Missed Retirement Planning Questions
SIMPLE IRAs require a X% penalty for early withdraws in the first two years if the participant does not meet any of the early withdrawal exceptions.
25%
The following statements accurately describes the requirements for a plan established under Section 457 to be qualified...
(1) Eligible participants include employees of agencies, instrumentalities, and subdivisions of a state, as well as Section 501 tax-exempt organizations. (2) The maximum employee elective deferral excluding catch-ups is limited to $17,500 (2013) (as indexed), or 100% of includible compensation.
The following statements correctly describe 2013 limitations upon annual employee contributions to a HER organization with a 403(b) plan...
(1) For a participant with 12 years of service who is 50 years old, deferrals are limited to $23,000. (2) For a participant with 16 years of service who is 40 years old, deferrals are limited to $20,500. (3) The Section 415 dollar limit for deferrals is $51,000. (4) The percentage limit of the Section 415 limit is 100% of the employee's salary.
the following tasks are the primary responsibilities of a plan trustee?
(1) Investing the plan assets in a "prudent" manner.(2) Monitoring and reviewing the performance of plan assets.
The following statements are applicable to phantom stock arrangements...
(1) The units added to each executive's account will mirror the value of stock in Current Industries, Inc. (2) Since the value of the units reflects the value of Current Industries, Inc., the value of the phantom stock will be a reflection of the performance of the executives. (4) After the executive has served the company for a prearranged period of time, the phantom stock can be paid out in cash or in company stock
The following items could cause a loss of deduction...
(1) employer's contributions (2) contributions (3) forfeiture amounts that reduced employer contributions (4) forfeiture reallocations to her account
A key employee is an individual who:
(1) owns more than 5% of the business, (2) is an officer with compensation greater than $165,000 (2013), or (3) owns at least 1% of the business and has compensation greater than $150,000.
the following general requirements are necessary to exempt a qualified plan loan from prohibited transaction treatment
(1) reasonable rate of interest (2) adequate security. In addition, the prohibited transaction exemption rules require that loans bear a reasonable rate of interest and that they be adequately secured. A loan will be treated as a taxable distribution if it does not meet the dollar limits and term requirements for plan loans.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) impacts an employee and employer in the following ways:
(I) An employee without creditable coverage can generally only be excluded by the group health insurance plan (if offered) for up to twelve months. (II) The waiting period is reduced by the amount of "creditable coverage" at a previous employer. (III) If the employee does not enroll in the group health insurance plan at the first opportunity, an 18-month exclusion period may apply
A qualified money purchase pension plan contribution (by the employer) is influenced by which of the following factors:
(I) Forfeitures from non-vested amounts of terminated employee accounts. (II)Increases in participants' compensation due to inflation or performance-based bonuses.
To retain its qualified status, a retirement plan must:
(I) Have pre-death and post-death distributions. (II) Be intended to be permanent. (IV) Be established by the employer.
An owner of a regular corporation (C Corporation.) Owners of C Corporations are eligible for loans as long as the safe-harbor rules are maintained.
(I) Loans are available to all participant/beneficiaries on a reasonably equivalent basis. (II) Have a reasonable rate of interest. (III) Made in accordance with specific plan provisions. (IV) Must be adequately secured.
The follwoing statements accurately reflect the provisions for a self-employed owner (partnerships and sole proprietorships) in a small business pension plan?
(I) Loans are available to owners and employees alike, if each has equal right and terms of the loans. (II) Contributions for owners are based on net earnings rather than wages. (III) Lump-sum distribution tax treatment allowed for employees, but not for owners, except in the case of disability.
The following is true regarding qualified incentive stock options?
(I) No regular taxable income will be recognized by the employee when the qualified option is granted or exercised. (II) The income from sale can be taxed as capital gains depending on when the stock is sold. (III) The income from sale of the qualified option will be taxed as ordinary income stock is sold within a year. (IV) The employer will be able to deduct the bargain element of the option as an expense. (V) For favorable tax treatment the option must be held two years and the stock for one year after exercise.
The following is/are some reason(s) employers sponsor pension plans..
(I) Recruit quality employees. (II) Fight/discourage collective bargaining
Factors which would affect a participant's retirement benefits in a target benefit plan include:
(I) The actuarial assumptions used to determine plan contributions.(II) The total return on plan assets. (III) The age of the participant. (IV) The includible compensation for the plan year for the participant.
According to ERISA, which of the following is/are required to be distributed automatically to defined benefit plan participants or beneficiaries?
