Unit 3: EE Contributions

Question 1

What are the three types of employee deferrals that can be made into a retirement plan?

Answer 1

Pretax, Roth, catch up

Question 2

In order to defer on paid time off after termination, it must be compensation the employee would’ve received even if termination hadn’t occurred and what other requirement?

Answer 2

Provided It is made by the LATER of within 2 1/2 months of severance or by the end of the limitation year

Question 3

The 415 Limit For 2022 is $61,000 or what amount?

Answer 3

100% of participant compensation if under $61,000

Question 4

Excess deferral’s are always taxed in the year that they are made true or false

Answer 4

It’s true for most plants, not for Paychex.

Question 5

What happens if the return of excess deferrals takes place after April 15 of the following year?

Answer 5

The amount is double taxed. The excess is taxed in the year of contribution and taxed again when it is distributed

Question 6

What distribution code shows up on the W-2 for excess deferrals?

Answer 6

Code P

Question 7

What two types of funding mechanisms of after-tax contributions might a plan allow?

Answer 7

1 Personal payment made to the plan
2Payroll deductions

Question 8

What are the three limits the after-tax contributions are confronted by?

Answer 8

1The 415 limit.
2Non-discrimination test
3Plan imposed limits

Question 9

You pay taxes on after-tax contributions at distribution true or false?

Answer 9

False. You do not pay taxes on contributions just earnings.

Question 10

What three reasons would be considered benefits of a roll over?

Answer 10

1Preserve tax benefit
2Easier to manage investments
3Fees may be lower in retirement plan versus an IRA

Question 11

What are 4 important considerations when rolling funds into a 401k?

Answer 11

1Does the plan accept rollovers?
2eligibility requirements for roll over?
3Does plan accept rolled over loans?
4When can distributions be taken from the roll over?

Question 12

Name the four types of direct rollover’s

Answer 12

1Former plan issues check to new plan
2Wire transfer to new plan
3Participant receives check made out to the new plan and delivers it to the new plan
4 If rollover is non-cash assets, the title can be made out to the new plan

Question 13

What is a 60 day roll over?

Answer 13

Funds are distributed to Participant. Funds must be rolled over into new account and 60 days..

Question 14

What percentage of taxes are withheld from 60 day rollovers? And how are employees supposed to roll the funds over?

Answer 14

20% taxes.
Employee must come up with the amount to deposit into the rollover. They will receive a reimbursement for the 20% tax when they file their taxes

Question 15

Can RMD’s hardship distributions in excess distributions be rolled over into an IRA?

Answer 15

No they cannot

Question 16

Distribution of equal payments, opt out distributions, distributions to pay for health and life insurance are always allowed to be rolled over into an IRA, true or false?

Answer 16

False. These items and six others are never allowed to be rolled over

Question 17

RMD’s, hardship withdrawal’s, excess distributions, distributions of equal payments, opt out distributions and distributions for health and life insurance are not allowed to be rolled over. What other three items are not allowed to be rolled over into IRAs or 401(k)s?

Answer 17

1. Dividends in employer securities
2. S Corp. allocations treated as deemed distributions.
   3.Qualified birth and adoption distributions