdrawals

Answer 13

only allowed for 401k plans
taxed as ordinary income with a 10% penalty, unless an exception applies

Question 14

net unrealized appreciation

Answer 14

the difference between the er’s cost basis and market value at lump sum distribution to the employee

Question 14

NUA

Answer 14

not subject to taxation until the employee sells the stock
always taxed at long term capital gains rates, regardless of the holding period

Question 15

SIMPLE

Answer 15

matching contribs are mandatroy
no $345k salary cap
<100 employees
NO other plans allowed
premature penalty distribution is 25% for the first two years of participations

Question 16

SEP

Answer 16

ER contribs only
no requirement for contributions
100% vesting immediately

Question 17

SEP participation rules

Answer 17

Must cover all EEs who are >21 working for the last 3/5 years (including PT)
Contribs don’t need to be made if EE comp was <$750

Question 18

HCE

Answer 18

> 5% owner or
$155k salary

Question 19

who can be a fiduciary under ERISA

Answer 19

Corporate officers and directors
plan admins
trustees
members of the investment committee
investment advisors

Question 20

Key Employee

Answer 20

> 5% owner
officer AND comp >$220k
1% owner AND comp >$155k

Question 21

Min benefits and contributions for non-key EEs if top heavy

Answer 21

DB - at least 2% of comp
DC min contribution not less than 3%

Question 22

plans that can be integrated with social security

Answer 22

DB
cash balance
money purcahse
target beenfit
profit sharing
stock bonus
sep

(essentially, not ESOP SIMPLE and 401k SIMPLE)

Question 23

control groups/related employers
parent subsidiary
brother sister
affiliated service group

Answer 23

-one entity owns at least 80% of one (or more) of the other entities
-five (or fewer) owners of two or more entities own 80% or more of each entity
-a service organization and a professional organization

Question 24

Non permissible rollovers

Answer 24

Almost all can be transferred except:
-transfers to another 457 plan remain the only option for nongovernmental 457
-hardship distributions
-RMDs

Question 25

Penalty and exceptions that apply to qualified plans and TSA distributions

Answer 25

death/disability
72t
separation from service >55
QDRO
medical >7.5% of AGE
$5k for birth/adoption
federally declared disaster

Question 26

72t basic rule

Answer 26

LATER of
-end of 5 year period
attainment of age 59 1/2

Question 27

Qualified Charitable Deduciton (QCD)

Answer 27

> 70 1/2
up to $105k annually
excluded from taxable income

Question 28

qualified plan loans

Answer 28

can’t exceed the lesser of 50% of vested plan balance OR 50%
OOORRRRR 10k

Question 29

QDROs generally don’t apply to what?

Answer 29

nonqualified retirement plans
IRAs

Question 30

Exceptions to the 59 1/2 10% penalty for IRAs

Answer 30

death
72t
disability
first time home ($10k)
Qualified education
medical >7.5%
medical insurance premium after separation from employment
$5k birth/adoption
federally declared disaster

Question 31

ordering rules for Roth IRA distributions

Answer 31

1. Contributions first (no tax because they were never deducted)
2. conversions (no tax, but there can be a 10% penalty)
3. Earnings (can be exposed to tax and penalty)

Question 32

NSO - basic definition

Answer 32

RIGHT to purchase a specific number of shares of the ERs stock at a given time and and given price
NO taxation occurs

Question 33

ISO - basic definition

Answer 33

AKA qualified stock option
tax-favored plan for compensating executives

Question 34

Primary difference between ISO and NSOs

Answer 34

taxation at the date of exercise
ISOs are not subject to regular tax when exercised, but NSOs are

Question 35

what is the maximum contribution limit to a db plan in 2024?

Answer 35

there is not a max limit, just a max benefit

Question 36

72t one time election switch

Answer 36

the annuity or amortization method to the RMD method