unit 24/5

Question 1

catch up provision age

Answer 1

50 or older

Question 2

IRA contribution limit

Answer 2

100% of earned income up to allowable amount plus catch up if applicable

Question 3

spousal IRA

Answer 3

same contribution limits apply for a spouse with little income. other spouse with higher income can contribute to both

Question 4

what determines if IRA contributions are deductable

Answer 4

everyone with earned income unless covered by employer sponsored plan or have income limit

Question 5

contribution deadline

Answer 5

april 15th of the following year

Question 6

excess contribution penalty
premautre
insufficent distribution

Answer 6

6% penalty
10%
50%

Question 7

nonallowable investments ira

Answer 7

tangibles (us gold and silver eagles allowed)
life insurance
(inappropriate) municipal bonds

Question 8

exception for first time home purchase

Answer 8

max is 10000

Question 9

roth contributions and dedutability

Answer 9

never

Question 10

roth earnings limitations

Answer 10

yes

Question 11

keogh

Answer 11

employered sponsored to self employed

Question 12

403b

Answer 12

employees of public schools or non profits(charitible& hospitals)

funded through pretax salary reduction

employer may make contributions

Question 13

defined benefit(pension) who bears risk

Answer 13

employer

Question 14

who bears risk defined contribution

Answer 14

employee bears risk

Question 15

money purchase pension plan

plan type and explanation

Answer 15

type of defined contribution
annual employer contribution fixed
employee bears risk

Question 16

profit-sharing plans

Answer 16

employer contribution can be scaled to performance of company

type of defined contribution

Question 17

401k

Answer 17

defined contribution plan
employee-funded through pretax

top heavy testing rules for key employees

Question 18

457

Answer 18

for state city and local
certain non profits but not churches
pre tax
no rollover
no penalty for distributions
can make max contribution to this and 403b or 401k

Question 19

qualified plans

Answer 19

contributions tax deductable
approved by irs
cannot discriminate
tax deffered
withdrawals taxed
plan operates as trust

Question 20

non qualified plans features

Answer 20

contributions not tax deductable
irs approval not required
can discriminate
may be tax defferred 
excess of cost basis taxed
trust not required

Question 21

examples non qualified plans

Answer 21

annuities
payroll deduction
defferred compensation(retain key employees)
SERPS(for executives)

Question 22

loans 401k plans

Answer 22

nontaxable
50k max or vested amount. has to paid back in 60 months

there are home mortgage exceptions

Question 23

RMD

Answer 23

70 1/2 following april first

unless still employed

Question 24

ERISA eligibility

Answer 24

1 year service
21
1000 hours a year

There is an alternative to the 1,000 hours worked per year. An employee working 500 or more hours per year for three years is now eligible.

Question 25

ERISA funding rules

Answer 25

employers required to fund plans

Question 26

ERISA reporting

Answer 26

employers must file reports with irs and department of labor and 1099 reports to employees

Question 27

ERISA beneficiarys

Answer 27

participants can name benes

Question 28

ERISA investment policy statement section 404A includes what

Answer 28

recomended(not required) plan detailing acceptable investments and investment strategies

invest objectives
invest selection(not specific securitys)
monitoring procedures and performance
determination to meet future cash flow needs

not the same as dol summary plan description

Question 29

safe harbor provisions section 404C

Answer 29

3 investment alternatives
employees choose own investments and can change investments at least quarterly
information abour risk and return and pospectus and financial statements

they will avoid fiduciary liability for plan performance if they meet these

Question 30

corvedall

Answer 30

after-tax
2000 limit
contributions made by anyone
made until 18th birthday
must be distributed by 30 otherwise tax +10% penalty
contributors may fall within certain limits

tax free for withdraws for education expenses

Question 31

529

Answer 31

after tax
donor retains control
not tax deductable
no age limit
no age limt for withdrawl
tax free for educational expenses
no earnings limitations
some states offer perks if residents use home state plan

Question 32

prepaid tuition plan

Answer 32

buy tuition in advance

no investment risk because its already paid for

Question 33

UGMA and UTMA

Who responsible for taxes

Answer 33

one child
1 custodian(adult)
irrevocable
no limit on gift size

minor responsible for taxes

Question 34

UGMA and UTMA difference

Answer 34

UGMA - assets go to bene on age of majority
UTMA- can designate age but max 25
UTMA can have real estate(broader investment choices)

Question 35

how can ugma and utma funds not be used

Answer 35

funds are only withdrawn for benefit of minor but not basic necessities

Question 36

what taxes are still paid with 401k

Answer 36

social security and medicare still paid

Question 37

when can utma or ugma custodian receive fee

Answer 37

when it is not a custodian who is family. Has to be outside managing company to receive fee

Question 38

The rule is that you can only defer RMDs

Answer 38

in the plan of the employer where you are currently employed.

Question 39

plan fiduciary under erisa obligations

Answer 39

Under ERISA, plan fiduciaries must act solely in the interests of plan participants and beneficiaries, and they may not place the interests of other interested parties above those of the plan participants and beneficiaries. They must diversify plan investments to minimize the risk of large losses, unless it would not be wise to do so. If they violate any of their fiduciary duties, they may be personally liable for large fines.

Question 40

kiddie tax

Answer 40

Because the income on the UTMAs is not considered to be earned income, the kiddie tax rules apply. Currently (2020 and beyond, but indexed), children younger than 19 having such income in excess of $2,200 are subject to tax at the parent’s marginal tax rate.

Question 41

types of businesses taxation

Answer 41

sole april 15
single member llc april 15
multi member llc march 15
c orp march 15