Retirement Planning Flashcards
Eligibility for Social Security (Spouse of a retired or disabled worker)
- Age 62 or older
- Child in care under 16
- Child over 16 and disabled
This kind of annuity provides the highest payout to a retiree.
Pure life / Straight Life annuity
This kind of annuity provides retirement income to a spouse or other dependent. (Good for Estate Liquidity)
Joint and Survivor
Eligibility for Social Security (Widow)
Widower must be age 60 or over, or have a child in care under 16.
Eligibility for Social Security (Child)
If worker is deceased, disabled or retired, the child needs to be under age 19 and a full time student…OR age 18 and over but has a disability which becan before age 22.
When can a fully insured worker start receiving retirement benefits?
The month after they reach age 62.
Nonqualified Plans - Employer Tax Deductions
Employer cannot take deductions until employee is taxed.
Cash Balance Pension Plan - What Does Employer Guarantee
Contribution level AND minimum rate of return (Defined benefit)
Who would choose a Cash Balance Plan?
Midsize or large company that has a well funded defined benefit plan and is looking to save on contributions.
Which retirement plans may forfeitures increase account balances of plan participants?
PSP and Money Purchase
When would a plan be considered top heavy?
More than 60% of its accrued benefits are allocated to KEY employees.
Four plans that can be integrated with Social Security
Stock Bonus, SEP, Defined Benefit, Target Benefit
Three plans that are prohibited from loan provisions
SEPS, SIMPLES, and IRAS
Traditional IRA - Who can Participate?
Cannot participate if you are not being compensated (Earned income). Also must consider spousal retirement accounts.
Roth IRA - Who can Participate?
AGI Limitation and you must have EARNED income.
These kinds of investments are not allowed in 403(b)
Unit Investment Trusts
Who Enforces ERISA?
The DOL
These types of investments are popular for Defined Benefit Plans
GICs - generally they have a 2-7 year maturity
Can SIMPLE Plans purchase life insurance?
NO
Only this type of plan can hold second to die insurance
Profit Sharing Plan
Are SEPS subject to FICA and FUTA?
No
When are you eligible to rollover a SIMPLE?
After 2 years of service.
These types of plans require the spouse to be the beneficiary.
Pension Plans - Defined Benefit, Cash Benefit, Money Purchase, and Target Benefit
True or False: QDROs apply to IRAs.
False
A direct distribution from a qualified plan requires the plan administrator to withhold _____%?
20%
What if an individual with two IRA accounts needs to take RMDs?
Calculate the RMD from the aggregate IRA values and then take the total RMD from one plan.
What does an “informally” funded plan mean? (AKA Unfunded)
The assets are owned by the company and are subject to the company’s creditors.
When is the employee taxed under an unfunded plan?
When he or she has constructive receipt or economic benefit.
If the holding requirements are met for an ISO - how will the resulting gain be taxed?
As a Long Term Cap Gain (favorable)
When is the interest from a 401(k) loan to purchase a house deductible?
Must be a rank and file employee and the loan must be secured with the primary residence.
What is the penalty for withdrawing a SIMPLE before two years is up?
25% early withdrawal penalty.
Which kind of investment may produce UBTI income?
Equipment Leasing Program
Does a Rabbi Trust automatically trigger constructive receipt?
NO - assets are still held by the company
What sorts of things could affect a target benefit plan participant’s retirement benefits?
- Age
- Compensation
- Investment Performance
- Actuarial Assumptions
Do SEPs have loan provisions?
NO
What is the phaseout for Coverdell?
190k to 220k
What is the phaseout for Roth?
118 - 133k (Single)
186k - 196k (MFJ)
When my an employee avoid receipt of taxable income in a funded nonqualified deferred compensation plan?
When there is substantial risk of forfeiture.
True or False: Every type off qualified plan can offer a loan feature.
TRUE!
True or False: Use of company apartment on weekends is tax-free to the employee.
False - weekends makes it taxable.
true or false
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