Chapter 9 exam - Retirement plans

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 tax

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

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

Ordinary income tax and a %10 tax penalty for early withdrawal

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

Salary-deferral contributions

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

The employee

All of the following statements about traditional individual retirement accounts are false EXCEPT:

a %10 is applied to withdrawals BEFORE age 59 1/2

a qualified profit-sharing plan is designed to:

allow employees to participate in the profits of the company

Traditional individual retirement annuity (IRA) distributions must start by:

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

in a qualified retirement plan, he yearly contributions to an employee's account:

are restricted to maximum levels set by the IRS

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

if Tim's employment is terminated, %20 of the funds would be forfeited

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

mandatory income tax withholding on the transfer amount

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

marital deduction

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

more than 60% of the plan assets are in key employee accounts

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

not limited by dollar amount

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

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

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

Age 59 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 has 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

How are Roth IRA distributions normally taxed?

Distributions are received tax-free

At the age of 45 an individual withdraws $50,000 from his qualified profit-sharing plan and then deposits this amount into a personal savings account. this action would result in:

Income tax and a %10 penalty assessed upon funds withdrawn from the qualified plan

Which of these retirement plans can be started by an employee, even if another plan is in existence?

Individual retirement account (IRA)

A sole proprietor may use this plan ONLY if the employees of this business are included.

Keogh pension plan