Retirement plans - life insurance exam

In an individual retirement account (IRA), rollover contributions are: subject to capital gains tax subject to ordinary income tax partially limited by dollar amount not limited by dollar amount

Not limited by dollar amount

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan? 25 50 100 250

100

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction? 10% is withheld for income taxes 20% is withheld for income taxes 30% is withheld for income taxes Nothing is withheld

20% is withheld

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable? No deduction allowed $25,000 $20,000 $10,000

25000

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? 30% 40% 50% 60%

50 %

How long does an individual have to "rollover" funds from an IRA or qualified plan? 60 days 90 days 120 days No limit

60 days

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made? Surrender charge is applied The account can be rolled into the surviving spouse's IRA Distributions will be received tax-free if surviving spouse is over age 59 1/2 Future distributions are payable to the owner's estate

Account can be rolled into surviving spouse's IRA

A qualified profit-sharing plan is designed to: allow key employees to participate in the profits of the company allow employees to participate in the profits of the company keep key employees from leaving the company allow employees to elect company officers

Allow employees to participate in the profits of the company

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company? Variable Life Interest-sensitive Life Universal Life Annuity

Annuity

Traditional individual retirement annuity (IRA) distributions must start by: age 59 1/2 age 65 April 1st of the year following the year the participant attains age 59 1/2 April 1st of the year following the year the participant attains age 70 1/2

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

In a qualified retirement plan, the yearly contributions to an employee's account: are not tax-deductible are restricted to minimum levels set by the IRS are restricted to maximum levels set by the IRS must be matched dollar-for-dollar by the employer

Are restricted to maximum levels set by the IRS

Which plan is intended to be used by a sole proprietor and the employees of that business? SEP Plan Keogh Plan Individual Retirement Account (IRA) SIMPLE Plan

Keogh plan

Which of the following is TRUE about a qualified retirement that is "top heavy"? More than 30% of plan assets are in key employee accounts More than 40% of annual additions are for key employee accounts More than 50% of plan assets are in key employee accounts More than 60% of plan assets are in key employee accounts

More than 60% of plan assets are in key employee accounts

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld? 10% 20% 30% None

None

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2? 10% tax penalty for early withdrawal Capital gains tax Ordinary income tax and a 10% tax penalty for early withdrawal Ordinary income tax

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

All of the following statements about traditional individual retirement accounts are false EXCEPT 10% penalty is applied to withdrawals after age 59 1/2 Withdrawals are normally tax-free to the recipient 10% penalty is applied to withdrawals before age 59 1/2 Contributions are not tax deductible

10% penalty is applied to withdrawals before age 59 1/2

How are Roth IRA distributions normally taxed? 10% penalty tax is applied Taxed as ordinary income Capital gains tax is applied Distributions are received tax-free

Distributions are received tax free

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity? The 403(b) custodian The financial institution The employer The employee

Employee

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted? 20% of the funds are subject to taxes 80% of the funds are invested in a separate account If Tom's employment is terminated, 20% of the funds would be forfeited If Tom's employment is terminated, 80% of the funds would be forfeited

If toms employment is terminated, 20% of funds would be forfeited

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: Only income tax on the amount withdrawn Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan Continued tax-free accumulations in the bank savings account Only a 10% penalty on the withdrawal of funds

Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over? Only income taxes on $30,000 Only income taxes on $24,000 Income taxes plus a 10% penalty tax on $30,000 Income taxes plus a 10% penalty tax on $24,000

Income taxes plus a 10% penalty tax on 30,000

Post-tax dollar contributions are found in: 401K investments Traditional IRA investments SIMPLE investments Roth IRA investments

Roth IRA investments

What does a 401(k) plan generally provide its participants? Tax-free distributions Salary-deferral distributions Salary-deferral contributions A defined retirement benefit

Salary-deferrable contributions

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 capital gains tax Distribution is subject to ordinary income tax Distribution is subject to a tax penalty Distribution is subject to federal income tax withholding

Distribution is subject to federal income tax withholding

An employer that offers a qualified retirement plan to its employees is eligible to: avoid ERISA regulations make tax-deductible contributions to the plan make tax deductible contributions to key employees only make partial tax-deductible contributions to the plan

Make tax deductible contributions to the plan

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid: mandatory income tax withholding on the transfer amount paying transfer fees paying trustee fees ever paying income taxes on the distributions

Mandatory income tax withholding on the transfer amount