Exam Fx Chapter 6

Employer contributions made to a qualified plan

Are subject to vesting requirements

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of a family corporation. are for self-employed individuals and their employees.

SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees. SIMPLE plan is available to small businesses that employ not more than 100 employees receiving at least $5,000 in compensation from the employer during the previous year.

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval. Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; therefore, they do not need to be approved by IRS.

If a retirement plan or annuity is "qualified," this means

It is approved by the IRS. gives both the employer and employee benefits such as deductible contributions and tax-deferred growth.

which type of retirement account does not require distributions to start at age 72

Roth IRA Roth contributions can continue regardless of the account owner's age, and in contrast with a traditional IRA, distributions do not have to begin at age 72.

All of the following are general requirements of a qualified plan EXCEPT

The plan must provide an offset for social security benefits. Plans must meet the general requirements established by IRS.

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

They are tax deferred on both contributions and earnings until funds are withdrawn.

which of the following characteristics applies to defined benefit plans but not defined contribution plans?

the amount of contributions made by the employer is determined by an actuarial formula. Defined benefit plans offer benefit that are based on definite contribution formula. Defined contribution plans may specify that contributions are made based on corp profits so contributions may not made when that corp not profitable. both are qualified plans subject to the rules of ERISA.

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)

403(b) Plan (TSA). Under a 403 plan, tax-sheltered annuities may be established for the employees of specified nonprofit charitable, educational, religious and other 501c(3) organizations, including teachers in public schools systems. Such plans generally are not available to other kinds of employees.

A tax-shelter annuity is a special tax-favored retirement plan available to

Certain groups of employees only. available only to certain groups of employees (nonprofit charitable, educational, religious, and other 501c(3) organizations, including all employees in public education).

All of the following statements are true regarding tax-qualified annuities EXCEPT

Employer contributions are not tax deductible. Tax-qualified annuities must be approved by the IRS and allow for tax deductible employer contributions. All withdrawals are taxed and earnings grow tax deferred.

Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose

HR-10 (Keogh Plan) are plans specifically for self-employed and their employees.

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

Retirement Profit-sharing plans are qualified plans where a portion of the company's profit is contributed to the plan and shared with employees. 401k qualified retirement plan allows employees to take a reduction in their current salaries by deferring amounts into retirement plan. Company can also somehow match the employee's contribution, whether it is dollar for dollar or on a percentage basis.

Who may contribute to an HR-10 plan?

Self-employed plumber