Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFP Pre-Study Flashcards > Retirement Planning and Employee Benefits - Lesson 1 (Introduction to Qualified Plans) > Flashcards

Retirement Planning and Employee Benefits - Lesson 1 (Introduction to Qualified Plans) Flashcards

You may prefer our related Brainscape-certified flashcards:
CFP® flashcards
1
Q

What are the 2 types of qualified plans?

A

1) Defined Benefit Plans

2) Defined Contribution Plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the 2 types of Defined Benefit Plans and the 2 types of Defined Contribution Plans (better known as the 4 types of pension plans)?

A

Defined Benefit Plans:

1) Defined Benefit Pension Plan
2) Cash Balance Pension Plan

Defined Contribution Plans:

1) Money Purchase Pension Plan
2) Target Benefit Pension Plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the 7 types of Defined Contribution Profit Sharing Plans?

A

1) 401(k)
2) ESOP
3) Profit Sharing Plans
4) Stock Bonus Plans
5) Thrift Plans
6) New Comparability Plans
7) Aged Based Profit Sharing Plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

All defined benefit plans are __________________ .

A

Pension Plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Defined contribution plans can be either _______________ or ______________________________ .

A

Pension Plans or Profit Sharing Plans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Qualified plans provide employers with 3 things, what are they?

A

1) Current Income Tax Deductions
2) Payroll Tax Savings
3) Federally Provided Creditor Asset Protection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the two main disadvantages of the qualified plan for an employer?

A

1) Cost of the plan

2) Compliance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

KNOW THIS CARD

A. Payroll taxes for an employees wages are taxed subject to a ____ % (OASDI) on thier compensation up to $ ___________ for 2022 and _______ % for Medicare tax on 100% of the employees compensation.

B. The employer is required to __________ any payroll taxes paid by the employee including OASDI up to $__________ , and Medicare.

A

A. 6.2% up to $147,000, 1.45% on Medicare

B. Match up to $147,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

*Employers and employees are exempt from payroll taxes on employer contributions to a ____________________ .

A

Qualified Retirement Plan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

*An individual is liable for an additional medicare tax of ___ % on wages, compensation, or self employment income if it exceeds ____________ MFJ, _____________ MFS, ____________ Single, ____________ HOH, _______________ QHDC.

A 
.9% 
$250k MFJ
$125k MFS
$200k Single
$200k Head of Household
$200k Qualifying Widower
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

*What categories are included in payroll taxes?

A

OASDI and Medicare

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Congress enacted this in 1974 to provide protection to an employees retirement assets both from creditors and plan sponsors

A

ERISA

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Because a qualified plan is designed to provide individuals income at retirement ERISA provides ____________ protection over plan assets in case of bankruptcy.

A

Anti-Alienation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

*A court order related to divorce, property settlement, child support, federal tax levy, or criminal event. IRA assets do not have anti-allienation protection in this instance.

A

QDRO - Qualified Domestic Relations Order

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

This act clarifies that retirement assets that are exempt from tax under the internal revenue code are also exempt from the debtors estate up to $1MM.

A

BAPCPA 2005 (Bankruptcy Abuse Protection and Consumer Protection Act)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

*Long term, PART TIME employees can make elective deferrals to a qualified plan if:

A

1) Employee worked at least 500 hours per year for 3 consecutive years (years prior to 2021 do not count)
2) Is age 21 by the end of the 3 consecutive years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How many plan entrance dates are there per year?

A

2 usually 6 months apart (because the employer may allow participants to wait until the plan entrance date but the employer is not allowed to make employees wait more than 6 months)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

*What is the special exception eligibility rule to qualified plans? (Not available to 401(k) plans).

A

A qualified retirement plan may make an employee complete 2 years of service before they are elligible to participate in the plan. Employer must allow for immediate vesting if electing this option.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

*An employee would be considered to have a year of service after completing both:

A

1) 12 months of service

2) 1000 hours of service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

*What defines a Highly Compensated Employee? (Not to be confused with a Key employee)

A

1) Anyone who owns more than 5% of a company’s stock or capital in the current year (or did in the previous year)
2) Income exceeds $135,000 (2022 compensation limit provided)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

________________________ consider shares of stock owned by relatives including: spouse, children, grandchildren, or parents as if owned by one owner.

A

Family attribution rules

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

*Employers can elect to limit highly compensated employees to top _____ %

A

20%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How does a qualified retirement plan pass the general safe harbor coverage test?

A

If the plan benefits 70% or more of nonexcludable non-highly compensated employees

24
Q

For a plan to classify as no discriminatory it must pass 2 tests:

A

1) Safe Harbor Test

2) Facts and Circumstances Test

25
Q

To be considered ‘Qualified’ a retirement plan must pass one of the three following tests:
A defined benefit plan must also pass the __________.

A

1) General Safe Harbor Test
2) Ratio Percentage Test
3) Average Benefits Test

50/40 Rule

26
Q

*How are the following calculated?

