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CFP Additional Need To Know > WAB Retirement > Flashcards

WAB Retirement Flashcards

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1
Q

Social Security Eligibility

A
  • retired insured worker age 62+
  • worker entitled to disability benefits if he/she is under age 65 and has been disabled for 12 mo/is expected to be disabled at least 12mo (5mo waiting period)
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2
Q

Social Security Spousal Eligibility

A
  • spouse of a retired or disabled worker if they are 62+ or have a child under age 16 or disabled child
  • divorced spouse who is 62+ and was married to them for at least 10 yrs and not remarried
  • surviving spouse or divorced spouse who is 60+
    -surviving spouse at any age taking care of child under 16y/o
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3
Q

SS Taxation of Benefits

A

If income plus 1/2 of SS benefits are greater than $25k single/$32k MFJ then 50% of benefits are included in taxable income

If income plus 1/2 of SS benefits are greater than $34k single/$44k MFJ then 85% of benefits are included in taxable income

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4
Q

When calculating MAGI for SS benefits, make sure to add

A

Muni bond interest

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5
Q

Retirement salary caps & max contributions

A

DB/DC Salary Cap - $330k
Simple IRA Salary Cap - $516,667

DC Max Contribution - $66k (50+ $73,500)
DB Max Contribution - stuff like a pig

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6
Q

Factors that affect employer DB Contributions

A
  • older participants (higher contr)
  • investment return assumptions (higher assumptions=lower contr, lower assumptions=higher contr)
  • forfeitures must be applied to reduce employer contributions (lower contr)
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7
Q

Max deductible employer profit sharing contribution

A

25% of eligible participant comp.

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8
Q

“Annual Additions” includes

A

Deferral and employer contributions AND FORFEITURES (total max of $66k)

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9
Q

Keogh and SEP calculation percentages

A

15% plan multiply business profit by 12.12%

25% plan multiply business profit by 18.59%

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10
Q

Who is subject to ownership attribution rules for key employees and HCEs

A

Children, spouses, grandchildren and parents but NOT SIBLINGS

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11
Q

ACP/ADP testing percentage

A

0-2%, you multiply by 2
2-8%, you add 2

To get percentage that a HCE can defer for non discrimination testing

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12
Q

Age weighted DC planning (cross tested and new comparability plan)

A

Discriminating to give higher benefit to owner/older employee

Employee % is lower of 1/3 of % of HCE or 5%

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13
Q

457 Plans are

A

Non qualified DC programs that are subject to creditors and are not aggregated with other plan contributions

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14
Q

SS INTEGRATION

A

discrimination based on wages

HCE gets additional 5.7% on top of regular employee percentage for amount of salary above NHCE salary used for their deferral (26.5% for DB plans)

** not available for ESOPs, Stock bonus plans or 401k w no match or company contribution

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15
Q

DC AND DB Life Insurance allowable amounts (412e3 or 412i)

A

DC - whole life 50%, Universal 25%, Term Life 25%

DB - 100 times expected monthly benefit for death benefit

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16
Q

If an ISO is sold in the same year it’s exercised, the bargain element is

A

Taxable comp AND SUBJECT TO FICA AND FUTA (If still within 12mo period but different calendar years, OI but no fica or FUTA)

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17
Q

Does a corporation get a tax deduction for granting an ISO?

A

No tax deduction for granting not when exercised/sold UNLESS IT BECOMES AN NSO

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18
Q

2 Reductions of SS benefits

A

1) before FRA - (# of months before FRA/180 x PIA) = reduction amount

2) working after retirement before FRA - (deduct $1 for every $2 EARNED above $21,240) or if turning FRA this year (deduct $1 for every $3 he earns above $56,520)

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19
Q

SEP IRA is an advantage for employers with numerous _________ employees but a disadvantage for employers with numerous___________employees

A

1) short term
2) long term and part time

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20
Q

What can’t be invested within a 403b

A

Closed end funds, UITs, individual securities are NOT ALLOWED

(Annuities, life insurance and MFs are)

21
Q

What entities cannot sponsor a 403b

A

A state or local govt

(Yes but only if with regard to employees who perform service for an educational org)

22
Q

Benefits that can be offered to full time employees that may exclude the part time employees

A

Profit sharing and SIMPLE 401ks have 500/1000 per year service eligibility requirements

Group health insurance participation normally required 30 hours per week

23
Q

Which plan can hold second to die insurance

A

Only profit sharing NOT pension plans

24
Q

Which plan can offer disability insurance

A

All qualified plans can hold disability insurance

25
Q

Who is eligible for lump sum death benefit under SS?

