Chapter 3 Retirement

Qualified; nonqualified " The federal government distinguishes qualified plans as those offering special tax benefits. Nonqualified plans are those which do not offer special federal tax benefits."

1. What are the two terms used to describe whether or not special federal tax benefits apply to retirement plans?

A 10% penalty tax is assessed. " If distributions from a qualified plan are made prior to the age of 59 1/2, then a 10% penalty tax is imposed."

10. What happens if Becky takes her distributions from her qualified plan prior to age 59 1/2?

Permits discrimination in favor of certain employees.

12. A nonqualified plan:?

Qualified; nonqualified

15. What are the two terms used to describe whether or not special federal tax benefits apply to retirement plans?

A 10% penalty tax is assessed.

16. What happens if Becky takes her distributions from her qualified plan prior to age 59 1/2?

10% penalty tax

17. Mildred is age 58. She withdraws a sum of money from her qualified plan. What is the penalty?

At any time.

18. If Becky wants to take a distribution from her qualified retirement plan, she should know that distributions can be made:?

Permits discrimination in favor of certain employees. " Nonqualified plans are characterized by the following: do not need to be approved by the IRS, can discriminate in favor of certain employees, contributions are not tax-deductible, and interest earned on contributions is tax-deferred until withdrawn upon retirement."

4. A nonqualified plan:?

Contributions are not tax-deductible for the employee. "Employee contributions to a qualified plan are made with pre-tax dollars."

6. All of the following are characteristics of qualified retirement plans, EXCEPT:?

Distributions are tax-deferred.

9. Special tax advantages of qualified plans include all of the following, EXCEPT:?

Employee contributions are not tax-deductible.

11. Which of the following is not a characteristic of qualified plans?

Distributions are tax-deferred.

13. Special tax advantages of qualified plans include all of the following, EXCEPT:?

Contributions are not tax-deductible for the employee.

14. All of the following are characteristics of qualified retirement plans, EXCEPT:?

59 1/2 " A 10% penalty tax is applied to distributions made from a qualified plan prior to the plan participant reaching the age of 59 1/2."

7. Maggie incurred a10% penalty to distributions from her qualified plan because they were made before she turned:?

10% penalty tax

8. Mildred is age 58. She withdraws a sum of money from her qualified plan. What is the penalty?

There are two types of qualified plans. "There are two types of retirement plans: Qualified and Nonqualified - not two types of qualified plans."

2. All of the following are characteristics of qualified retirement plans, EXCEPT:?

Employee contributions are not tax-deductible. " Employee contributions to a qualified plan are made with pre-tax dollars."

3. Which of the following is not a characteristic of qualified plans?

At any time.

5. If Becky wants to take a distribution from her qualified retirement plan, she should know that distributions can be made:?