(I) The plan's summary annual report. (II) Terminating employee's benefit statement.
The following correctly describes characteristics of group universal life insurance...
(I)The employer usually pays all of the policy premiums. (II) Expenses are often lower than for individual universal life policies.
Non-qualified stock options are taxed on the "bargain element" (difference between the market price and the strike price) as ordinary income when exercised.
(Market Price - strike price) x Number of Shares x Tax Rate = Tax
A highly-compensated employee may be taxed on part of his or her medical expenses for which he or she is reimbursed under a discriminatory self-insured plan, even if the same benefits are available to all workers.
...
Highly-compensated employees may lose their tax-free status of medical benefits under a self-insured plan which is discriminatory.
...
Medical expenses paid as a benefit to a surviving spouse are excludable from gross income only to the extent they would have been excluded if they had been paid to the employee.
...
the following factors affect a target benefit plan participant's retirement benefits
1) the actuarial assumptions used to determine the contribution to the plan (2) the participant's compensation for the plan year (3) the investment performance of the plan's assets (4) the years of service of the plan participant
The following statements about ISOs are true?
1. the value of ISOs exercised in any year may not exceed $100,000. 2. early sale (less than one year) is a disqualifying disposition. 3. the exercise of NQSOs creates income taxed as wages.
When calculating the Wage Replacement Ratio (WRR), what percentage of income is subtracted for a self-employed individual for Social Security and Medicare Taxes
15.30% This is an important point to stress as many clients are self-employed and pay both employer and employee portions of the tax.
MFJ IRA Contribution Rduction
5,500 X [(MFJ AGI-95,000) ÷ 20,000]
GICs are "spot-rated"; the rate of return that is established is based upon the investment made with the deposit.
A "window" GIC may allow for the plan to make their payments or contributions during the first year as compared to a "bullet" GIC in which the total contribution is required in one deposit. Bullet GICs generally fit the needs of defined benefit plans, with window GICs more appealing to defined contribution plans.
The following statements is correct regarding the use of a guaranteed-investment contract/account (GIC) in a corporate retirement plan?
A GICs provide a guaranteed rate of return which is paid regardless of whether the actual rate of return is higher or lower.
A non-qualified deferred compensation plan providing the key employee with a vested beneficial interest in an account is known as:
A funded* deferred compensation plan.
In order for a group term life insurance plan to be non-discriminatory:
A plan must benefit 70% of all employees or a group of which at least 85% are not key employees. If the plan is part of a cafeteria plan, it must comply with Section 125 rules.
The following apply to distributions from an IRA...
After-tax contributions are not subject to taxation or premature distribution taxation. Distributions from IRAs which contain after-tax contributions are governed by the annuity rules in IRC 72. All amounts in an IRA are included in gross estate.
A hybrid plan that uses a discretionary contribution but adjusts for age is a form of an:
Age-based profit sharing plan
The following statements is correct regarding an investment-guarantee account (IG) in a corporate retirement plan
Although the IG provides a guaranteed rate of return, the account is not spot-rated. The account may earn more than the guarantee, which is then paid, or credited, on an annual basis or at the end of the contract period. Another difference between an IG and a GIC is that an IG will usually accept deposits over the contract period, although the amount of the deposits may be prearranged.
The following statements accurately reflects the overall limits and deductions for employer contributions to qualified plans...
An employer's deduction for contributions to a money purchase pension plan and profit sharing plan is limited to the lesser of 25% of covered payroll or the maximum Section 415 limits permitted for individual account plans...
A 403(b) plan participant is subject to the 10% early distribution tax, but
An exception applies if the participant is at least age 55 and separates from service.
NQSOs are taxed as W-2 income for the fair market value of the option less the exercised price when it is exercised...
And then he will be taxed at capital gain rates for the balance when the stock then subsequently sold (long or short term).
The following components must be factored into the calculation of the maximum annual addition limit of a MPP?
Annual additions are defined as new money contributed into the individual account of a participant. Because forfeitures reduce employer contributions and are not added directly to employee's individual accounts, the forfeitures are not included in annual additions. Annual earnings and rollover contributions are not included in annual additions.
"Golden parachute" payments made to a "disqualified" person...
Are includible in W-2 income.
Health, Education, Religious (HER) organizations..
Are only eligible for the eligible for the long service catch-up..
A fiduciary of a retirement plan ...
Are those who provide investment advice to the plan.
Both SEC and FINRA call for voluntary negotiations first.
Barring success with this level of contact both SEC and FINRA require arbitration.
