Unit 11- Retirement Plans Flashcards
Are contributions tax deductible for QUALIFIED OR NONQUALIFIED PLANS?
QUALIFIED
IRS must approve QUALIFIED/NONQUALIFIED PLANS?
QUALIFIED
QUALIFIED/NONQUALIFIED plans may discriminate
NONQUALIFIED
Tax on accumulation is deferred for QUALIFIED/NONQUALIFIED?
BOTH
All withdrawals are taxed for QUALIFIED/NONQUALIFIED?
QUALIFIED
All excess over cost base is taxes for QUALIFIED/ NONQUALIFIED
NONQUALIFIED
QUALIFIED/NONQUALIFIED plans are a trust?
QUALIFIED
Deferred Compensation Plans are QUALIFIED/NONQUALIFIED
NONQUALIFIED
Payroll Deduction Plans are QUALIFIED/NONQUALIFIED?
NONQUALIFIED
Are board members eligible for Deferred Compensation Plans?
No
What is the difference between Payroll Deduction and 401(k) Plan?
401(k) plans are qualified and are pre-tax dollars
IRA Contribution limit for under 50? 50 and over?
$5,500 and $6,500
What is FDIC Insurance Amount on retirement accounts?
$250,000
Can you hold margin accounts or options strategies in your IRA?
No
Are annuities allowable as investments in IRAs?
Yes
Are life insurance contracts allowable as investments in IRAs?
No
Are munis allowable as investments in IRAs?
No
At what age is there no penalty for distributions?
59 1/2
At what age MUST distributions begin?
The year after the customer turns 70 1//2
“RMD’
Required Minimum Distributions
“RBD”
Required Beginning Date
What is the penalty for distributions before 59 1/2?
10%
What is the penalty if you have not taken distribution by the April 1st after the individual turns 70 1/2?
50% insufficient distribution penalty
How many days must a rollover be completed in after withdrawal?
60 calendar days
Difference between a rollover and a transfer
the Rollover- the individual takes possession of the funds, whereas
the Transfer, the funds move from one custodian to another custodian
How many rollovers can occur in a year?
Only One
How many transfers can occur during a year?
unlimited
Roth IRAs
IRAs that allow after-tax contributions
Are contributions to ROTH IRAs deductible?
NO
Is there a required minimum distribution at age 70 1/2?
No
Re-characterization of a contribution
When a traditional IRA has been converted in to a ROTH IRA and the participant wishes to go back to the traditional IRA instead
Can you convert and reconvert and amount during the same tax year?
No
Coverdell IRA
Education IRA
Are Coverdell’s pretax or after tax?
after tax
What is the max annual contribution to a Coverdell IRA
2,000 per student per year for children under 18
Are Coverdell distributions taxed or tax free?
Tax Free
Are contributions to 529 Plans pretax or aftertax?
after-tax
Keogh Plans / HR-10 Plans
self-employed or owner-employees of unincorporated businesses
Are Keogh Plans/HR-10 Plans qualified or nonqualified?
qualified
Employees of self-employed are eligible for Keogh contributions if they meet 3 requirements
- works a least 1,000 hours in the year
- completed one or more years of continuous employment
- are at least 21 years of age
Can IRAs or Keoghs hold cash-value life insurance contracts?
Keoghs
What is the penalty for excess contributions to an IRA?
6%
What is the penalty for excess contributions to a Keogh?
10%
How are Keogh distributions taxed?
taxed as ordinary income
How are ROTH 401 (k)s different from ROTH IRAs (2 reasons)
1) no income limitations on who may have such a plan
2) account owner MUST begin withdrawals by 70 1/2
ERISA- Employee Retirement Income Security Act
PARTICIPATION: all employees over 21 who have performed more than one year of service must be provided option to participate
FUNDING: funds contributed to plan must be segregated from corporate assets
VESTING: entitled to their entire retirement benefit within a certain number of years even if leave the company
Communitication: Plan docs must be in writing, with annual statements of account
Nondiscrimination: impartially treat employees
Beneficiaries: must be names to receive an employee’s benefits at death
