Ch 10: SIMPLE, 403(b) & 457 Plans

Rex works for New Orleans Museum of Art, which sponsors a 403(b) plan. If Rex is 45 years old and has worked at the museum for the last 20 years, what is his maximum elective deferral for 2021?

$19,500

What is the maximum catch-up contribution for 2021 under the 457(b) plan "Final 3-Year" rule?

$19,500

Monique, age 42, earns $300,000 annually as an employee for CTM, Inc. Her employer sponsors a SIMPLE retirement plan and matches all employee contributions made to the plan dollar-for-dollar up to three percent of compensation. What is the maximum contribution (employer and employee) that can be made to Monique's SIMPLE account in 2021?

$22,500 $300,000 compensation x 3%= 9k $13,500 maximum employee contribution for 2021 + $9,000 employer match

Henrietta, age 57, has compensation of $72,000. The normal retirement age for her 457(b) plan is age 62. Henrietta has unused deferrals totaling $22,500 as of January 1, 2021. How much can Henrietta defer into his 457(b) public plan for the current year?

$26,000

What is the maximum elective deferral contribution to an eligible governmental 457(b) plan for 2021?

$26,000

Ren, age 63 in 2021, is planning for retirement at normal retirement age of 65 from the Salt Lake City coroner's office, which has a 457(b) plan. Ren has an unused deferral amount of $9,000. He has compensation of $128,000 per year as a mortician/autopsy specialist. Ren wants to know the maximum amount he can defer in 2021 in the 457(b) plan.

$28,500 $19,500 + $9,000

Jovi, age 58, has compensation of $150,000 and wants to defer the maximum to his public 457(b) plan. The normal retirement age for his plan is age 60. How much can Jovi defer in 2021 if he has an unused deferral amount of $60,000 from age 40 to age 49?

$39,000 2 x $19,500

Which of the following are permitted investments in a 403(b) TSA (TDA) plan? 1. An annuity contract from an insurance company. 2. An international gold stock mutual fund. 3. A self-directed brokerage account consisting solely of U.S. stocks, bonds and mutual funds.

1 and 2

Which of the following are correct? 1. SIMPLEs provide incentives to small employers to adopt retirement plans for employees with less administrative costs and fewer set-up procedures than qualified plans. 2. SIMPLE IRAs can permit loans to employees. 3. SIMPLE IRAs require the employer either to match the employee contributions of those who participate or to provide nonelective contributions to all eligible employees.

1 and 3

Which of the following statements is/are correct regarding 403(b) plans? 1. 403(b) plans are eligible for rollover treatment to IRAs, qualified plans, and other 403(b) plans. 2. Investments in stocks, bonds, and money markets are available. 3. Assets in a 403(b) plan are generally 100% vested.

1 and 3

Which of the following statements is/are correct regarding TSAs and 457(b) deferred compensation plans? 1. Both plans require contracts between an employer and an employee. 2. Participation in either a TSA or a 457 plan will cause an individual to be considered an "active participant for purposes of phasing out the deductibility of Traditional IRA contributions. 3. Both plans allow a special "final 3-year" catch-up contribution. 4. Both plans must meet minimum distribution requirements that apply to qualified plans.

1 and 4

All of the following statements is/are correct regarding tax-sheltered annuities (403(b) plans) except? 1. The non-age-based catch-up provision is available to employees of all 501(c)(3) organization employers that sponsor a TSA. 2. Active employees who take withdrawals from TSAs prior to 59½ are subject to a 10% penalty tax. 3. TSAs are available to all employees of 501(c)(3) organizations who adopt such a plan. 4. If an employee has had at least 15 years of service with an eligible employer, an additional catch-up contribution may be allowed.

1 only

Which of the following types of 457 plans permit employees to defer recognition of income without any risk of forfeiture? 1. Public 457(b) plans. 2. 457(f ) plans. 3. Private 457(b) plans.

1 only

Which of the following are true concerning 457 plans? 1. Contributions to 457(b) plans may be either pre-tax or Roth. 2. An employee may contribute the maximum amount to a 401(k) plan, 403(b) plan, SARSEP, or SIMPLE IRA, in addition to the deferral limits for 457(b)s. 3. An employee in 2021 may contribute up to $19,500 to a 457(b) plan and up to $19,500 to a 403(b) or 401(k) plan if available. 4. Deferrals to the 457 plan of one employer are not aggregated with deferrals to the 457 plan of a different employer. A)

1, 2, and 3

Taylor, age 25, works for Swim America. Swim America adopted a SIMPLE plan six months ago. Taylor made an elective deferral contribution to the plan of $8,000, and Swim America made a matching contribution of $2,400. Which of the following statements is/are correct? 1. Taylor can withdraw his entire account balance without terminating employment. 2. Taylor can roll his SIMPLE IRA into his Traditional IRA. 3. Taylor will be subject to ordinary income taxes on withdrawals from the SIMPLE. 4. Taylor may be subject to a 25% early withdrawal penalty on amounts withdrawn from the SIMPLE.