1) General Safe Harbor Test
2) Ratio Percentage Test
3) Average Benefits Test

A

1) General Safe Harbor Test = % NHC employees covered >= 70%
2) Ratio Percentage Test = (% NHC Covered) / (% HC Covered) >= 70%
3) Average Benefits Test = AB% of NHC/ AB% of HC >= 70%

27
Q

*What is the 50/40 Rule?

A

That a defined benefit plan benefit the LESSER of:

50 non-excludable, elligible employees
40% of all non-excludable elligible employees (on each day of the plan year)

28
Q

The transfer of ownership of employer contributed assets to the employee over a specific period of time.

A

Vesting

29
Q

*Deferred eligibility to a qualified plan requires immediate vesting after __________ of service.

A

2 years

30
Q

**As a result of the PPA 2006 a profit sharing plan must vest at least as rapidly as a ________ cliff or a __________ graduated schedule. (For defined benefit for years after 2006 and defined contribution plans)

A

3 year cliff

2-6 year graduated schedule

31
Q

*What is the permitted defined contribution 2-6 year graduated vesting schedule?

A 
Year 1 - 0%
Year 2 - 20%
Year 3 - 40%
Year 4 - 60%
Year 5 - 80%
Year 6 - 100%
Year 7 - 100%
32
Q

The determination of years of service is based on the employees ___________________________ .

A

Beginning date of employment

33
Q

*What is the permitted 3 year cliff defined contribution vesting schedule?

A

Year 1- 0%
Year 2- 0%
Year 3- 100%

34
Q

*How is the vested balance for interest earned on a qualified defined contribution plan determined for a plan that maintains the least generous graduated vesting schedule?

A

For Employee:

Total Interest Earnings X (Employee Contributions / Total Contributions) (X Vested % based on schedule)

For Employer:

Total Interest Earnings X (Employer Contributions / Total Contributions) (X Vested % based on schedule)

35
Q

**What defines a “Key Employee?”

A
  • a GREATER THAN 5% Owner
  • Greater than 1% Owner with compensation in excess of $150k
  • Officer with compensation in excess of $200,000 (provided)
  • Key Employee MUST be either an officer or an owner regardless of salary
36
Q

*What defines a “Top-Heavy Plan?”

A

If > 60% of benefits or contributions are going to key employees

37
Q

*What is the minimum funding requirement for Top Heavy defined contribution plans non key employees?

A

3% of salary OR equal to that of key employees if less than 3%

38
Q

*What is the minimum funding requirement for Top Heavy defined benefit plans non key employees?

A

2% X Years of Service X Compensation Factor

39
Q

**Maximum annual expected benefit allowed as of 2022 for defined benefit plans?

A

$245,000 OR 100% of the average of the employees 3 highest consecutive years of compensation (during participation considering covered compensation limit)

40
Q

Maximum contribution per participant for defined contribution plans?

A

Lesser of 100% of employees compensation

OR

Up to $61,000 for 2022 (not including the catch up contribution of $6500)

41
Q

Describes the maximum contribution which is an aggregate amount including employer and employee contributions to the plan along with any forfeitures.

A

415c Limit

42
Q

*Employers maximum tax deductible amount is _________ of employers total covered compensation paid on defined contribution plans?

A

25%

43
Q

*Any forfeiture is counted towards the ___________________ .

A

Contribution Limit for the year

44
Q

Two or more trades or businesses under common control

A

Control group

45
Q

**A parent subsidiary control group exists when one or more corporations are connected through stock ownership of what percentage?

A

80% ownership of stock in another corporation

46
Q

Controlling interest generally equals _____ % or more.

Effective control generally means _____ % or more.

A

80%

50%

47
Q

Group of two or more corporations in which 5 or fewer common owners own directly or indirectly a common interest.

A

Brother-Sister Relationship

48
Q

When different businesses are all members of the same combined group under common control.

A

Combined Group

49
Q

Rules for this type of group treats all of the employees of the memberships of an affiliated service group as if a single employer employed them.

A

Affiliated Service Group

50
Q

*When determining an employees eligibility for entrance to a plan one must consider:

A

1) Age
2) Start date
3) Entrance Dates (allowable days of entry by company) - PAY ATTENTION sometimes although employee has completed service requirements the entrance date is not open for a couple more months

51
Q

How much corporate stock are ESOPs permitted to hold in the trust?

A

100%

52
Q

Under the IRC, qulaified participants may force diversification of their holdings if they are at least ______________________________________________________ .

A

55 years old and have completed at least 10 years of participation in the ESOP

53
Q

The qualified participant of the plan (ESOP) must be offered a diversification election option within _____ days after the close of each plan year beginning with the year after the employee becomes qualified.

A

90

54
Q

The participant of an ESOP may elect to diversify up to _____ of the account balance into one of the plans alternative investment options.

A

25 percent

55
Q

In the final year of the 6 year election period for ESOPs the diversifiable percentage is increased to _______ %.

A

50%

CFP Pre-Study Flashcards (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions