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Wrong Answer Flash Cards > Retirement Planning > Flashcards

Retirement Planning Flashcards

1
Q

Taxation of SS Benefit if MAGI exceeds 34k

A

85% of SS is taxable income

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2
Q

Social Security Calculation for spouse/divorced spouse with requirements for divorced spouse

A

Spouse / Divorced Spouse fulfilling requirements, is entitled to 50% of the other spouses primary SS amount unless their personal amount is higher.

Divorce qualifications
- Divorced must have been married to the worker for at least 10 years.
- Divorced spouse is great than 62 years old and has been divorced for greater than 2 years is entitled to retirement benefit.

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3
Q

Qualifications for surviving dependent for social security

A
  • Unmarried
  • < 19 years old
  • > 18 years old with a disability that began before turning 22
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4
Q

When is a worker entitled to disability benefits?

A
  • < 65 years old
  • Disabled for 12 months & will be disabled for at least 12 months OR the disability will result in death within 5 years
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5
Q

Requirements for spouse of retired or disabled worker to qualify for SS

A
  • At least 62 or any age if…
    • Has a child less than 16 years old
    • Child is over 16 and disabled earlier than 22 years old
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6
Q

Formula for taking social security BEFORE retirement

A

Reduced Benefit Calculation = PIA - [(Number of month before FRA / 180) x PIA]

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7
Q

Withdrawing a SS Application

A
  • Fully insured worker has a ONE time right to withdraw an application for benefits within TWELVE MONTHS of initial claim.
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8
Q

What benefits are available to a widow/er before age 60?

A

Can only receive SS benefit if child in “care” or child in care < 16 years old or older than 16 disabled before age 22.

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9
Q

What are qualified plan subject to?

A

IRC 401(a)

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10
Q

Safe Harbor 401k contribution rules

A

THINK LIKE AN OWNER
- Employer match $1/$1 up to 3% of employee compensation. 0.5/$1 for the next 2%
OR
- They must contribute 3% regardless of employEE contribution

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11
Q

How is the amount of permissible annual contribution to a DB plan determined?

A

Actuarially Determined. Though they are DC, target benefit pensions are actuarially determined as well

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12
Q

What is the maximum amount of retirement benefit for a participant in a Target Benefit Pension Plan?

A

Value at retirement

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13
Q

Forfeiture Rules
- DB & CB
- MPPP
- PSP

A
  • DB & CB must reduce plan costs
  • MPPP may be allocated to employee account balances
  • PSP normally are allocated to the plan participants
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14
Q

Cross-Testing

A

Allows for higher contribution amount for HCE
1. Take their contribution amount
2. Apply the less of 1/3 of the HCE contribution and 5%.
3. Apply that to the NHCE contribution

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15
Q

What plans are allowed to do cross testing?

A

Defined Contributions Plans EXCEPT ESOPS

Self-Employed Keogh type plans

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16
Q

Max annual life annuity benefit for benefit beginning at 65?

A

Lesser of 265k or 1005 of the participant’s average over 3 highest earning consecutive years

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17
Q

Two tests for qualified plan coverage and their definition

A

You need either one of these to pass
- Rato % Test
- - Plan must cover NHCEs at 70% of the % coverage of HCE

  • Average Benefit Test
    • Average benefit of NHCEs must be 70% of the benefit of HCE
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18
Q

Shortcut for ADP and ACP Test

A
  • NHCE Rate = 0 to 2% then multiply by 2 to get HCE limit
  • NHCE Rate is 2 to 8% then add 2 to get HCE rate.
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19
Q

Minimum benefit for Top Heavy plans.

A

DB = 2% * Employee’s Years of Service

DC = No less than 3% of each NHCE’s compensation

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20
Q

Can an ESOP be integrated with social security?

A

No

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21
Q

What plans can be integrated with SS?

A

SEP
DB
MPPP
PSP
Stock Bonus

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22
Q

Rules governing the deductibility of traditional IRAs

A

Neither spouse can be an active participant in a…
- Qualified Plan
- SIMPLE IRA
- SEP IRA

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23
Q

If one spouse is an active participant and the other not, can the non-active deduct IRA contributions?

A

Yes, as long as their combined AGI is less than 218k. 228k phaseout

24
Q

Requirements to contribute to a traditional IRA and Roth IRA

A

Earned income

25
Q

Are there income phaseouts for either traditional IRA or Roth IRA?

A
  • No phaseout for the traditional IRA
  • Yes phaseouts for the Roth IRA

Both require earned income
Both have a combined contribution limit of 6500 with a 1000 catch up

26
Q

Special withdrawal rule for SIMPLE IRAs

A

If you take a distribution before 2 years of service, the withdrawal is subject to a 25% penalty, not a 10%

27
Q

SEP Contribution Limit?
Easy to install?

