Retirement Plans

Question 1

Which plan is intended to be used by a sole proprietor and the employees of that business?
<> Keogh Plan
<> SIMPLE Plan
<> SEP Plan
<> Individual Retirement Account (IRA)

Answer 1

Keogh Plan

~ A Keogh Plan may be used by a sole proprietor only if the employees of the business are included

Question 2

In a qualified retirement plan, the yearly contributions to an employee’s account:
<> are restricted to minimum levels set by the IRS
<> must be matched dollar-for-dollar by the employer
<> are restricted to maximum levels set by the IRS
<> are not tax-deductible

Answer 2

are restricted to maximum levels set by the IRS

~ Annual limits to an employee’s qualified retirement plan are based on maximum limits set by the IRS.

Question 3

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
<> Ordinary income tax and a 10% tax penalty for early withdrawal
<> Ordinary income tax
<> Capital gains tax
<> 10% tax penalty for early withdrawal

Answer 3

Ordinary income tax and a 10% tax penalty
~ Income tax and a penalty tax are generally assessed when a participant receives retirement savings from an IRA before reaching age 59 1/2

Question 4

An individual participant personally received eligible rollover funds from a profit-sharing plan. What are the income tax withholding requirements for this transaction?
<> 20% is withheld for income taxes
<> 30% is withheld for income taxes
<> Nothing is withheld
<> 10% is withheld for income taxes

Answer 4

20% is withheld for income taxes
~ A plan sponsor must withhold 20% of the distribution in federal taxes on a rollover. once the rollover takes place to a new custodian, the remainder of the distribution is made

Question 5

What does a 401(k) plan generally provide its participants?
<> A defined retirement benefit
<> Salary-deferral distributions
<> Tax-free distributions
<> Salary-deferral contributions

Answer 5

Salary-deferral contributions

~ A 401(k) plan normally provides participants with a salary-deferral option for contributions to the plan

Question 6

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:
<> 403(b) plan
<> profit-sharing
<> rollover plan
<> salary reduction plan

Answer 6

profit-sharing plan

~ Profit-sharing plans set aside a portion of a company’s net income for distribution to qualified employees

Question 7

What type of employee welfare plans are not subject to ERISA regulations?
<> Qualified plans
<> Corporate 
<> Church plans
<> Major medical plans

Answer 7

Church plans

Question 8

A qualified profit-sharing plan is designed to:
<> allow employees to elect company officers
<> allow key employees to participate in the profits of the company
<> keep key employees from leaving the company
<> allow employees to participate in the profits of the company

Answer 8

allow employees to participate in the profits of the company

~ One of the purposes of a qualified profit-sharing plan is to distribute a portion of company earnings to employees

Question 9

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
<> 250
<> 100
<> 50
<> 25

Answer 9

100

~ An employer can have a maximum of 100 employees earning at least $5,000 to be eligible for a SIMPLE retirement plan