Life and health insurance: chapter 5 (qualified plans)

What qualified plan is suitable for the self-employed?

HR-10 or Keogh

What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2?

10% penalty

What is the penalty for excessive contributions to a traditional IRA?

6%

What is required to qualify an individual to contribute to a traditional IRA?

Earned income

For a retirement plan to be qualified, it must be designed for whose benefit?

Employees

Who qualifies for tax-sheltered annuities, or 403(b) plans?

Employees of nonprofit organizations under Section 501(c)(3) and employees of public school systems

What are some examples of qualified plans?

IRA, 401(k), HR-10 (Keogh), SEP, SIMPLE

In what form of payment must the contributions to a traditional IRA be made?

In cash

SIMPLE plans are available to groups of how many employees?

No more than 100

In qualified plans, are employer contributions taxed as income to the employees?

No, employer contributions are not taxed as income to the employees.

An employer is sponsoring a qualified retirement plan for its employees where the employer contributes money whenever the business has profit. What is this type of plan called?

Profit-sharing plan

What is the primary purpose of a 401(k) plan?

Provide retirement income

What are the income tax benefits of a qualified plan?

Employer contributions are tax deductible and are not taxed as income to the employee. The earnings accumulate tax deferred.

What type of plan is a 401(k)?

Qualified profit-sharing plan

If a retirement plan is qualified, what does that mean?

The plan has favorable tax treatment