Unit 18

Question 1

Qualified plan

Answer 1

An employer-sponsored plan, such as a pension, 401(k), or 403(b), where the contributions are made with pre-tax dollars and earnings in the account grow without any tax (tax-deferred) until the funds are withdrawn.

Question 2

Nonqualified plan

Answer 2

An employer-sponsored plan, such as a deferred compensation plan, where there are no tax advantages other than that the payout is not received until sometime later when the individual should be in a lower tax bracket. Another advantage is that the employer can discriminate between employees.

Question 3

What date was alimony (divorce money) decreed not compensation toward IRAs

Answer 3

December 31, 2018

Question 4

What is Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) responsible for

Answer 4

Catch-up provisions

Question 5

Can you make an IRA contribution over the limit in one year if you received an extension on taxes

Answer 5

No

Question 6

How much tax are annual IRA contributions exceeding the maximum allowed are subject to

Answer 6

6%

Question 7

Items deducted from Adjusted Gross Income (AGI) (4)

Answer 7

1. Traditional IRA contribution
2. Alimony paid as part of a pre-January 1, 2019, divorce decree;
3. Self-employment tax
4. Penalties paid on early withdrawal from a savings account

Question 8

What is not included in AGI

Answer 8

Tax-exempt income from municipal securities

Question 9

Ineligible IRA investments (5)

Answer 9

Collectibles, life insurance contracts, Tax-free municipal bonds, municipal bond funds, and municipal bond UITs

Question 10

Who is not included in the prohibited persons category

Answer 10

Sibling

Question 11

Who uses SEP IRAs

Answer 11

Small businesses

Question 12

When withdrawals are not subject to 10% tax before 59 1/2

Answer 12

1. Death
2. Disability
3. First-time purchase of a primary residence ($10,000 lifetime maximum)
4. Qualified higher education expenses for immediate family members (including grandchildren, but not nieces or nephews);
5. Certain medical expenses
6. Up to $5,000 during the first year after a child is born; or
   up to $5,000 during the first year after an eligible person is adopted

Question 13

How much penalty is incurred if someone doesn’t meet minimum Internal Revenue Code (IRC) distribution requirements?

Answer 13

50% on amounts falling short of the requirement

Question 14

Does the age 73 requirement apply to a Roth

Answer 14

No

Question 15

When you can postpone distributions to using a qualified plan

Answer 15

April 1 of the calendar year following your retirement

Question 16

Should you assume questions are about traditional IRAs unless stated otherwise

Answer 16

Yes

Question 17

If someone takes possession of funds from a company plan and puts it into an IRA, when must they complete rollover

Answer 17

Within 60 calendar days of withdrawing

Question 18

Benefit of Trustee to Trustee Transfers when rolling over to an IRA

Answer 18

No 20% withholding

Question 19

Difference between rollover and transfer

Answer 19

Rollover just moves money from a 401k to an IRA within the same company vs transferring an IRA here to an IRA there

Question 20

Two options for spousal beneficiary whose partner died

Answer 20

1. Rollover amount of the inheritance into the spouse’s own IRA
2. Continue to own the IRA as the beneficiary

Question 21

Two options for nonspousal beneficiary

Answer 21

1. Take cash now (subject to tax at the end of the period)
2. Cash out the IRA by the tenth year after the account owner’s death

Question 22

3 things employee must fall into to be eligible for a Keogh plan

Answer 22

Full time, tenured (one year or more), adult

Question 23

What Keogh Plans are designed for

Answer 23

Self-employed individuals

Question 24

What one must have in a Roth 401k plan

Answer 24

Two accounts, since the employer match is taxed

Question 25

What funds are in use when contribution limit has to be aggregated

Answer 25

401(k) and 403(b)