1, 3, and 4

Distributions may be paid from a 403(b) account after: A) Employee death or disability. B)Employee turns age 59½. C)Employee is separated from service.

All of the above

Individual accounts in 403(b) plans may not be in one of the following forms?

An account invested in individual stocks in companies in the S&P 500.

Which of the following entities cannot establish 457(b) plans?

Churches

Dr. Wood has taught accounting at FSU (Florida Sate University) for the last 30 years and is expected to retire in a few years, at age 65. FSU sponsors a 403(b) plan and a 457(b) governmental plan. Both plans have Roth accounts available. She has been diligent and always contributed the maximum amounts to the traditional accounts in each of the plans. She is also a partner in an equipment business that has lost money the last several years and she has a net operating loss carry forward. Which of the following statements is true?

Dr. Wood is able to rollover amounts in the traditional deferral account for the 457 plan into the Roth account without terminating employment.

Roger has a small convenience store with three employees. Each of the employees earns $10 per hour and they each work approximately 1,500 hours per year. His business is very successful. He recently considered adopting a defined benefit plan, but felt it was too expensive. He looked into a 401(k) plan, but thought it was too complicated. Finally, a few of his friends recommended a SIMPLE plan and told him about the basics of the plan. Which of the following statements from his friends is the most incorrect?

Employers that sponsor SIMPLEs must provide a matching contribution to employees who defer money into the SIMPLE.

Roger has a small convenience store with three employees. Each of the employees earns $10 per hour and they each work approximately 1,500 hours per year. His business is very successful. He recently considered adopting a defined benefit plan, but felt it was too expensive. He looked into a 401(k) plan, but thought it was too complicated. Finally, a few of his friends recommended a SIMPLE plan and told him about the basics of the plan. Which of the following statements from his friends is the most correct?

If Roger's salary is $500,000 and the SIMPLE used a match, then his match would generally equal $13,500.

Dr. Means has taught accounting at FAU for the last 30 years and is expected to retire next year, at age 65. FAU sponsors a 403(b) plan and a 457(b) governmental plan. She has been diligent and has always contributed the maximum amounts to each of the plans. If her salary is $100,000, how much can she contribute in total to both plans in 2021?

$52,000 19.5k*2+6.5k*2

Which of the following is/are correct regarding SIMPLE plans? 1. A SIMPLE plan does not require annual testing. 2. A SIMPLE IRA must follow a 3-year cliff vesting schedule if the plan is top-heavy. 3. A 25% early withdrawal penalty may apply to distributions taken within the first two years of participation in a SIMPLE plan. 4. The maximum elective deferral contribution to a SIMPLE 401(k) plan is $19,500 for 2021 and $26,000 for 2021 for an employee who has attained the age of 50.

1 and 3

Which of the following plans permit employers to match employee elective deferral contributions or make non-elective contributions? 1. 457(b) plan. 2. 401(k) plan. 3. 403(b) plan.

All of the above

Which of the following are true regarding 457(f) plans? 1. IRC Sec. 457(f) plans are referred to as ineligible plans. 2. 457(f) plans are nonqualified deferred compensation plans for state and local governmental employers and for tax exempt employers. 3. 457(f) plans are also called "top-hat" plans. 4. There is no limit on the amount of deferral with 457(f) plans.

All of the above

Which of the following characteristics accurately describes a 403(b) plan? 1. A self-reliant employee elective deferral plan. 2. The retirement benefit is dependent on the investment results. 3. The plan generally permits loans. A)

All of the above

An employer may reduce the three percent matching contribution requirement for a calendar year in a SIMPLE, IRA, but only under which of the following circumstances? 1. The limit is reduced to no less than one percent. 2. The limit is not reduced for more than two years out of the five year period that ends with (and includes) the year for which the election is effective. 3. Employees are notified of the reduced limit within a reasonable period of time before the 60 day election period for a salary reduction agreement.

All of the above must be present

Which term or phrase best completes the following sentence: "Employee contributions in 403(b) plans are ______."

Always fully vested.