A

Lesser of 25% or $66,000

SEPs are very easy to install

28
Q

How much can be contributed to a MPPP?

Is there a mandatory contribution?

A

$66,000

Yes because it is a pension

29
Q

Characteristics of a SARSEP

A
  • 415 Limit of 66k applies. 25%
  • No more than 25 employees
  • Max deferral of 22,500
  • 100% vested immediately
  • Plan must be established before 1/1/1997
30
Q

Are SEP IRAs subject to FICA and FUTA tax?

A

NO, because it is funded by EMPLOYERS only!

31
Q

Can you roll a nongovernmental 457 into an IRA?

A

No.

You can only roll it into a nongovernmental 457

32
Q

Benefit of a uni-401k

A

For self-employed, you can stuff employee deferral of 22,500 + Catch-Up and EMPLOYER contribution up to the 415 limit of 66k

33
Q

Are distributions from a qualified plan for disability exempt from 10% early withdrawal penalty?

A
  • Total, LT disability is exempt
  • Temporary/Partial Disability is not exempt
34
Q

Rules for beneficiary designations for pension plans? DB CB TB MPPP

A

Spouse MUST be the primary beneficiary and MUST consent to making the beneficiary someone else.

*This does not apply to PSP

35
Q

What type of accounts do QDROs apply to?

A
  • DQROs only apply to qualified plan, 403bs and 457s
  • They DO NOT apply to IRAs
36
Q

What happens if I receive a cash distribution as a result of a QDRO?

A

I will receive the amount LESS 20% due to mandatory federal tax withholding on a lump sum cash distribution

37
Q

What are the options for a correct distribution if your spouse dies before they take their RMD?

A
  1. Roll into your personal IRA and take the RMD at you RBD at your life expectancy rate.
  2. Keep in spouse’s IRA and take the RMDs at their RBD, but with your expected life expectancy rate.
38
Q

Does a Rabbi Trust trigger constructive receipt in the event of a merger or acquisition?

A

It might. Does not have to.

39
Q

What constitutes constructive receipt?
What are the provisions?

A

Funds available to employees.
- IF employee owns deferred comp assets, its employees will not have constructive receipt.
- Constructive receipt results in taxation to the employee.

40
Q

Qualities of Rabbi Trust

A
  • Informally Funded
  • May be funded with general assets
  • Contributions are not subject to payroll tax until they are distributed to employee
  • May be used for the purposes other than discharging to employees
41
Q

Vesting of ISOs

A

If more than 100k of ISOs that vest in the same year is granted, only the first 100k will be considered ISO. The excess is considered NSO.

42
Q

What are the 2 major determinants of taxation of a Nonqualified employer stock granted to an employee?

A
  • Free transferability of the employer’s interest
  • Presence of a substantial risk of forfeiture
43
Q

Can an employer that maintains a PSP contribute more than 25% to an employee’s account?

A
  • Individual employees can receive more than 25% as long as 415 limit (66k) is not exceeded.
  • Company contributions cannot exceed 25% of total eligible plan contributions.
44
Q

Keywords for SEP

A
  • Easy
  • Most Flexible
  • No indication of employee deferrals
  • Owner employees benefit
45
Q

What is NUA?

A

Net Unrealized Appreciation
- Difference between employee’s cost basis and mkt value at time the stock was granted to employee.

46
Q

Are salary deferrals for a simple plan subject to any taxation?

A

Yes, they are subject to FICA and FUTA. This includes 401k salary deferrals.

47
Q

Are tandem plans a possibility today?

A

NO, Pre-2001 they were.

48
Q

2 Active participant spouses. One dies. What is the best course of action for the surviving spouse?

A

Roll decedent’s qualified plan into their own plan to avoid the constraints of an IRA. more flexible.

49
Q

Non-Spouse Beneficiary IRA distribution requirements?

A

IRA must be completely distributed by 10 years. There is no year to year required distribution.

50
Q

What asset makes the most sense to pledge as collateral for a margin account?

A

Common stock

51
Q

When may an employee avoid receipt of taxable income when participating in a funded NONQ deferred comp plan?

A

When there is substantial risk of forfeiture relative to the compensation that was deferred.

52
Q

List of a few non-taxable fringe benefits

A

OCCASIONAL is the keyword
- Occasional money for meals
- Occasional typing of letter by secretary
- Gifts of flowers for an ill client

53
Q

Quality to qualify for hardship withdrawal

A

10 years of reserves to qualify

54
Q

Are there any tax implications for loans out of a 401k?

A

Loans are not subject to ordinary income tax or 10% early withdrawal penalty.

55
Q

How can a company qualify for COBRA?

A
  • Group health insurance plan
  • Greater than 20 employees. Not just how many are participating in the plan
56
Q
A

Wrong Answer Flash Cards (7 decks)

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