Chapter 9 Exam - Retirement Plans

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

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%

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

59 1/2

How long does an individual have to "rollover" funds from an IRA or qualified plan?

60 days

The time limit an individual has to "rollover" funds from an IRA or qualified plan is

60 days

According to ERISA regulations, a Summary Plan Description must be provided to a new plan member within days of the member's eligibility date.

90

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Annuity

An individual working part time has an annual income of 5,000 for the year. if this individual has an IRA, what is the maximum deductible IRA contribution allowable?

$5,000

Premature IRA distributions are assessed a penalty tax of:

10%

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

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

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

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

Post tax dollar contributions are found in

Roth IRA investments

What does a 401k plan generally provide its participants?

Salary deferral contributions

XYZ Corp. has implemented a qualified retirement plan. This plan may NOT discriminate

in favor of highly compensated employees

An officer for a corporation takes out numerous unsecured loans from the company's qualified retirement plan. Which of these rules is the plan in violation of?

Exclusive benefit rule

Which of these statements about traditional individual retirement accounts is accurate?

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

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?

100

A qualified profit -sharing plan is designated 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, the yearly contributions to an employees account:

Are restricted to maximum level set by the IRS

What type of employee welfare plans are not subject to ERISA regulations?

Church plans

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 his employee?

Distribution is subject to federal income tax withholding

How are Roth IRA distributions normally taxed?

Distributions are received tax free

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

If Tom's employment is terminated, 20% of the 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:

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?

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

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

Investment retirement account (IRA)

Which plan is intended to be used by a sole proprietor and the employees of that business?

Keogh Plan

An employer that offers a qualified retirement plan to its employees is eligible to:

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

Risk 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 th:

Marital deduction

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?

None

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

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a:

Profit sharing plan

Which of the following is TRUE if the owner of an IRA names their spouses as beneficiary. but then dies before any distributions are made?

The account can be rolled into the surviving spouses IRA

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

The participating employee

Tim is retired and has recently separated from his wife. He receives benefits from a qualified retirement plan through his former employer. The plan's trustee has decided to split these benefit payments between Tim and his estranged wife. This decision is likely in violation of which IRS rule?

alienation of benefits

Which of the following situations would allow funds to be deposited into a rollover IRA?

an employee quits her job and receives $50,000 from her qualified plan

A description of a qualified plan's insurance contract may be found in which ERISA reporting form?

annual return/report (Form 5500)

An employee welfare plan exempt from ERISA regulations would be

church plans

According to the IRS, a company may NOT do which of the following in regard to funds in a qualified retirement plan?

repossess the funds for business purposes

A life insurance producer's underwriting duties may include

seeking additional information requested by the insurance company

Which of these is a true statement regarding survivor benefits under a qualified retirement plan?

survivor benefits can only be waived with the written consent of a married employee's spouse

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

unlimited by dollar amount