retirement plans
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Which of the following statements are TRUE regarding tax-deferred, noncontributory, defined benefit plans? Contribution amounts are fixed. Contribution amounts vary. Benefit payments are fixed. Benefit payments vary.
In an employer-sponsored defined benefit plan, the contribution amounts vary according to the assumptions used. The benefit amount, however, will be fixed per person based on a formula combining age, years of service, salary, etc.
All of the following must meet the nondiscrimination provisions of the Employee Retirement Income Security Act (ERISA) EXCEPT:
Deferred compensation plans are nonqualified and therefore do not have to meet the nondiscrimination provisions of ERISA.
Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding EXCEPT:
Deferred compensation plans are not qualified plans and may be discriminatory. Keogh, profit-sharing, and corporate pension plans must meet set standards for vesting, eligibility, and funding under ERISA.
How often will the IRS allow a Health Savings Account (HSA) to be funded via an IRA distribution without paying federal taxes or penalties on the distribution?
Health Savings Accounts (HSAs) are qualified employer sponsored plans. The IRS allows a one-time funding distribution from an IRA to a qualified HSA without paying federal taxes or penalties on the IRA distribution.
Which of the following plans requires an actuary's services?
In a defined benefit plan the payout is established, and employers must contribute annually to assure payment of the benefit amount. An actuary must calculate the annual contribution amount necessary to meet the benefit requirement.
All of the following regarding savings incentive match plans for employees (SIMPLEs) are true EXCEPT
SIMPLEs are retirement plans for businesses with fewer than 100 employees that have no other retirement plan in place. The employee makes pretax contributions into a SIMPLE up to an annual contribution limit which can include catch-up contributions for those age 50 and older. The employer is permitted to make matching contributions for employees.
Which of the following are qualified plans? Payroll deduction. Deferred compensation. Defined benefit. Keogh.
Defined benefit and Keogh plans are funded with pretax contributions and are thus qualified plans. Payroll deduction and deferred compensation plans are funded with after-tax contributions and are thus nonqualified plans.
When does pension payment liability affect the credit rating of a municipality?
The credit rating for a municipality's debt would be adversely affected if funds needed to make payments exceeded funds available. This is an unfunded pension liability and can result if monies set aside to make future payments are not enough or if poor investment decisions deplete the funds.
An unfunded pension liability is generally associated with which type of corporate retirement plan?
An unfunded liability is one that has been incurred but does not have to be paid until a future date, and for which sufficient money to meet the obligation has not been set aside. Defined benefit plans guarantee a specific payout in the future and require an actuary to determine the monies that must be set aside today to meet this future obligation. If sufficient monies are not set aside or if poor investment performance wipes out a portion of these funds, an unfunded liability results.
All of the following statements regarding nonqualified deferred compensation plans are true EXCEPT:
Needing no IRS approval, nonqualified deferred compensation plans may be discriminatory and offered only to certain employees such as key executives. An agreement between a company and an employee in which the employee agrees to defer some income until retirement, the benefits payable at retirement would be taxable at that time. Board members are not considered to be employees and therefore not eligible for these plans.
