Unit 7 Book 2

John is married to Billie. They have been married for the past 30 years and have 2 minor children. John has recently received an offer from his employer for an early retirement package. One of qualified pension plan payout options is a single life annuity. Which of the following statements regarding John's distribution options is (are) CORRECT?

A single life annuity would provide the largest monthly amount of payout. To accept a single life annuity, John must obtain a signed, written waiver from Billie.

Ann, age 50, is the beneficiary of her father's traditional IRA, which was funded entirely by tax-deductible contributions. Her father recently died at age 76. Which of the following statements is CORRECT regarding Ann's options for the inherited account?

Ann may execute a direct transfer of the account balance into an inherited IRA and must begin required minimum distributions by December 31 of the year following the year of her father's death.

Luke, age 55, participates in his employer's Section 401(k) plan. He has not designated a beneficiary. If Luke dies in 2019, his vested account balance must be distributed over which of the following periods?

Before December 31, 2024.

Beverly's husband, age 67, dies with a $1.2 million balance in his traditional IRA. Beverly, who is the designated beneficiary, would like to know what her options are regarding her deceased husband's IRA. She is currently 55 years old and has a life expectancy of 30 years. When she was younger, Beverly ran a consulting business, which allowed her to contribute a significant amount of money to a self-employed Keogh plan. When she closed her business, she rolled over the plan balance into her own traditional IRA. Which of the following statements regarding inheriting her husband's IRA is (are) CORRECT?

Beverly can roll her deceased husband's traditional IRA over to her own traditional IRA.

Herb, age 62, has a $700,000 balance in his qualified plan account. His 38-year old son, Mark, is his designated beneficiary. Herb passed away this year and had not begun making RMDs from this account. When must Mark begin taking distributions from Herb's account to stretch the balance over his life expectancy?

By December 31 of the year following the year of Herb's death.

Maria has a traditional IRA valued at $500,000. She named her daughter, Faith, as beneficiary of the account. If Maria dies prematurely, which of the following statements are CORRECT?

Faith inherits the IRA. Faith can transfer the inherited funds to an inherited IRA via a direct trustee-to-trustee transfer and name her own beneficiary.

Carol, a 45 year old widow with no children, is considering naming her estate as the beneficiary of her traditional IRA. Which of the following are disadvantages of this approach?

Her estate cannot be treated as a designated beneficiary for purposes of determining the required minimum distributions after she dies. The estate will most likely pay more income tax on the IRA distributions than an individual beneficiary.

Which of the following statements regarding the application of mandatory death benefit rules concerning the status of a given participant is (are) CORRECT?

If the participant's death occurs before retirement, a qualified plan must provide a spousal benefit called a qualified preretirement survivor annuity (QPSA) (with the exception of certain profit-sharing plans). If the participant's death occurs after retirement, a qualified plan must protect the plan participant's spouse by requiring that the normal form of distribution from the retirement plan for a married participant must be a joint and survivor annuity (with the exception of certain profit-sharing plans).

Kathleen named the following individuals as beneficiaries of her traditional IRA. If Kathleen dies and the IRA is not divided into separate accounts, which beneficiary's life expectancy (listed in the answer choices) will be used to determine the distribution period for the IRA?

Karen, age 60.

Following the death of the owner of a traditional IRA, if no designated beneficiary is determined by the required date how must the IRA balance be distributed?

Over the longer of 5 years or the remaining life expectancy of the owner-participant, reduced by one for each subsequent year

Robert, age 70, and his wife, Diane, age 64, have been married 42 years. They have two sons and five grandchildren. If Robert dies having named Diane as his beneficiary, what is Diane's best option for his IRA if she wants to delay distributions as long as possible?

Roll over his IRA to her IRA and take distributions beginning at her age 70½.

In order to avoid a government mandate regarding the qualified plan distribution period for non-spousal beneficiaries, a qualified plan participant's designated beneficiary must be determined by:

September 30 of the year following the year of the participant/owner's death.

Jerry owns a traditional IRA. If he dies on July 17, 2019, the designated beneficiaries for his IRA will be determined as of what date?

September 30, 2020.

Which of the following statements is(are) CORRECT regarding the determination of a designated beneficiary of a traditional IRA?

The beneficiaries of a qualifying trust will be treated as a designated beneficiary if certain requirements are satisfied

Which of the following is correct regarding the options available to a nonspouse beneficiary following the death of a traditional IRA owner?

The nonspouse beneficiary may roll over the distribution into an inherited IRA using a trustee to trustee direct transfer.

Automatic survivor benefits (QJSAs and QPSAs) apply to Section 401(k) plans unless:

The participant elects to receive payment as a lump sum distribution. The participant does not elect payments in the form of a life annuity. The plan provides that, upon the participant's death, his or her vested account balance will be paid in full to the surviving spouse. The plan is not a direct or indirect transferee of a plan to which the automatic survivor annuity requirements apply.

Which of the following statements regarding required minimum distributions (RMDs) from a Roth IRA following the death of the account owner is(are) CORRECT?

The same required minimum distribution rules apply to the Roth IRA as apply to a traditional IRA when death occurs prior to the required beginning date. A new 5-year holding period requirement does not begin for the beneficiary, but the original owner's 5-year holding period must be met to afford tax-free distribution of earnings to the beneficiary.

John, age 65 and single, recently retired after 20 years of service with his employer. He has named the American Heart Association, a qualifying charity, as the sole beneficiary of his qualified plan. Which of the following statements regarding this situation are CORRECT?

There is no income tax due on the distributed benefit. The balance of the account generally must be distributed to the charity within five years. A deduction is allowed for estate and gift tax purposes.

Under a divorce decree, the assignment of the right to receive benefits from a qualified retirement plan by a court to the former spouse of a participant is referred to as:

a qualified domestic relations order (QDRO).

All of the following statements regarding qualified domestic relations orders (QDROs) are correct EXCEPT:

distributions made to an alternate payee under a QDRO subjects the payor to the 10% premature distribution penalty.

A participant may receive an in-service distribution:

from a profit-sharing plan.

A qualified domestic relation order (QDRO) may be used when:

the qualified plan participant and spouse divorce.

Carl has named a trust as the beneficiary of his qualified retirement plan. The trust beneficiaries include his 4 children, ages 4 through 18, and his nephew, age 30. In order for the trust beneficiaries to be treated as the designated beneficiaries of the plan, the trust must meet all of the following requirements EXCEPT:

the trust beneficiaries must not be identifiable by the trust instrument.

Assuming a qualified plan participant designates more than one beneficiary for his retirement account, what factor is used to determine the distribution period? The designated beneficiary:

with the shortest life expectancy.