Unit 24: Retirement Plans and Special Types of Accounts
A spousal IRA arrangement allows the contribution of a total of _________ to the two accounts and no more than _______ in either account
$12,000 $6,000
What is the maximum contribution limit for a Coverdell ESA?
$2,000
With regard to opening a Roth IRA, As long as a married couple's AGI does not exceed _________, a Roth IRA can be opened without an restrictions
$208,000
With a 401(k), the maximum allowable loan amount is the lesser of...
$50,000 or 50% of the participant's vested account balance
Full-time employment is defined as...
1,000 hours or more per year, regardless of the number of days, weeks, or months worked
The employer share of the contributions to a traditional 401(k) plan (or any other DC plan) may not exceed....
25% of the total payroll
All funds within a CESA must be distributed within __ days of the students 30th birthday, and earnings in the account are subject to...
30 Ordinary income tax plus a 10% penalty
All funds within a Coverdell Education Savings Account (CESA) must be used before the student reaches..
30 years of age
Qualified annuity plans are offered under section....
403(b) of the Internal Revenue Code
Most loans from a 401(k) plan are required to be repaid within...
5 years
Unless a 401(k) loan is taken out for the purpose of a mortgage on the participant's principal residence, repayment must be completed within..
60 months of obtaining the loan
With regard to IRA contributions, an individual over 50 is permitted...
A $1,000 catch-up contribution, increasing their total annual IRA contributions to $7K
What is a QDRO?
A QDRO is a court-issued order that gives someone the right to an individual's qualified plan assets, typically an ex- (or soon-to-be-ex-) spouse, and the QDRO is usually issued in the course of divorce proceedings or to satisfy child support obligations
What is a QDRO?
A QDRO is a judgment, decree, or order for a qualified retirement plan to pay child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant.
mployees of certain non-profit organizations, such as religious organizations and those qualifying under Section 501(c)(3) of the IRC, including private colleges, research and scientific foundations, private hospitals, and medical schools, are...
Allowed to participate in 403(b) plans
Simple trusts must distribute income...
Annually
Minimum distributions from a traditional IRA must begin by...
April 1 of the year after the owner turns 72.
What is the tax-exempt organization that a 457 plan may never be offered to?
Churches
If used for the right expenses, Section 529 plans are..
Exempt from federal income tax
Are there income limitations for contributors of 529 plans?
No
The definition of security specifically excludes
Retirement plans
If the money is not used in a Coverdell ESA, it...
Reverts back to the beneficiary
The Coverdell was originally known as..
The Education IRA
What is the difference between UTMA's and UGMA's?
The Uniform Transfer to Minors Act (UTMA) allows virtually any kind of asset, including real estate, to be transferred to a minor. UGMA accounts, on the other hand, are limited to gifts of cash, securities (such as stocks, bonds, or mutual funds), and insurance policies.
With defined benefit plans, the employer (not the employee) bears...
The investment risk
The adviser of an employment retirement plan's primary responsibility is to...
The plan itself
What is the purpose of the Investment Policy Statement?
The purpose of the IPS is to set "policy" for the portfolio, not to list its composition.
A QDRO applies only to assets in a qualified employer plan. True or false?
True, a penalty would be applies to an IRA in the event of a split
The one major exception for investments in collectibles in IRA's is...
U.S. gold and silver coins minted by the Treasury Department
In general, money in an UTMA is not permitted to use for....
Basic necessitates such as food, clothing and shelter
The only requirement to be the custodian of an UTMA (or UGMA) account is....
Being of legal age (an adult).
With regard to Roth IRA's, distributions need not be made until..
Death of the owner/participant.
On retirement, if your customer who is a corporate executive will receive retirement income equaling a percentage of the average of his last 5 years of compensation, this is which type of plan?
Defined Benefit Plan
Unlike a qualified plan, a nonqualified plan is permitted to...
Discriminate in favor of highly compensated employees
Default on the loan of a 401(k) will result in the IRS treating the loan as a...
Distribution
Section 529 plan contribution limits are set by..
Each state
403(b) plans are available to _________, not _______, of ______________________________________.
Employees, Students Public educational institutions such as schools.
For employers to qualify for protection under Section 404(c), employees must...
Enjoy the benefits and risks of their decisions (individual accounts), have the right to exercise independent control over the account, and have a sufficiently broad range of choices to make the right of control meaningful
In order to qualify for the safe harbor under 404(c), the portfolio selections must include at least 3 different asset classes, what are they?
Equity Debt Cash equivalent
In almost all cases, if your Section 529 Plan is one operated by your state of residence, it will be..
Exempt from your state's income tax.
Gems, collectibles, and works of art are eligible investments for an IRA, true or false?
False
A grandparent that is NOT the legal guardian of the beneficiary of a Coverdell ESA is considered to be the responsible party for the account, true or false?
False. Unless the grandparent is the legal guardian.
The Coverdell ESA's contribution limits are set by..
Federal law
Trustees, board members of a foundation, IARs who exercise and those who hold themselves out as a fiduciary for an ERISA plan will generally find themselves being defined as a...
Fiduciary
Name two things you would expect to see in the Investment Policy Statement of a Qualified plan
How the investment performance of the plan is measured The investment parameters to be followed by the portfolio managers
In an IRA, Funds may be withdrawn without penalty for qualified education expenses for __________________.
Immediate family members
What is the primary authority given to the donator of a UGMA/UTMA account?
Investment decisions
In a defined benefit plan, the payout to the employee is fixed. The employer must pay that benefit regardless of the...
Investment performance
A pension portfolio manager may write covered options as long as...
It matches investment objectives
The list of qualified expenses in a 529 includes...