A

A dependent child or spouse living in the same household

26
Q

Pension max

A

Electing a single life annuity and using part of the higher monthly benefit to purchase life insurance on employees life

27
Q

A solo 401k will allow which contributions

A
  • elective deferrals
  • employer contributions
  • catch ups

BUT NOT FORFEITURES

28
Q

What plans can make plan loans

A

All qualified plans (profit sharing, 401k, target benefit, money purchase, etc.) PLUS 403b

29
Q

Do Roth 401ks have RMDs?

A

Yes!!

30
Q

In a rabbi trust, the participant has the same rights as

A

An unsecured creditor

31
Q

SS integration formula

A

Base percentage (given) + permitted disparity (26.25 for DB or 5.7 for DC) = excess percentage

32
Q

Minimum benefits for non-key employees in a top heavy plans

A

2% of comp multiplied by number of yrs in service for DB plans

3% of comp for DC plans

33
Q

Qualified plan coverage (ratio and benefit tests)

A

Ratio test - must cover at least 70% NHCE of the percentage of HCE covered

Benefits test - avg benefits for all NHCEs must be at least 70% of those for HCE

34
Q

Minimum participation for DB plans only

A

Lesser of:
- 50 employees
- the greater of 40% of employees or 2 employees

35
Q

HCE versus Key Employees

A

HCE (discrimination/ACP/ADP testing) - 5% owner OR earning $150k+

Key Employee (vesting) - 5% owner, officer and comp over $215k, OR 1% owner and como over $150k

36
Q

Top Heavy Plans

A

(Vesting)
A plan is too heavy if more than 60% of accrued benefits or acct balances are allocation to key employees

(*remember the max salary you can use is $330k)

37
Q

Fast and Slow Vesting Schedules

A
38
Q

What is the most stringent service requirement vs the most stringent vesting requirement

A

Service - 2yr/100% schedule
Vesting - longest graded schedule

39
Q

83b stock option election (NSO ONLY)

A
  • elected when the stock is expected to appreciate over time
  • employee pays the tax at the time of award(grant) (FMV-EE cost = OI comp)
  • appreciation after this is taxed when sold at cap gains rate
40
Q

Stock Appreciation Rights (SARs) vs Phantom Stock

A

SARs - rights paid in money equal to different between shares on grant date vs exercise date

Phantom stock - right to cash based on stock performance over SPECIFIED time period (no options but have dividend rights)

41
Q

Employee Stock Purchase Plan (ESPP)

A

Section 423
- employer discounts price of stock up to 15%
- taxes paid at time of sale of stock
- must be available to all employees*

42
Q

When more than _______ of ISOs are_______ In the same calendar year, only first __________ will be treated as ISOs

A

1) $100k
2) VESTED
3) $100k

(If there’s a problem like this look for an answer with income tax liability AND AMT add back element)

43
Q

401k/403b interest on loans for primary residence is only deductible if

A

The loan is secured by the residence for which the loan is made and the participant is not a key employee

44
Q

FICA and FUTA does not apply to which plans contributions

A

SEP (employeR contributions only)

45
Q

QDROs apply to

A

Qualified plans, 403bs, and governmental 457s (NOT IRAS)

*distributions are subject to 20% withholding but not 10% penalty

46
Q

Rolling an entire ESOP (company stock and other investments) into an IRA________ but __________

A

Reduces phantom income BUT the company stock loses NUA tax treatment

47
Q

Suing ERISA plan officials

A

You can sue for plan losses but ERISA prohibits monetary punitive damages for claims

48
Q

To receive SS Disability benefits the worker must

A
  • be under FRA (after only Ret benefits)
  • be disabled for 12mo, expect to be disabled for 12mo, or result in death
  • satisfy a 5mo waiting period
  • filed an app for disability benefits and is insured for disability benefits

CFP Additional Need To Know (7 decks)

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