Retirement Savings and Income Planning

Question 1

The difference between the capital preservation model and the purchasing power preservation model is the ______

Answer 1

assumed interest rate - cap pres uses the growth rate, purchasing power uses the inflation adjusted growth rate

Question 2

ERISA intended to protect ______ interest of plan participants

Answer 2

retirement interests of plan participants and to establish equitable standards and curtail abuses

Question 3

Qualified plans must meet ERISA requirements, including:

Answer 3

coverage
participation
vesting
reporting and disclosure
fiduciary requirements

Question 4

ERISA titles 1-4 are as follow:

Answer 4

1: protect employee rights to collect benefits and impose nondiscrimination
2: establish plan qualification requirements for special treatment under IRS code
3: create regualtory and administrative framework for ongoing ERISA implemenation
4: estalbish the PBCG to insure defined benefit plans

Question 5

The acronym for ERISA titles is WTRP:

Answer 5

workers rights
tax code treatment
regulatory and admin framework
pbgc

Question 6

ERISA reporting is required to the following entities

Answer 6

IRS
DOL
PBGC
plan participants

Question 7

Does the PBGC cover defined contribution plans?

Answer 7

NO only defined benefit plans

Question 8

The PBGC can terminate plans for the following reasons:

Answer 8

min funding requirements not met
benefits cannot be paid when due
the long-run liability is expected to increase unreasonably

Question 9

You can file a form 550 SF for an ERISA plan if you have

Answer 9

fewer than 25 participants
eligible for small plan audit waiver
hold no employer securities
have 100% of assets in investments that have readily determinable FMV

Question 10

Plan requirements for a qualified plan are:

Answer 10

must be in writing
must be communicated to employees
must be permanent
must not allow or have prohibited transactions

Question 11

401(k) plans may not use a ____ service requirement

Answer 11

two year service requirement

Question 12

The ratio percentage test for NHC vs HC employees is % of NHC covered / % of HC covered, and is has to be greater than __%

Answer 12

greater than 70%

Question 13

The average benefits test for nondiscrimination is like the safe harbor test but is calced as average benefits _____

Answer 13

average benefits %

Question 14

A HCE has to meet one of the following criteria:

Answer 14

greater than 5% owner of the employer at any time during the current or preceding year
had comp greater than $120k from the employer

Question 15

A defined benefit plan must benefit no fewer than the lesser of the following:

Answer 15

50 employees

40% of more of all nonexcludable employees

Question 16

Noneligible employees for a qualified plan are generally:

Answer 16

not age 21 and not 1 year of service

union employees, some airline pilots, and nonresident aliens

Question 17

Plans that may not integrate with social security are:

Answer 17

ESOPs, simples, and SARSEPs

Question 18

An employer must choose a vesting schedule that is more favorable to the ____ but not less favorable than the _____

Answer 18

more favorable to employee but not less favorable than the cliff

Question 19

Control groups as they relate to qualified plans are commonly :

Answer 19

brother-sister

parent subsidiary

Question 20

Defined benefit pension plans that do NOT have to be covered by PBGC are professional services companies with 25 or fewer employees, those professions are:

Answer 20

Attorneys
Doctors
Dentists
Accountants
Actuaries
Architects 
Engineers

ADD AAA Engineers

Question 21

A cash balance pension plan is similar to a money purchase pension plan but has an employer-guaranteed ______

Answer 21

rate of return

Question 22

The legal promise of a profit sharing plan is to ______

Answer 22

defer taxes

Question 23

The major difference between a stock bonus plan and a profit sharing plan is that distributions are made in _______

Answer 23

employer stock

Question 24

A target benefit pension plan is a hybrid between a ____- and a _____

Answer 24

defined benefit and a defined contribution plan

Question 25

Is PBGC available for target benefit pension plans?

Answer 25

NO

Question 26

A target benefit pension plan must provide a _____ as its automatic benefit, unless waived by participant and spouse

Answer 26

a joint and survivor annuity

Question 27

A new comparability plan is a defined contribution plan that is either a _______ or a ______

Answer 27

money purchase pension plan or a profit sharing plan

Question 28

A new comp plan is designed so that one class of employee is given _____ and another class ____

Answer 28

is given one level of contribution and another is given a different level

Question 29

Can an S corp have a self-employed retirement plan?

Answer 29

NO

Question 30

Plans for self-employed business owners are typically one of the following:

Answer 30

profit sharing
401k
defined benefit pension plan (not generally chosen given mandatory contributions)

Question 31

For self-employed business owners, the entire cost of life insurance for regular employees is ____ as a plan contribution

Answer 31

deductible

Question 32

All qualified pension plans must provide two forms of survivorship benefits:

Answer 32

preretirement survivor annuity

joint and survivor annuity

Question 33

Generally speaking, any distribution from a qualified plan will be taxed at _____

Answer 33

ordinary income

Question 34

The exceptions for distributions from qualified plans being treated as ordinary income are:

Answer 34

• NUA

- persons born prior to 1936 (10year forward avg & pre1974 cap gain)

Question 35

For NUA, the cost basis is taxed at _____ and will be taxed at ______ upon sale

Answer 35

cost basis taxed at ordinary income, taxed at capital gains when sold

Question 36

A qualified domestic relations order (QDRO) assigns part or all of a ____ to an _____

Answer 36

part or all of a participants plan benefits to an alternate payee

Question 37

For SIMPLE IRAs, the early withdrawal penalty is _____ for two years before reverting to _____

Answer 37

25% then reverts to 10%

Question 38

Unrelated business taxable income (UBTI) for a plan is subject to income tax, but from it are excluded:

Answer 38

dividends and interest
royalties
incidental rents
gains from the disposition of property