Retirement Missed Flashcards
A participant who has an account balance of between $10,000 and $20,000, may borrow up to $10,000 even if the $10,000 exceeds 50% of the plan balance true or false
True, in fact when the vested balance is below $10,000 the entire vested balance is available for a loan (assuming this is the first loan)
Does a profit sharing plan allow elective deferrals?
No not unless it has an attached 401k!
Can funds from a qualified pension, profit sharing, stock bonus, section 401k, section 403b, and section 457 plans be converted into a ROTH?
Yes
Can distributions from one Roth IRA be rolled over tax-free to another Roth IRA?
Yes
What plans are allowed to offer section 401(k) provisions?
Define contribution, plans, such as profit-sharing plans, stock, bonus plans, ESOPs, and savings plans are allowed to offer section 401(k) provisions
A traditional defined benefit pension plan is permitted to accept section 401(k) pretax employee contributions
Cash balance pension plans cannot offer section 401(k) provisions
What employees are eligible for a SEP?
Age 21 and over who have performed services in 3 of the past 5 years and has compensation of at least $750 in the current year.
What employees are eligible for a simple?
Covers employees who receive $5,000 in previous 2 years and is expected to continue.
If ADP/ACP for NHC is 0% to less than or equal to 2% or greater than 2% but less than or equal to 8%. What is the max ADP/ACP for HCE?
0% to 2% times 2, 3% to 8% plus 2% anything above times 1.25%
What are the coverage test?
of NHC covered employees / # of NHC that are eligible = must be greater than or equal to 70%
1st: percentage test
(Safe Harbor test)
If fails you must pass either the
Ratio Test:
% NHC covered / % HC employees covered
Or
Average Benefit percentage test
Ave benefits % NHC / Ave benefits % HC
Both must be equal to or greater than 70% to pass
A defined benefit plan must pass an additional test:
The 50/40 test
Plan must benefit at least the lessor of: 50 employees or 40% of all eligible employees
Both SEP and qualified plans can be funded as late as what?
The due date of the return plus extensions
Do SEPs share the same protections under ERISA and federal bankruptcy law that qualified plans are protected by?
Yes
Do SEP plans have to follow the same non-discriminatory and top heavy rules as qualified plans?
Yes
Top heavy plan requirements include
- Special vesting schedules for top heavy defined benefit pension plans, must use accelerated testing schedules
- Top heavy defined contribution plan typically must provide a minimum contribution of 3% for non-key employees, unless the contribution for key employees is less than 3%, in which an equal percentage for all participants may be used
- A top heavy defined benefit pension plan must provide a minimum benefit accrual of 2% multiplied by the number of years of service, up to a 20% benefit
Is to act for the exclusive purpose of providing benefits for plan, participants and their beneficiaries a fiduciary responsibility under ERISA?
Yes
What is a SERP?
Supplemental executive retirement plan (SERP)
Is a set of benefits that may be made available to top level employees in addition to those covered in the companies standard retirement savings plan
Form of a deferred compensation plan it is not a qualified retirement plan that is, there is no special tax treatment for the company or the employee
The spouse of a retired or disabled worker qualifies for Social Security benefits if he/she:
Is age 62 or over
Has a child in care under age 16 or age 16 and over if disabled
The surviving spouse (including a surviving divorced spouse) of a deceased insured worker qualifies for Social Security payments if the widow is age 60 or over
A surviving spouse of a deceased, insured worker, regardless of age, qualifies for Social Security payments if caring for an entitled child of the deceased who is either what?
Under age 16 or is disabled before age 22
When can a divorce spouse receive Social Security benefits?
The divorced spouse must have been married to the worker for at least 10 years and must not be remarried
A divorce spouse, who is at least age 62 has been divorced from the worker for at least two years can receive retirement benefits based on the workers earnings, even if the worker does not claim benefits
A surviving dependent, unmarried child of a deceased, insured worker, qualifies for Social Security payments if the child is
Under 19 and a full-time elementary or secondary school student or is
Age 18 or over but has a disability which began before age 22
Is a SIMPLE IRA or a SIMPLE 401k exempt from creditors?
A SIMPLE 401k is an ERISA plan… it will be exempt from creditors
Under substantially equal periodic payments 72t, the one time election allows participants to switch from which method?
The annuity or amortization method to the RMD method
An owner or a greater than 5% owner that is approaching age 73 and continues to work has to or can do with their retirement plan?
Must start to take RMD’s beginning date is April 1 of the year following the year in which they attain a 73
They can continue to contribute to the plan after age 73
Can you convert an IRA to a Roth without taking an RMD if you were age 73 or older?
Can’t convert until an RMD is taken
First dollars withdrawn from the IRA her deemed to be the RMD until that amount is distributed
Once the RMD is withdrawn, then the remaining balance can be converted
How many quarters of coverage are needed for a person to be fully insured under Social Security?
40
Using the ratio percentage test (70%), if the plan covers only 50% of the HCEs… then up to what amount of NHCEs could be excluded?
50% x 70% = 35%
35% must be covered 65% can be excluded
Which type of retirement plans require qualified joint and survivor annuity for the plan participant spouse?
Qualified pension plans
Does a QDRO apply to SIMPLES?
No, only to qualified plans
What is a Surety bond?
- An executive may consider purchasing a Surety Bond if there is concern about receiving the deferred compensation payment from the former employer
- The bond ensures that the benefit will be paid. If for any reason the employer is unable to make good on its promise.
- However, the executive must pay the premium for the bond without being reimbursed by the employer
- In that case, the purchase of the bond does not create a current vested right to the deferred compensation that would result in current income taxation
What is the additional Medicare tax?
.9% on AGI in excess of $250000 MFJ and $200,000 Single
Distributions for higher education expenses from any IRA are exempt from what?
Early withdrawal penalty, but not income taxes
Is the ACP test required for a SIMPLE?
No
What is the maximum contribution that can be made to a SIMPLE by both employee and Employer?
- Maximum total contribution is $16,000 for the Employee ($3500 catch up)
- Employor is 3% of employees compensation, can elect a lower percentage not less than 1% in no more than 2 our of 5 years
- Employor can choose Nonelective which is 2% of compensation to ALL eligible employees even if not deferring.
NOTE: Maximum compensation is $345,000
Can a fiduciary who is a full time, paid employee of a plan sponsor recieve additional payment for services redered to the plan?
NO, that is a prohibited transaction under ERISA
If a Social Security recipent decides that they should have delayed receipt of his Social security benefits until a later age. How long do they have to pay back all payments and refile for increased benefits at a future date?
12 months to repay and then can file for benefits at a later date
What are the Employor contributions for a SEP plan?
Limited to the lessor of 25% (Not 100%) of compensation or $69,000 (Note $345,000 limit)
Self employed owners: Limited under Koegh rules use 18.59% of Schedule C income.
A worker is entitled to Social Security Disability benefits if?
Under age 65 and has been disabled for 12 months and
Is expected to be disabled for at least 12 months, or has a disability which is expected to result in dealth and has completed a 5 month waiting period.
