NWM Chapter 10 review

Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions?

Conduit IRA

First-time homebuyers are able to withdraw up to how much from their qualified IRAs without incurring the 10% early withdrawal penalty?

$10,000

An individual working part-time has a gross income of $5,000 for the year. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

$5,000

Premature IRA distributions are subject to a penalty tax of

10%

Which of these statements about traditional individual retirement accounts is accurate?

10% penalty is applied to withdrawals prior to age 59 1/2

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?

100

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

20% is withheld for income taxes

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?

50%

The time limit an individual has to "rollover" funds from an IRA or qualified plan is

60 days

According to ERISA regulations, a Summary Plan Description must be provided to a new plan member within ___ days of the member's eligibility date.

90

ERISA requires that a Summary Plan Description must be provided to a new plan member within how many days following the new member's eligibility date?

90

Tim is retired and has recently separated from his wife. He receives benefits from a qualified retirement plan through his former employer. The plan's trustee has decided to split these benefit payments between Tim and his estranged wife. This decision is likely in violation of which IRS rule?

Alienation of benefits

Which of the following situations would allow funds to be deposited into a rollover IRA?

An employee quits her job and receives $50,000 from her qualified plan

A description of a qualified plan's insurance contract may be found in which ERISA reporting form?

Annual return/report (Form 5500)

Traditional individual retirement annuity (IRA) distributions must start by

April 1st of the year following the year the participant attains age 70 1/2

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately had the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distribution is subject to federal income tax withholding

What is another name for a Keogh plan?

HR 10 plan

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 for income tax withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000

When funds are transferred directly from one IRA to another IRA, what percentage of the tax is withheld?

None

According to the IRS, a company may NOT do which of the following in regards to funds in a qualified retirement plan?

Repossess the funds for business purposes

What does a 401(k) plan generally provide its participants?

Salary-deferral option

Which of these is a true statement regarding survivor benefits under a qualified retirement plan?

Survivor benefits can only be waived with the written consent of a married employee's spouse

In a qualified retirement plan, the yearly contributions to an employee's account

are restricted to maximum limits set by the IRS

The IRS has a "minimum coverage" rule regarding qualified retirement plans. This rule states that each qualified plan is required to

benefit a broad cross-section of employees

An employee welfare plan exempt from ERISA regulations would be

church plans

A qualified profit-sharing plan is designed to

distribute a portion of company earnings to its employees

XYZ Corp has implemented a qualified retirement plan. This plan may NOT discriminate

in favor of highly compensated employees

An employer that offers a qualified retirement plan (as opposed to a non-qualified plan) to its employees is eligible to

make tax-deductible contributions to the plan

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

mandatory income tax withholding on the amount transferred

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a

profit-sharing plan

A Keogh plan is a(n)

qualified retirement plan for the self employed

In an individual retirement account (IRA), rollover contributions are

unlimited by dollar amount

An officer for a corporation takes out numerous unsecured loans from the company's qualified retirement plan. Which of these rules is the plan in violation of?

Exclusive benefit rule

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?

If Tom's employment is terminated, 20% of the funds could be forfeited

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?

Income tax and penalty tax

Which of the following is TRUE about a qualified retirement plan that is "top heavy"?

More than 60% of plan assets are in key employee accounts

How are qualified Roth IRA distributions normally treated for tax purposes?

Received income tax-free

Which of the following statements is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?

The account can be rolled into the surviving spouse's IRA

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?

The participating employee

A life insurance producer's underwriting duties may include

seeking additional information requested by the insurance company

Contributions made by an employee to a qualified retirement plan are required to be

subject to a vesting schedule

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The transfer of Rick's IRA account balance to his surviving spouse qualifies for

the marital deduction