Mandatory tuition and fees Room and board on campus
Because there are so few regulations involved, the administrative costs of a nonqualified plan are...
Much lower than those for a qualified plan
Section 529 plans are technically considered...
Municipal Fund Securities
Are there are limitations for Roth IRA contributions?
No
Can a pension portfolio manage write uncovered, or naked calls?
No. Because of the unlimited risk potential
____________ are NOT covered by the ERISA
Nonqualified
The Summary Plan Description has nothing to do with....
Nothing to do with the investment policies that will be followed by the plan's advisers. That is the IPS.
Payback of a 401(k) loan will be through...
Payroll deduction.
The Investment Policy Statement is a guideline for the..
Plan's fiduciary regarding funding, and investment management decisions.
Assets from any _________ corporate plan or from another IRA may be rolled over into an IRA.
Qualified
Companies cannot use their _________ ____ ______ to finance their business operations.
Qualified plan assets
Pension plans, profit sharing plans, and 401(k) plans are examples of....
Qualified plans
If the money is not used in a 529 plan, it...
Reverts back to the donor
There are AGI limits with a ____ ___ but none with a __________ ___.
Roth IRA Traditional IRA
The requirement for a retirement plan trustee to follow fiduciary standards is found in...
Section 404 (c) of ERISA.
Which of the college education accounts offers the donator the most control over the assets?
Section 529
What best describes the tax treatment of a child inheriting an IRA from a deceased parent?
She will pay income taxes on the full amount she withdraws each year.
A one-worker couple can open a..
Spousal IRA
If you elect to contribute to a Section 529 plan that is operated by another state, your withdrawals will more than likely be..
Subject to state income tax
Under the rules of the Department of Labor (DOL), one of the most important documents that participants are entitled to receive automatically when becoming a participant of an ERISA-covered retirement plan, is a....
Summary of the plan, called the Summary Plan Description or SPD.
Explain 457 plans
The 457 plan is a nonqualified deferred compensation plan for municipal employees, as well as for independent contractors performing services for those entities.
If someone over contributes to their IRA, the 6% penalty can be avoided if...
The 6% penalty can be avoided by removing the excess contribution plus any growth it experienced before removal.
Explain the The Employment Retirement Income Security Act of 1974 (ERISA)
The Employment Retirement Income Security Act of 1974 (ERISA) is a federal law that regulates many aspects of retirement plans established by employers in the private sector
In order to comply with ection 404(c) of ERISA...
The plan must offer a selection of at least three investment choices with materially different risk and return characteristics.
To avoid income tax and penalties on an unused Coverdell ESA, the IRS permits the funds...
To be transferred into another Coverdell ESA for someone related to the first beneficiary (Harry), who is under 30 years of age
There is no employee/employer relationship in a...
Traditional or Roth IRA
A 457 plan can discriminate in favor of key employees, true or false?
True
An investment adviser, as a fiduciary and disqualified person under the plan, is prohibited from using plan assets in payment of personal obligations (such as outstanding office expenses), true or false?
True
Bank CD's are permissible to invest in an IRA, true or false?
True
Contribution limits are the same with a Traditional IRA and Roth IRA, regardless of age, true or false?
True
Covered calls are eligible to invest in an IRA, true or false?
True
If a portion or all of the withdrawal (QTP) is spent on anything other than qualified higher education expenses, the distributee will be taxed at her own tax rate on the earnings portion of the withdrawal, true or false?
True
QTPs (Section 529 Plans) allow large contributions reaching as high as $300,000, true or false?
True
If an employer installs a Keogh plan, it must include all full-time employees..
Who are at least 21 years of age, and have 1 or more years of service.
The Coverdell ESA may only be used by persons who fall..
Within certain income limits
Can a donator of a 529 plan take the money back?
Yes
If an donor has decided to move only a portion of their current 529 plan to another state, will this be permitted?
Yes, partial rollovers are allowed.
In any qualified plan, if all of the contributions are in pre-tax dollars, the cost basis is...
Zero, no matter who contributes the money
One of the requirements for enrolling in an HSA is that the individual be...
covered under a health plan with a high deductible.
An individual may withdraw from an IRA before the age of 59½ without a penalty tax in the case of...
death or disability
All qualified retirement plans are either...
defined contribution or defined benefit plans
Unlike traditional IRAs, Roth IRAs are not subject to the minimum..
distribution rules regarding a participant's age (72).
The most common settlor functions are to design decisions involving...
establishment of the plan defining who are the covered employees and benefits to be provided and amending or terminating the plan
Leaving IRA assets to a charity offers the same...
estate tax benefits as any other asset
ERISA provides that a person is a fiduciary with respect to an employee benefit plan to the extent that such a person does any of the following...
exercises any discretionary authority or control over the management of a plan or over the management or disposition of plan assets renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of such plan or has any discretionary authority or discretionary responsibility in the administration of such plan including appointing other plan fiduciaries or selecting and monitoring third-party service providers
ERISA Section 404(c) relieves the employer of...
fiduciary responsibility for investment decisions made by employees
What is the information provided in the Summary Plan Description?
information on when an employee can begin to participate in the plan how service and benefits are calculated when benefits become vested when and in what form benefits are paid and how to file a claim for benefits
The 457 plan may ALSO be offered to employees...
of a certain tax-exempt organizations such as hospitals, charities, unions, and so forth
457 plans may be used by employees..
of a state, political subdivision of a state, and any agency or instrumentality of a state
The 457 plan is unique in that it is the only tax-qualified retirement plan....
permitting withdrawals, for any reason, before reaching 59½ without penalty
What information must be stated in a QDRO?
the participant and each alternate payee's name and last known mailing address and the amount or percentage of the participant's benefits to be paid to each alternate payee
