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CFP Roadmaps > Retirement Roadmaps > Flashcards

Retirement Roadmaps Flashcards

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CFP® flashcards
1
Q

Types of retirement plans

Defined benefit pension plan

Two types

A
  • qualified plan / ERISA
  • vesting schedule / admin costs / exempt from creditors / can integrate with Social Security
  1. Favors older employees (age 50+)
  2. Specific retirement benefit (to meet a set objective)
  3. Stable cash flow
  4. Past service credits allowed

Cash balance pension plan is a second type of DBP

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2
Q

Defined contribution plan characteristics and types

A

Qualified plans / ERISA

Vesting schedules / admin costs / exempt from creditors / integrate with social security

Favor younger participants, with the exception of target benefit pension

Uncertain retirement benefits

  1. Money-purchase pension
  2. Target benefit pension
  3. Profit sharing
  4. Stock bonus
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3
Q

Defined contribution plans with fixed contributions key notes

A
  • up to 25% employer deduction
  • fixed contributions
  1. Money purchase pension keys
  • stable cash flow required
    (These are sort of obsolete)
  1. Target benefit pension keys
  • stable cash flow
  • favors older employees
    (Like a MPP but discriminated based on age - age weighted)
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4
Q

Defined contribution plans that don’t have fixed contributions and key notes

A

up to 25% employer deduction

  1. Profit sharing keys
  • FLEXIBLE contributions (recurring and substantial)
  • 401k provisions (FICA) (hardship provision)
  • Simple 401K exempt from creditors

Note: Profit-sharing is company money only. 401k adds other provisions like salary deferral and match

  1. Stock bonus plan keys
  • FLEXIBLE contributions 100% invested in company stock
  • ESOP cannot be integrated with social security or cross tested. Used when company needs cash flow.
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5
Q

Other retirement plan types (non qualified)

A
  1. Simple IRA
  2. SEP IRA
  3. SARSEP
  4. 403b
  5. 457
  6. Keogh
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6
Q

Non qualified plans

Simple IRA keys

A

No vesting schedule / limited admin costs

  1. Simple 401k is exempt from creditors
  2. For small employers (100 or fewer employees)
  3. Requires employer match (immediate vesting)
  4. Salary reduction limit up to $13,000 (FICA)
  5. Company cannot have another plan
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7
Q

Non qualified plans

SEP IRA keys

A

No vesting schedule / limited admin costs

  1. No salary deferral
  2. Up to 25% contribution for owner (W2)
  3. Immediate vesting
  4. Cannot integrate with social security
  5. Special eligibility: 21+ years old, paid at least $600 and worked 3 of the 5 prior years
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8
Q

Non qualified plans

SARSEP keys

A

No vesting schedule / limited admin costs

  1. May have up to 25 employees and 50% of eligible employees must defer
  2. Must have been in existence before 12/31/1996. Grandfathered so new employees can contribute if plan exists
  3. Salary reduction limit $19,000 (FICA)
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9
Q

Non qualified plans

403b keys

A
  1. For 501c3 organizations and public schools
  2. Subject to ERISA only if employer contributed
  3. Salary reduction limit up to $19,000 (FICA)
  4. Employer contributions may be subject to vesting schedule
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10
Q

Qualified plans rules and options

DB and DC

18 points to know

A
  1. ERISA rules
  2. Eligibility: age and service
  3. Top heavy rules (key employees)
  4. Vesting schedules
  5. Coverage testing ADP and ACP
  6. Cross testing except ESOP
  7. Integration with social security
  8. Multiple plan rules: agg deferrals and annual additions
  9. Investment suitability (UBTI/life insurance)
  10. Lump sum distribution (10 yr)
  11. Rollover
  12. Distributions (20% withholding and possible 10% penalty)
  13. QP penalty exceptions
  14. RBD (70.5 or separation)
  15. QJSA/QPRA/QDRO
  16. Creditor protection (ERISA)
  17. Deductibility of contributions
  18. General established in same year to take deduction (exceptions: safe harbor and simple 401k)
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11
Q

Non qualified plans rules and options to know

Retirement plans (Simple and SEP)

18 points to know

A
  1. No ERISA rules
  2. Eligibility: Simple - none / SEP 3 out of 5 / $600
  3. No Top heavy rules - SEP automatically satisfied
  4. No Vesting schedules - SEP immediate
  5. No Coverage testing
  6. No Cross testing
  7. Integration with social security for SEP only
  8. Multiple plan rules: agg deferrals and annual additions
  9. Investment suitability
  10. No Lump sum distribution
  11. Rollover - IRA rules
  12. Distributions (simple 25% first 2 yrs possible 10% penalty)
  13. IRA penalty exceptions
  14. RBD (70.5)
  15. No QJSA/QPRA/QDRO
  16. Creditor protection varies based on state law
  17. Deductibility based on phaseout
  18. Establishment dare varies by type of plan
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12
Q

Vesting schedules

A

Faster
Top heavy DB plans and all DC contribution plans

3 yr cliff or
2 to 6 year graded or
100% vested with 2 yr eligibility

Slower
Non top heavy DB plans
No deferred contributions

5 yr cliff or
3 to 7 year graded or
100% vested with 2 yr eligibility

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CFP Roadmaps (11 decks)

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