RMI330 Quiz 31-34

a tax deferred annuity is not subject to Section 415 limits

FALSE

an employer must make SEP contributions every year, regardless of company performance

FALSE

a SEP may not maintain Roth IRAs

TRUE

to qualify for the credit for qualified retirement savings contribution, the taxpayer must

be at least 18 years old

Jack mattingly, owner and employee of the Crab Shack, a local seafood restaurant, has a SEP for his business. currently, he employs Star, his head cook who has been with him for 4 years; dot and skip, his head waitress and waiter, who have been with him for 5 years; and andy. another waiter who has been there 3 years. he has five part-time employees who started between 1 and 2 years ago. his 16-year-old son busses tables on the weekends, but he never makes more than $400. all of his other employees, except one part-timer, are over age 21. how many employees must jack cover under the SEP?

5

an employer cannot use a salary reduction SEP unless ______ percent or more of the employees eligible to participate elect to make SEP contributions

50

bill brown, age 51, is planning to retire in 5 years and withdraw funds from his tax deferred annuity. bill can make this withdrawal, but he must pay a 10% penalty for early withdrawal

FALSE

in-service withdrawals are not permitted in a tax deferred annuity

FALSE

plan loans are allowed in a SEP

FALSE

currently, a SEP provides for employer contributions only

TRUE

in a tax deferred annuity plan, salary reductions, but not employer contributions, are generally subject to FICA and FUTA payroll taxes

TRUE

tax deferred annuity plans allow employer contributions in addition to, or instead of, employee salary reductions

TRUE

tax-deferred contribution levels for SEPs are generally significantly higher than the maximum contribution limit for traditional IRAs

TRUE

the maximum amount that can be withdrawn from an elective deferral account for hardship is the principal amount only

TRUE

which of the following statements about a tax deferred annuity plan is (are) true? a. an employer can contribute to an employees account b. tax deferred annuity plans are relatively inexpensive and simple to administer c. employers bear the investment risk under the plan d. a and b e. b and c

a

August Winter has a Tax Deferred Annuity (TDA) at her place of employment. Currently, she has almost 80% very conservatively invested. She wants to reallocate her plan assets so that only 10% is very conservatively invested and the remainder is invested in moderate to high risk investments. To make sure the fund transfer is not a taxable event:

august can direct the mutual fund company that holds her original investment to transfer assets directly to the new mutual funds that she designates. OR august can structure the transaction as a direct rollover from the old plan to the new plan.

all of the following organizations can adopt a TDA plan, except a. an organization operated exclusively for religious purposes b. a political organization that is formed to influence legislation c. an organization that promotes prevention of cruelty to animals d. a charitable organization e. an organization that fosters a national amateur sport competition.

b

which of the following cannot offer a tax deferred annuity? a. the first baptist church b. healthsmart drug store, inc. c. st. luke's hospital d. sentential college, a private institution e. state university

b

each of the following is true regarding a SEP, except a. direct employer contributions to a SEP are not subject to Social Security (FICA) or federal unemployment (FUTA) taxes b. in a SEP, employer contributions are made directly to an employee's IRA c. SEP contributions must be "recurring and substantial" to maintain tax-favored status d. employer contributions to a SEP reduce the amount the employer can deduct for qualified plan contributions for an employer who maintains a SEP and a qualified plan e. distributions from the plan follow the IRA distribution rules

c

Gym-fantastic, a local gymnastics studio has a SEP for its 5 full-time employees. this year, as in the previous 5 years, the business has made a substantial profit. Gym-Fantastic

can omit any year's contribution to the SEP without concern of disqualification of plan or loss of tax advantages

it is late march, and the owner of the loud 'n' crazy music store is reviewing the business's tax return and realizing that it would have been advantageous if the store could have implemented a SEP the previous year. the owner:

can set up a plan for the previous calendar year as late as the date that taxes are due. including extensions.

to install a SEP, an employer must

complete the appropriate tax form and file the appropriate tax form prior to tax filing date for year the SEP is to take effect

maria valquez is a public school teacher. her employer provides a tax deferred annuity (TDA). she began working for this employer 4 years ago and started her TDA at that time. over those 4 years, she has contributed $1,000, $2,500, $3,000, $3,000 to her TDA through salary reduction. her employer matches $1 for $1 up to $100 and offers graded vesting at the rate required by law for TDA accounts. currently, maria's vested interest in the plan is

d

which of the following is true regarding a SEP? a. a SEP does not provide as much flexibility in the timing of contributions as a qualified profit sharing plan b. SEP participants do not risk bad investment results c. an employer may deduct contributions to a SEP, up to 20% of the total payroll of all employees covered under the plan d. contributions need not be made on behalf of employees whose compensation for the calendar year was less than $600 (indexed 2015) e. all of the above are true

d

a tax deferred annuity plan can invest in all of the following, except a. level premium annuities b. a growth mutual fund c. variable annuities d. a bond mutual fund e. shares of stock

e

advantages of a SEP include: a. portable benefits for employees b. contribution, deduction, and exclusion amounts equal those available in other defined contribution plans c. flexibility for employer in timing plan contributions d. a and b e. a and c

e

anchor hardware store has a SEP and a qualified profit sharing plan. when anchor hardware makes a contribution to the SEP, contributions to the qualified profit share plan are not affected.

false

avent charities is a section 501(c)(3) organization that has three highly paid administrators and a small clerical staff. the administrators have asked you to help them evaluate the merits or installing a tax deferred annuity plan (section 403(b)) instead of a Section 401(k) plan. you tell them.

top-heavy rules generally do not apply to a tax deferred annuity plan the entire plan will not be disqualified if the salary reduction limit is exceeded for one employee