A rabbi trust to pay benefits for either a top-hat plan or an excess benefit plan.
Benefits for a top-hat plan or an excess benefit plan can be paid through a rabbi trust. It is not necessary to obtain a ruling from the IRS prior to making contributions to a rabbi trust, although doing so would be prudent.
The cash balance plan is required to use 3 year cliff vesting.
Cash Balance plans must use 3 year vesting.
Defined contribution pension plans must have a definite allocation formula based upon salary and/or age or any other qualifying factor....
Contributions may be made without regard to company profits and, because it is a pension plan, are fixed by the funding formula and must be made annually.
All DB plans (DB and cash balance) must be covered by PBGC except for professional firms with 25 or fewer employees
Defined contribution plan and is not subject to PBGC... They are all the same, in that they have NO PBGC coverage.
A policy which must cover all eligible dependents if the employer pays the entire premium cost best describes:
Dependents' group life insurance.
The value of phantom stock may be based on the value of a corporation's stock, but phantom stock cannot be traded over the market. Executives who receive phantom stock have a paper account that is used to provide the benefit at retirement.
Depending upon the agreement, the benefit may be paid in cash, stock, a combination of cash and stock, or some other agreed upon consideration.
SERP supplements the pension plan without regard to limits imposed upon salary levels (i.e., maximum salary of $255,000 in 2013) or the maximum funding levels of Section 415
Do not confuse with an excess benefit plan which extends the benefits of a company's qualified plan above the Section 415 limits but still adheres to maximum salary limitations.
If a leasing organization provides at least a 10% money purchase plan with immediate vesting, and the leased employees constitute less than 20% of the total number of nonhighly compensated.....
a company does not have to include the leased employees under the retirement plan he provides.
There no provision foreducation withdrawals from qualified plans.
Education withdrawals are allowed in IRAs.
Section 415(c) limits
Elective Deferral and Catch-Up Contribution Limits
A supplemental deferred compensation plan that pays retirement benefits on salary, above the Section 415 limits, at the same level as the underlying retirement plan is known as:
Excess benefit plan. (Quiz 4, Question 5134)
Which of the following statements are correct regarding a Medicare HMO enrollee's options to go outside of the HMO for health care?
HMOs that have "risk" contracts with Medicare receive a set monthly fee to provide all their enrollees covered health care. Since Medicare has already paid for this care, and beneficiaries have agreed to receive their care through the HMO, neither Medicare nor the HMO have financial responsibility for persons who go outside of the HMO, except in the case of emergencies. If an HMO has a "cost" contract with Medicare, the Medicare enrollees can go outside of the HMO and still receive Medicare reimbursement subject to copayments and deductibles.
VEBAs may not offer retirement benefits...
Having retirement as a factor that would lead to benefits would make the plan too similar to a deferred compensation or retirement plan.
A premature distribution from a qualified retirement plan is allowed at age 52 without a 10% additional tax when a participant:
I. Becomes obligated for payment of plan benefits to an alternate payer under a qualified domestic relations order (QDRO). II. Separates from service and takes an accepted form of systematic payment.
The following are correct statements about self-employed retirement plans...
I. Benefits provided by a self-employed defined benefit plan cannot exceed the lesser of $205,000 or 100% of income. II. May be established by an unincorporated business entity. III. Such plans are permitted to make loans to common law employee participants.
The following statement(s) concerning Unrelated Business Taxable Income (UBTI) is/are accurate
I. Dividends, interest, and otherincome derived from investments in a business are not subject to UBTI. (II) A direct business activity carried on for the production of income is considered a trade or business for UBTI purposes. (III) Securities of the employer purchased with loan proceeds by an Employee Stock Ownership Plan (ESOP) are not subject to UBTI.
The following statements are true in regards to Section 457 plans...
I. Eligible plan sponsors include non-profit organizations, and governmental entities. II. In-service distributions after age 70 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...
The following accurately describes the characteristics of a "Rabbi trust"
I. It is an irrevocable trust but assets are still subject to the employer's creditor demands. II. Retirement payments out of the trust are subject to ordinary income taxes.
The following is pertinent when an employee is faced with the decision to stay with the old pension formula or to switch to the new cash balance plan formula
I. Retirement expectations. II. Intent to begin receiving benefits. III. Current value of accrued benefits. IV. Possibility that needs may change.
Services provided on a discounted or free basis to employees are not includible in taxable income to the employee under which of the following circumstances?
I. The employer must incur no substantial cost. II. Services offered to the employees must be in the line of business . III. Services cannot be discounted more than 20% of the price that is available to customers. IV. If there is a reciprocity agreement between two unrelated employers in the same line of business.
