Retirement Quizzes

Question 1

Questions that must be addressed before one undertakes any type of Stock Option plan for employees.

Answer 1

What is the earliest date you can exercise the option?
What do you need to do when you exercise the option?
Can you exercise using stock you own?
When will the option terminate?
Can you exercise after your employment terminates?

Question 2

Non-qualified stock options are taxed on the…

Answer 2

“bargain element” (difference between the market price and the strike price) as ordinary income when exercised

(Market Price – strike price) × Number of Shares × Tax Rate = Tax

Question 3

The security holding period in the case of a non-qualified options begins…

Answer 3

on the date the option is exercised.

Question 4

If you are not an employee, stock options are…

Answer 4

Not qualified

Question 5

ISO is not subject to ____
NQSO is subject to ____

Answer 5

Payroll tax

Question 6

Client will not be taxed for gain upon the award of the NQSO if…

Answer 6

there is a lack of readily ascertainable value.

Question 7

If an employee receiving incentive stock options does not meet the employment time requirement, but receives options as a nonqualifying and exercises them, what will the consequences be?

Answer 7

The employee will be required to recognize compensation income in the year the option is exercised.

Question 8

Tax Sequence of NQSO

Answer 8

No tax at Grant

W-2 Income at Exercise = FMY at time of exercise - exercise price

Capital Gains at subsequent sale (LT or ST)

Question 9

Safe harbor 401(k) plans require ____ vesting, while 401(k) plans with qualified automatic contribution arrangement require ____ vesting

Answer 9

100%

2-Year 100%

Question 10

Keough Contribution Rate Formula

Answer 10

contribution rate / (1 + contribution rate) = self-employment contribution rate

Question 11

ESOP distribution in stocks are…

Answer 11

NUA (Net Unrealized Appreciation)

Question 12

Employees in an ESOP may demand…

Answer 12

25% of the current balance be diversified.

Question 13

What increases the funding costs of a DB plan?

Answer 13

Low turnover rate.
Early retirement.
Salary scale assumption.

Question 14

If the employee has a non-forfeitable beneficial interest in a deferred compensation account, the IRS considers the plan…

Answer 14

“funded” and subject to current income tax due because the employee has constructive receipt of the assets.

Question 15

Golden Parachute

Answer 15

substantial payments made to executives being terminated due to changes in ownership

considered OI
subject to additional 20% excise tax

Question 16

unfunded deferred compensation plan

Answer 16

A non-qualified deferred compensation plan that provides the targeted key employees with only a promise to pay benefits at a future time

no assets are segregated (as in a rabbi trust or taxable trust), so the plan is considered unfunded

assets are still owned by the employer and subject to the creditors

Question 17

excess benefit plan

Answer 17

supplemental deferred compensation plan that pays retirement benefits on salary, above the Section 415 limits, at the same level as the underlying retirement plan

excess benefit plan would put additional $15,250 into non-qualified retirement plan

Question 18

SERP

Answer 18

provides benefits in excess of the Section 415 limits AND ignores the covered compensation limits (i.e., $305,000 in 2022) applied to qualified plans.

Question 19

Rabbi trust

Answer 19

non-qualified plan which is subject to the claims of creditors yet is irrevocable and not accessible by the employer

Question 20

How is life insurance utilized to finance the obligation of an employer under a non-qualified deferred compensation plan?

Answer 20

A company can defer compensation that would otherwise be due an employee and use the amount to purchase life insurance on the employee in the company’s own name while paying the premiums for the policy.