Retirement Planning

Question 1

A supplemental deferred compensation plan providing retirement benefits above the company’s qualified plan AND without regard to Section 415 limits is known as:

Answer 1

A Supplemental Executive Retirement Plan (SERP).

Question 2

A supplemental deferred compensation plan that pays retirement benefits on salary, above the Section 415 limits, at the same level as the underlying retirement plan is known as:

Answer 2

An excess benefit plan.

Question 3

A _____ trust is a irrevocable trust but, unlike a funded deferred compensation plan, the assets are subject to the claims of the employer’s creditors. This avoids constructive receipt by the employee and delays income taxation until distribution.

Answer 3

Rabbi Trust.

Question 4

The ___ of guaranteed future payments from a Non-Qualified Deferred Compensation plan to be made to a participant’s beneficiary will be included in the gross estate of the deceased participant.

Answer 4

NPV.

Question 5

If the employee has a non-forfeitable beneficial interest in a deferred compensation account, the IRS considers the plan “_____” and subject to current income tax due because the employee has constructive receipt of the assets.

Answer 5

Funded.

Question 6

A _____ deferred compensation plan is a non-qualified deferred compensation plan providing the key employee with a vested beneficial interest in an account is known as:

Answer 6

Funded.

Question 7

” A defined benefit plan that has the appearance of a defined contribution plan” is a…

Answer 7

Cash Balance Plan.

Question 8

A hybrid plan that uses a discretionary contribution but adjusts for age is a form of a _____ _____ plan.

Answer 8

Profit Sharing.

Question 9

A qualified plan which allows employee elective deferrals of 100% of includible salary and has a mandatory employer match” is…

Answer 9

A SIMPLE 401K.

Question 10

What is the early withdrawal penalty for a SIMPLE IRA plan during the 2-year period beginning on the date the employee first participated in the SIMPLE plan?

Answer 10

25%.

Question 11

When calculating the Wage Replacement Ratio (WRR), what percentage of income is subtracted for a self-employed individual for Social Security and Medicare Taxes?

Answer 11

15.30%.

Question 12

Which of the following capital needs analysis methods mitigates the risk of outliving retirement funds?

Answer 12

Capital Preservation Model.

Question 13

The _____ _____ Model assumes at life expectancy, as estimated in the annuity method, the client has exactly the same account balance as he/she started with at retirement. So if life expectancy is exceeded there is still capital available.

Answer 13

Capital Preservation Model.

Question 14

An _____ _____ is an employee who has benefited under one of the following plans through a contribution or an accrued benefit during the year:

1. qualified plan;
2. annuity plan;
3. tax sheltered annuity (403(b) plan);
4. certain government plans (does not included 457 plans);
5. SEPs; or
6. SIMPLEs.

Answer 14

Active participant.

So, a Section 457 deferred compensation plan does NOT count.

“Eligible” = active participant.

Question 15

For a designated non-eligible beneficiary, the account must be fully distributed by the ___ anniversary of the account holders death.

Answer 15

10th.

Question 16

Withdrawing a _____ from a ROTH IRA will be subject to a 10% penalty but no income tax if the withdrawal does not occur after a 5 year holding period beginning Jan 1 in the year of conversion or meet one of the 10% early withdrawal exceptions.

Answer 16

Conversion.

Question 17

Distributions to the IRA owner must begin by _____ __ of the year following the year in which the owner reaches age 70 1/2 (if by 12/31/2019) or age 72 (if 70 1/2 after 12/31/2019).

Answer 17

April 1st.

Question 18

Participating in a _______ plan is considered being an “Active Participant.”

Answer 18

SIMPLE Plan.

Question 19

The _______ _______ IRA is probably the simplest retirement arrangement that a business can have.
No plan document needs to be adopted under this arrangement.
The employer has no filing requirements.
Only employees make the contributions.
Any size business can provide this.

Answer 19

Payroll Deduction IRA.

Question 20

Under a _______ _______ IRA, an employee establishes an IRA (either a traditional or a Roth IRA) with a financial institution.
The employee then authorizes a payroll deduction for the IRA.
The employer’s responsibility is simply to transmit the employee’s authorized deduction to the financial institution. I
n general, if this arrangement is offered to any employee then it should be offered to all employees.

Answer 20

Payroll Deduction IRA.

Question 21

If a stock option is _____ when it is received, and has a readily ascertainable value it is immediately taxable.

Answer 21

Vested.

Question 22

For ___’s, the bargain element will be deductible for the employer if the sale is a disqualifying disposition.

Answer 22

ISOs.

Question 23

Participating in a ___ plan is NOT considered being an “Active Participant.”
You can still contribute and deduct a contribution to a Traditional IRA and is not subject to an AGI limitation.

Answer 23

457 Plan.

Question 24

Which one of the following is a possible disadvantage of a Simplified Employee Pension plan (SEP) for an employer?

A. The SEP’s trustee is subject to ERISA’s prohibited transaction excise tax penalties.
B. A SEP must have a fixed contribution formula that is non-discriminatory.
C. SEPs prohibit forfeitures.
D. Employer contributions to a SEP are subject to payroll taxes.

Answer 24

C. SEPs prohibit forfeitures.

Question 25

A _____ trust is a trust established and sometimes funded by the employer that is subject to the claims of the employer’s creditors, but any funds in the trust cannot generally be used by or revert back to the employer.

Answer 25

Rabbi Trust.

Question 26

Owners of C Corporations are eligible for LOANS as long as the ___ ____ rules are maintained.

Answer 26

Safe Harbor Rules.

Question 27

A parent-subsidiary group exists if the parent company owns __% of voting stock in another corporation.

Answer 27

80%.
This is important because parent-subsidiary companies must have substantially equal benefits or cover employees of all subsidiary companies under the same plan.