Wrong answer Retirements

Question 1

Solo 401k contributions

Answer 1

-elective referrals
-employer contributions
-catch up contributions allowed

No plan forfeitures

Question 2

SEP Contributions

Answer 2

-Employer only
-Annual SEP contributions are limited to 25% if compensation or 69k. (345k max)
-For self employed wonders the contributions is calculated like Keogh plans

Question 3

QJSA (Qualified Joint and Survivor Annuity) for Retirement Plans

Answer 3

Required for all qualified pension plans

Question 4

QDROs

Answer 4

Applies only to qualified plans

Question 5

Rabbi Trust Rights

Answer 5

Participant and unsecured creditor have equal rights

Question 6

Ways to avoid phantom income on ESOP distributions…

Answer 6

-Take 72t distribution over full distribution.

-roll the whole account into an IRA

In both situations phantom
Income is avoided but NUA is lost and it becomes taxed at ordinary income level.

Question 7

Ratio Percentage Tesr

Answer 7

The plan must cover a percentage of NHCE employees that is at least 70% of the HCE covered.

Question 8

Average Benefits Test

Answer 8

The average benefits for all non highly compensated employees must be at least 70% of that for HCE.

Question 9

What happens if a plan violates top heavy rules?

Answer 9

The plan will continue to be qualified but subject to top heavy rules not terminated.

Question 10

412i Plan

Answer 10

Defined benefit plan funded entirely with insurance products such as life insurance and annuities. This plan is exempt from the minimum funding standard. Appeals to employers with a need for life insurance.

Question 11

Roth Conversions and RMDs

Answer 11

Cannot convert an IRA to a Roth without taking an RMD first if 73 or older. Once the RMD is withdrawn the remaining balance can be converted.

Question 12

ISO 100K rule

Answer 12

The first 100k worth of ISOs granted to any employer that vest in one calendar year is entitled to favorable ISO treatment. Anything excess of 100k is treated as an NSO

Question 13

ISO vs NSO

Answer 13

The primary difference is taxation at the date of exercise. ISOs are not subject to regular tax when exercised but NSOs are.

Question 14

When are ISOs subject to FICA and FUTA tax?

Answer 14

If ISOs are sold in the same calender year as the ISOs were exercised, the bargain element is taxable compensation subject to FICA and DUTA. It they are sold within 12 months but the following year, then the bargain element is ordinary income but not subject to FICA or FUTA

Question 15

Capital Loss on ISO

Answer 15

Cannot be claimed if an ISO declines in value from excercise to sale date.

Question 16

Social Security Reduction

Answer 16

66 (6.67% reduced)
65 (13% reduced)
64 (20% reduced)
63 (25% reduced)
62 (30% reduced)

Question 17

Non Qualified Plan Earnings

Answer 17

Earnings from non qualified plans may be taxable to the employer

Question 18

Controlled Group Rules

Answer 18

When an employee works for two or more related (control) groups, contribution limits are aggregated.

Question 19

Simple 401k Keys

Answer 19

Not subject to ADP and ACP testing. No top heavy testing is required. Loans are permitted. Participants are fully vested at all times.

Question 20

What RMD Balance to use at age 74

Answer 20

Balance at beginning of year in which RMD taker turns 73.

Question 21

Unfunded Plans

Answer 21

The plan may operate as an unsecured promise by the employer. Non qualified deferred compensation programs may be funded with any investment. However the earnings would be taxable to the employer.

Question 22

83B election

Answer 22

The employee elects to recognize the tax at the time of the award instead of at the time of exercise. The excess of the fair market value of the stock awarded is taxed at ordinary income compensation rates: any appreciation after will not be taxed until the employee sells the stock

Question 23

IRAs may not hold

Answer 23

Life insurance or collectibles. Gold and silver are okay, as well as options

Question 24

Cash Balance Pension Plan

Answer 24

Works somewhat like a money purchase plan but the money purchase plans do not require employer guarantees of minimum rates of return like a cash balance.

Question 25

Diversification Requirements for 401ks

Answer 25

Qualified plans must diversify among asset classes and within a single asset class.

Question 26

Catch up provisions offered by section 457 plans

Answer 26

-special “catch up” up during final 3 years of participation before NRA
-age 50 catch up for governmental employees only

Question 27

Cross Testing Keys

Answer 27

-results in a higher contribution rate for older employees
-maximizes benefits to highly compensated employees
-NHCEs must receive the lead set of 1/3 of the allocation rate of the HCE with the highest rate or 5%.

Question 28

Substantially equal placements

Answer 28

Must take substantial equal payments for the longer of 5 years of until you reach age 59 1/2

Question 29

Alternate Payee in a QDRO

Answer 29

Typically an ex spouse but technically can be a child, a spouse or another dependent recognized by court order.

Question 30

Secular trust keys

Answer 30

-it’s an irrevocable trust
-the funds are beyond the reach of the employers creditors
-taxation occurs in the year in which the assets are placed in the trust and a substantial risk of forfeiture no longer applies
-funded arrangement

Question 31

Qualified loans

Answer 31

Must be available to all participants on a reasonable equivalent basis and must not be available to highly compensated employees.

Question 32

Hardship Withdrawals

Answer 32

Only allowed in a 401k. The two hardship tests are:

Financial needs test, due to immediate and heavy financial need.
Resources test, the amount of the withdrawal cannot exceed amount needed to satisfy need and participant has no other sources to satisfy

Question 33

Spousal PIA Amount

Answer 33

50% or more of the other spouses PIA unless theirs is greater.