Retirment Plan Overview Flashcards
What are the four categories of retirement plans and which ones are qualified plans?
Defined benefit pension plans
Defined contribution plans
Other tax advantage plans
Nonqualified plans
Qualified plans are benefit, pension plans, and defined contribution plans
What are the defined benefit pension plans?
Traditional define benefit pension plans
Cash balance pension plan
DB(K)
What are the defined contribution plans?
Money purchase pension plan
Target benefit pension plan
Profit sharing plans
Stock bonus plan
Employees stock ownership plan (ESOP)
Section 401K plan
Thrift plan
Simple 401(k) plan
Age based profit-sharing plan
New comparability plan
What are the other tax-advantaged plans?
SEP Plan
SARSEP plan
Traditional IRA
Roth IRA
Section 403B plan
Simple IRA
What are the nonqualified plans?
Deferred compensation plan
Section 457 plan
What plans are employer contributions deductible?
All of them
Are employer contributions to qualified and other tax advantage plans subject to payroll tax?
No
Are employee contributions to qualified and other tax advantage plans subject to payroll tax?
Yes
Net unrealized appreciation (NUA) treatment for employer stock is used for qualified plans or other tax advantage plans?
Used for qualified plans, but not other tax advantage plans
The 20% withholding on distributions is required for qualified plans or other tax advantage plans?
Qualified plans, but not other tax advantage plans
Qualified and other tax advantage plans
Which one may invest in life insurance?
Qualified plans, but not other tax advantage plans
Qualified and other tax advantage plans
In-service withdrawals are allowed in which plans
Both with certain rules
Pension plans May permit in-service withdrawals from employees age 59 1/2 or older
Profit sharing plans there may be limitations in the plan for employer contributions
Qualified and other tax advantage plans
Investment in employer securities may exceed 10% in which of these
Yes, other tax advantage plans
Underqualified plans no for pension plans and yes for profit sharing plans
Qualified and other tax advantage plans
Which offer 100% immediate vesting
Qualified plans no, with the exceptions of profit sharing plans employee will be automatically fully invested when he attends normal retirement age under a section 401(k) plan, elective deferral, qualified, non-elective, and qualified, matching contributions and safe harbor contributions to a safe harbor section 401(k) plan are 100% vested at all times
Other tax advantage plans are 100% immediate vesting, but a 403B plan can have vesting schedules
Employer contributions
Which plans have mandatory employer contributions?
Define benefit pension plan
Money purchase pension plan
Cash balance pension plan
Target benefit pension plan
Simple plan
Employer contributions
Which plans have discretionary employer contributions?
Profit sharing plan
Stock bonus plan
Savings or thrift plan
Section 401(k) plan
ESOP
SEP / SARSEP
Under which retirement plans plans are employee contributions pretax
DB(K) plan, which is a sort of defined pension plan
Profit sharing plans , also after tax
401(k) , also after tax
SARSEP (Existing)
Simple
Under which retirement plans are employee contributions after tax?
Money purchase plans
Profit sharing plan , also pretax
Savings or thrift plan
401(k) , also pretax
Which retirement plans have guaranteed interest credit
Cash balance pension plan
Which retirement savings plan has leverage borrowing to purchase company stock?
ESOP
Which retirement plans do not allow in service withdrawals
Cash balance pension plan
Target benefit pension plan
Which retirement plans offer in-service withdrawals after age 59 1/2
Defined benefit pension plan
Money purchase pension plan
Which retirement plans do not allow employer securities
SEP/SARSEP
SIMPLE
Which retirement plans allow investment employers securities up to 10%?
Define benefit pension plans
Money purchase pension plans
Cash balance pension plans
Target benefit pension plans
Which retirement plans allow you to invest in an unlimited amount of employer securities?
Profit sharing plan
Stock bonus plan
Savings or thrift plan
Section 401K plan
ESOP
Which retirement plans do not allow integration with Social Security?
ESOP
SARSEP
SIMPLE
What retirement plans must use forfeitures to offset plan expenses?
Defined benefit pension plan
Cash balance pension plan
Which retirement plans are forfeitures not applicable?
SEP / SARSEP
SIMPLE
Which retirement plans can you offset forfeitures to plan expenses?
Money purchase pension plan
Profit sharing plan
Stock bonus plan
Savings or thrift plan
401(k)
ESOP
Target benefit pension plan
In retirement plans loans are possible from all plans except?
SEP / SARSEP
SIMPLE but allowed for SIMPLE section 401k
All retirement plans allow 10 year forward averaging except which ones
SEP / SARSEP
SIMPLE, except SIMPLE 401k
In retirement plans, the employee takes on all the investment risk except for which types of plans. These plans, the employer takes the risk.
Define benefit pension plan
Cash balance pension plan
Which retirement plans have actuarial cost?
Define benefit pension plans
Cash balance pension plan
Target benefit pension plan
Which retirement plans are covered by PBGC insurance?
Define benefit pension plan
Cash balance pension plans
Which retirement plans have immediate 100% vesting?
401(k) employee contributions only not for employer contributions
SEP / SARSEP
SIMPLE
Which retirement plans have 5-year cliff or 3-7 year graduated?
Define benefit pension plan
Which retirement plans have 3 year cliff or 2 - 6 year graduated?
Defined benefit pension plan if top-heavy
Money purchase pension plan
Profit sharing plan
Stock bonus plan
Savings or thrift plan
401(k) employer contributions
ESOP
Cash balance pension plan, 3-year cliff only
Target benefit pension plant
Which retirement plans favor older employees
Define benefit pension plans
Target benefit pension plants
Profit sharing plan can favor older employees if age weighted or if a new comparability profit-sharing plan
What is the maximum limit for a defined benefit plan?
275,000
What are the define contribution plan annual edition limits lesser of:
$69,000
Percent of compensation 100%
The lesser of either of these
What are section 401(k) and section 403B deferral limits
$23,000
What is the IRA contribution limit for 2024?
$7000
What are the catch up provisions for 401(k), SARSEP, 457 and 403B plans?
$7500
What are the catch-up provisions for a SIMPLE?
$3500
What are the catch-up provisions for an IRA?
$1000
How much can you contribute to a SIMPLE plan?
$16,000
What is the minimum earnings required for employee to be eligible for a SEP plan?
$750
What is the maximum compensation that can be taken into account when determining contributions to a SEP plan?
$345,000
What is the maximum combined employer and employee contributions to a section 457 plan?
$23,000
What is the maximum compensation that can be taken into account on determine qualified plan contributions
$345,000
What is the Social Security integration wage base?
168,600
What is the Medicare wage base?
Unlimited
What are the advantages to qualified plans for the employer?
Employer contributions are deductible and no payroll tax
What are the advantages to a qualified plan for the employee?
Employee contributions are
Deductible , except thrift or Roth - but payroll is taxed
Earnings are tax deferred
ERISA protection
Net unrealized appreciation
What are some of the disadvantages of qualified plans?
Costs
Participation
Vesting
Top heaviness
Minimum contributions
Reporting
Disclosure
Testing (50/40 Defined benefit ratio Test, Average benefit % test, Section 401k ACP, Section 401k ADP
2024 limits (compensation limit = $345,000, define benefit limit = $275,000, defined contribution = Lessor of 100% EE compensation or $69,000)
Nondiscrimination
Fairness coverage
Highly compensated
Key employees
What are some of the objectives and questions to plan selection?
Cost and operation
Cash flow, funding and flexibility
Reporting
Self reliance
Investment risk
Nature of benefits - cash/stock
Maximum deferral
What are ways to increase profit sharing in retirement plans
Forfeitures
Integration
Age Weighting
