Unit 23-Qualified Plans

Distributions may begin without penalty after age 59 1/2 and are generally added to ordinary income for tax purposes

withdrawals

Although life insurance is not allowed within IRAs, ___ are allowed

annuities

retirement plans sponsored by employers

defined contribution plans and defined benefit plans

if a customer moves money from an employer plan to a 401(k) this is called

direct rollover BUT its a transfer

As with traditional IRAs, the contribution must come from

earned income

person is allowed to perform ___ rollover per year

1

All of the following are true of Roth IRAs except A)contributions may be deductible depending on income limits. B)contributions are made after tax. C)withdrawals are not required at age 72. D)contributions may be able to be made after 72.

A

these distributions are required beginning in the year the account owner turns 72 and annually by Dec 31. Amt is based on the account values as the end of the previous year

RMD

Introduced in 1997 as part of the Taxpayer Relief Act. Variation of a traditional IRA

Roth IRA

Which of the following are available to participants in a 401(k) plan that are not available to IRA holders? I. Tax deferral on the earnings II. Hardship withdrawals III. The catch-up provision for those who are age 50 and older IV. Loans against the vested balance A)I and III B)II and IV C)II and III D)I and IV

B

Which of the following are true of qualified plans but not true of nonqualified plans? A)The plan may discriminate B)The plan cannot discriminate C)All withdrawals are tax free D)All withdrawals are taxable above cost basis

B

All of the following are true of Roth IRAs except A)anyone with earned income under a certain limit may contribute. B)contributions are not deductible. C)distributions are required after reaching 72. D)distributions are not required after reaching 72.

C

Who can contribute to an IRA? A)Anyone with earned income not covered by an employer-sponsored plan B)Anyone with taxable income C)Anyone with earned income D)Anyone with earned income under the age of 59½

C

In a defined benefit plan: I. the benefit amount is fixed. II. the benefit amount is variable. III. the contribution amount is fixed. IV. the contribution amount can vary. A)I and III B)II and III C)II and IV D)I and IV

D

What is the penalty, if any, for overcontribution to an IRA? A)10% B)No penalty C)50% D)6%

D

Which of the following is an acceptable investment for an IRA? A)A collection of medieval manuscripts and art B)Gold coins minted in Switzerland but sold in the U.S. C)A universal variable life insurance contract D)A mutual fund specializing in speculative bonds

D

In a defined contribution plan: I. the benefit amount is fixed. II. the benefit amount is variable. III. the contribution amount is fixed. IV. the contribution amount can vary. A)II and IV B)II and III C)I and IV D)I and III

B

What is the penalty for not taking the minimum required distribution (MRD) for the year? A)50% of the annual contribution limit B)50% of the amount that should have been taken C)10% of the amount that should have been taken D)10% of the annual contribution limit

B

A 72-year-old customer has a $30,000 required minimum distribution (RMD) calculated to be taken from an IRA. If the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much in taxes and penalties will be owed? A)$10,000 B)$5,000 C)$12,500 D)$8,500

D 5,000 x 50%=2500 30,000 x 20%=6000

Distributions before age of 59 1/2 are subject to

10% penalty and income tax

If an account fails to take an RMD by the required date, the amount below the RMD account will be subject to

50% penalty (excise tax)

In an IRA, no contributions are allowed with the year the holder turns

70 1/2

Which of the following are true of nonqualified plans but not true of qualified plans? I. Contributions are not tax deductible. II. Contributions are tax deductible. III. Plan needs IRS approval. IV. Plan does not need IRS approval.

I and IV

Contributions to Roth IRAs are not deductible from

current income

when a customer may transfer IRA assets from one IRA account to another IRA account. no limit on how many times they can do this

transfer

defined benefit plans are usually called

pension plans

when a customer withdraws and takes possession of IRA assets and then returns the assets back to an IRA (or other qualified account) within 60 calendar days. no tax implications

rollover

the first RMD may be delayed until April 1 after the account holder turns 70 1/2. what will need to happen in this scenario?

second distribution in that year by Dec 31