CFP - Retirement Planning: 457s & 403(b)s (Quizzes)

D. $19,500

Elaine, age 28, wants to put the maximum contribution into her TSA offered through her school in the current year. Her annual salary is $30,000 per year. There are no make-up provisions available to her. How much can Elaine put into her TSA for this year? A. $7,500 B. $13,500 C. $26,000 D. $19,500

D. The plan document may provide for a maximum and minimum loan amount. (payments over five years, unless used for home purchase)

Joseph wants to take a loan from his 403(b) plan. Which of the following requirements will apply to his situation? A. The loan can exceed $50,000 only if the account is worth more than $100,000. B. The loan must be paid back with quarterly payments over three years, unless used to purchase a principal residence. C. The loan is exempt from interest charges since the participant is borrowing his own money. D. The plan document may provide for a maximum and minimum loan amount.

III and V only. (not eligible for the long service catch-up because the museum is not a Health, Education, Religious (HER) organization)

Kent Reeder, age 52, works as the administrator and curator at the Museum of Antique Manuscripts, a not-for-profit organization in Metropolitan Center. He has worked there 18 years and began contributing to the 403(b) plan 12 years ago but skipped contributing last year. He earns $85,000 a year. He has asked you to maximize his contribution. Which of the following is/are TRUE? I. He may contribute $19,500 plus $6,500 for age 50+ catch-up, plus $3,000 long service catch-up. II. He may not contribute to the long-service catch-up this year due to omitting a contribution last year. III. He may contribute $19,500 plus $6,500 age 50+ catch-up. IV. He may not participate in both the long service catch-up and the age 50+ catchup the same year. V. He is not eligible for the long service catch-up.

B. She can contribute $7,000 to a Traditional IRA and deduct all $7,000.

Shawnte has AGI of $1,000,000 (which is all comprised of earned income). She is single and age 55. She participates in her employer's 457 plan. Which of the following statements is true? A. She can contribute $6,000 to a Traditional IRA and deduct all $6,000. B. She can contribute $7,000 to a Traditional IRA and deduct all $7,000. C. She can contribute $6,000 to a Traditional IRA and deduct $0. D. She can contribute $7,000 to a Traditional IRA and deduct $0.

III and IV only.

Which of the following statement(s) regarding 403(b) plans is true? I. Assets within a 403(b) plan may be invested in individual securities. II. A 403(b) plan usually provides a 3 to 7 year graduated vesting schedule. III. A 403(b) plan must pass the ACP test if it is an ERISA plan. IV. In certain situations, a participant of a 403(b) plan can defer an additional $9,500 as a catch up to the 403(b) plan.

III and IV only.

Which of the following statements accurately describes the requirements for a plan established under Section 457 to be qualified? I. Distributions are NOT permitted until age 70 1/2 or termination of employment if before 59 1/2. II. To avoid constructive receipt, the agreement must be signed during the same month the services are rendered and prior to receipt of the paycheck. III. Eligible participants include employees of agencies, instrumentalities, and subdivisions of a state, as well as Section 501 tax-exempt organizations. IV. The maximum employee elective deferral excluding catch-ups is limited to $19,500 (2021) (as indexed), or 100% of includible compensation.

I, III and V only.

Which of the following statements accurately reflect the characteristics of a Section 457 plan? I. Benefits taken as periodic payments are treated as ordinary income for taxation. II. Lump-sum distributions are eligible for 5-year and/or 10-year averaging. III. Deferred amounts are subject to Social Security and Medicare taxes at the later of: performance of services or employee becomes vested in the benefits. IV. Income tax withholding is not required until funds are actually received as opposed to constructively received. V. Cannot exceed the smaller of $19,500 or 100% includible compensation in 2020.

II, III and IV only. (Churches are not qualifying sponsors of 457s)

Which of the following statements are true in regards to Section 457 plans? I. Eligible plan sponsors include non-profit organizations, churches, and governmental entities. II. In-service distributions after age 59 1/2 are allowed in a 457 plan. III. Salary deferrals are subject to Social Security, Medicare, and Federal unemployment tax in the year of the deferral. IV. Assets of the plans for non-government entities are subject to the claims of the sponsor's general creditors.

I, III and IV only.

Which of the following types of funding vehicles is eligible (approved) for TSAs? I. Fixed Annuity Contracts. II. LI policy which develops large cash values. III. Mutual funds. IV. Variable annuity contracts. V. Custodial accts holding individual stocks and bonds. VI. Credit union share account.

II only. (total excludable contributions must be for all prior years, not just the past three)

Which statement(s) accurately reflect(s) the Tax-Sheltered Annuity (TSA) provisions: I. Salary reductions into a TSA are exempt from all payroll taxes. II. The annual elective deferral limit may be increased by up to $3,000 for employees of certain organizations who have completed 15 years of service and meet certain other requirements. III. Tax sheltered annuities must allow participants to invest in mutual fund, annuities and/or fixed income securities. IV. To calculate the maximum exclusion allowance for make-up calculation purposes, the participant's years of service and the amount of total excludable contributions made in the prior three years are needed.

II, III and IV only.

Which statements below accurately reflect characteristics of the Tax Sheltered Annuity (TSA)? I. Annuity payments from a TSA are taxed using the three-year rule. II. Employers may make matching contributions or contribute a fixed percentage. III. An employee under age 50, who contributed $8,000 to a 401(k) plan is limited to contributing a maximum of $11,500 to a salary reduction TSA. IV. At the TSA owner's death, the full amount of proceeds paid to beneficiaries is included in the gross estate of the decedent.

D. Contributions are subject to Federal/State withholding tax. (EE's benefit within a 403(b) plan is always 100% vested)

Your client's only employer has established a payroll deduction TSA. Your client is single, making more than $64,000 per year. Which of the following is false concerning the plan? A. TSA contributions are pre-tax. B. TSA contributions are subject to Social Security taxes. C. The employer usually does not control the asset allocations in the plan. D. Contributions are subject to Federal/State withholding tax.