Chapter 9 - Retirement Plans

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

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

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 this employee?

Distribution is subject to federal income tax withholding

How are Roth IRA distributions normally taxed?

Distributions are received tax-free

Tom has a 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

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

Post-tax dollar contributions are found in:

Roth IRA investments

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

Salary-deferral contributions

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

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

not limited by dollar amount

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

profit-sharing plan

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

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Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan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

Individual Retirement Account (IRA)

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

Keogh Pension Plan

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

The employee

A qualified profit-sharing plan is designed to:

allow employees to participate in the profits of the company

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

make tax-deductible contributions to the plan

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

Annuity

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

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

None