Retirement Planning 18%

Question 1

Payroll taxes

Answer 1

OASDI + Medicare

Question 2

Qualified Plans ERISA protection

Answer 2

Anti-alienation protection of plan assets from being assigned, garnished, levied ,or subject to bankruptcy procedings while in plan

Question 3

What defines a Highly Compensated Person

Answer 3

• more than 5% owner (including family owning stock)
• employee with compensation of more than $155k for current plan year
• employee with compensation in excess of $150k last year

Question 4

General Safe Harbor Test

Answer 4

% NHC covered >= 70%

Question 5

Ratio Percentage Test

Answer 5

%of NHC Covered/ %HC Covered >= 70%

Question 6

Average Benefits Test

Answer 6

1. AB% of NHC/AB% of HC >= 70%
2. Nondiscriminatory Test

Question 7

What is the lease generous graduated vesting schedule

Answer 7

2-to-6 year graduated vesting

Question 8

The maximum annual addition to qualified plan accounts on behalf of employee

Answer 8

$69,000

Question 9

Key employee

Answer 9

Decision makers who:
- greater than 5% owner
-greater than 1% owner with $150k
-officer with comp in excess of $220k
*Must be an owner or officer

Question 10

Top-heavy plan

Answer 10

• DB plan key employees’ benefits exceed 60% of overall accrued benefits for all employees
• DC account balances of key employees exceed 60% of aggregate accounts of all employees

Question 11

Parent Subsidiary Group Ownership Requirements

Answer 11

Owns 80% of at least one other corporation

Question 12

Money Purchase Pension Plan

Answer 12

The business does not bar the investment risk of the plan assets

Question 13

Target benefit pension plan

Answer 13

Assuming equal salaries, a target benefit pension plan would allocate a higher percentage of its current contributions to an older employee

Question 14

Permitted Disparity

Answer 14

SS integration that can increase the contributions because compensation covered is limited to $345k

Question 15

Negative Elections

Answer 15

A device where the employee is deemed to have elected a specific deferral unless the employee specifically elects out of such election in writing available for current and new employees

Question 16

ADP test - 401(k)

Answer 16

Average Deferral Rate (NHC) % / Average Deferral Rate (HC) % >= 70%

Question 17

Nonrecognition of gain treatment

Answer 17

must own stock for at least 3 years and reinvest within 12 months

Question 18

What is the RMD Minimum distribution penalty - SECURE 2.0 Act

Answer 18

25%, can reduce penalty to 10% if make corrective distributon

Question 19

Qualified Domestic Relations Order (QDRO)

Answer 19

Court order that divides retirement benefits between people during a divorce or dissolution

Question 20

QDRO distributions

Answer 20

Not considered taxable distributions if deposited in the recipient’s IRA or qualified plan

Question 21

Involuntary Termination of Qualified Retirement Plan

Answer 21

PBGC initiates a termination because the plan was determined to be unable to pay benefits from the plan

Question 22

Distress termination of Qualified Retirement Plan

Answer 22

An employer is in financial difficulty and is unable to continue with the plan financially Generally occurs when the company has filed for bankruptcy, either Chapter 7 liquidations or Chapter 11 reorganization

Question 23

Standard termination of Qualified Retirement Plan

Answer 23

the employer has sufficient assets to pay all benefits vested at the time but is distressed about it

Question 24

Eligible Designated Beneficiary

Answer 24

Individual who inherits an IRA and is eligible for special treatment, can take withdrawals through their lifetime expectancy

Question 25

Eligible Designated Beneficiary Requirements

Answer 25

• spouse or minor child
• diabled or chronically ill individual
• individul who is no more than 10 years younger than the deceased
  trusts created to benefit disabled or chronically ill beneficiaries

Question 26

What amount of Self-Employment Income is included in Self-Employment tax

Answer 26

92.35%

Question 27

Subtract Payroll Tax Rate

Answer 27

7.65% = 6.2% SS and 1.45% Medicare

Question 28

Self- Employment Tax

Answer 28

Net Earnings X 12.4% up to $168k (2.9% on all income)

Question 29

SEP Contribution Limit

Answer 29

$69,000 up to 25% $345k (Defined Contribution)

Question 30

Which plans permit employer matching and non-elective contributions

Answer 30

457(b), 401(k), 403(b)

Question 31

ISO- Incentive Stock Options

Answer 31

Is a right given to an employee to purchase an employer’s common stock at a stated exercise price, exercise price is equal to FMV of stock, must be less than $100k based on grant price and must hold for at least 2 years from grant date or one year from exercise of ISO
* if done right only positive adjustment for AMT

Question 32

Exercise of a NQSO

Answer 32

W-2 income on difference between market price and exercise price, no AMT adjustment

Question 33

Phantom Stock Plan Characteristics

Answer 33

Benefits are paid in cash and there is no equity dilution from additional shares being issued.

Question 34

ESPP - Employee Stock Purchase Plan Characteristics

Answer 34

The price may be as low as 85% of the stock value, there is an annual limit of $25,000 per employee, the gain in excess of W-2 income will be capital gain

Question 35

When are losses permitted for Stock Options

Answer 35

When the right to the stock has been vested and 83(b) is elected right after it is vested

Question 36

Dependent Care Assistance Program for

Answer 36

Dependent child under 13 years old, dependent child who is physically or mentally incapable of caring for themselves, employee’s spouse if the spouse is physically or mentally incapable of caring for herself

Question 37

How much group term insurance can an employer provide an employee without the employee including in gross income

Answer 37

$50,000

Question 38

Max number of employees a company has to not be subject to COBRA even if it has a health plan (continuation of health care coverage)

Answer 38

20 employees

Question 39

Entity approach to fund a buy/sell agreement that requires surviving partners to purchase the partnership interest of any partner to die requires how many policies? (if there are 5 partners)

Answer 39

5 policies for the entity for each partner

Question 40

Lean FIRE

Answer 40

minimalistic lifestyle where investment or supplemental income covers basic necessities

Question 41

Barista FIRE

Answer 41

investment income and supplemental income may not fully cover annual expenses. One may use a part time job or accept lower pay and less stress to supplement lifestyle

Question 42

Fat FIRE

Answer 42

Investment income and the supplemental income more than covers lifestyle expenses allowing one to enjoy retirement and “live it up”