The following statements accurately describes a situation where the use of a Flexible Spending Account (FSA) would be advisable...
I. The employer's medical plan has large deductibles/ coinsurance/ copayment provisions. II. There is a need for benefits that are difficult to provide on a group basis. III. The employees are primarily non-union and operating outside of a collective bargaining agreement. IV. There are a great many employees who have an spouse with duplicate medical coverage.
The following statements concerning the use of life insurance as an incidental benefit provided by a qualified retirement plan (are) correct...
I. The premiums paid for the life insurance policy within the qualified plan are taxable to the participant at the time of payment. II. Under the 25 percent test, if term insurance or universal life is involved, the aggregate premiums paid for the policy cannot exceed 25 percent of the employer's aggregate contributions to the participant's account. If a whole life policy other than universal life is used, however, the aggregate premiums paid for the whole life policy cannot exceed 50 percent of the employer's aggregate contributions to the participant's account. In either case, the entire value of the life insurance contract must be converted into cash or periodic income at or before retirement.
69/115/188
IRA Tax Deductible Phase Outs.
ISO Taxation
ISOs are not taxed at the time of grant or at exercise. The bargain element value at exercise is $84,000 ($90,000 - $6,000 = $84,000) results in an AMT adjustment for that amount. Incentive stock options are exempt from Section 409A and are not subject to FICA, FUTA, or federal withholding.
Safe Harbor Rules: Leased employee
If either the leased employees are more than 20% of the nonhighly compensated or the leasing agency does not provide the leased employees with a money purchase plan with immediate entry, 100% vesting on entry and at least a 10% formula, the safe harbor fails and Mr. Williams must include the leased employees under the plan that he offers.
HC are limited by the ADP of the nonhighly employees...
If the nonhighly employees are deferring 1% then the highlys can defer 2%
SERP which provides benefits in excess of the Section 415 limits AND..
Ignores the covered compensation limits
What is the maximum permitted deductible employer contribution to the profit sharing plan?
In 2013 under PPA, an additional contribution of up to 6% more than the 25% of participants' compensation overall limit may be made or an additional $30,000 (6% of $500,000 = $30,000).Note: The overall limit for the profit sharing plan would be 25% of participating payroll if the defined benefit plan were covered by PBGC.
the following statements correctly describe the maximum difference between the base benefit percentage and the excess benefit percentage for this plan...
In general, the excess benefit percentage cannot exceed .75 for any given year, and no more than 35 years can be used in calculation of the excess benefit (a maximum of 26.25%). The excess percentage (the total benefit percentage plus permitted disparity) cannot be more than double the base percentage (e.g., if the base percentage is 10%, the excess percentage cannot exceed 20% and if the base is 30% the excess cannot exceed 56.25, also less than 2 times the base).
Everyone (with earned income) can make a $5,500 contribution to an IRA in 2013, without respect to income or "active participation" status.
In some cases, however, phaseouts may directly impact the deductibility of these contributions depending on income levels.
The following individuals are subject to the Keogh plan rules...
Individuals who serve as corporate directors are treated as self-employed (and are therefore subject to the Keogh rules for an unincorporated business). "Owner employees" (i.e., individuals who own the entire interest in an unincorporated trade or business) are treated as self-employed individuals. A partnership can establish a Keogh plan in which the partners may elect to participate.
The maximum contribution that can be made to a DBP..
Is whatever the actuary determines needs to be made to the plan.
The distribution is from a qualified plan after the attainment of age 55, incur no penalty.
Non-qualified distributions from a Roth IRA come out in the order of contributions, conversions and then earnings. The first is not subject to income tax or penalty because it is from contributions. The second is from rollovers, which have been subject to taxation. However, because they have been rolled over within the last five years, there is a penalty and there is no exception...
Which of the following recommendations would you make to improve employee appreciation of the defined benefit plan
Low-cost methods to improve employee appreciation of defined benefit plans include holding more frequent meetings with employees to explain the benefit formula, providing annual statements that include a projection of future benefits, comparing the potential benefits with other types of retirement plans, and letting employees know the amount that the company contributes to the plan and what percentage of payroll this amount represents. Recommending a defined contribution plan would not be part of your suggestions, as it falls outside the scope of the question.
The following types of plans may be eligible for favorable forward averaging tax treatment on lump-sum distributions?
Lump-sum distributions from qualified corporate and Keogh plans for common-law employees separating from service may be eligible for forward averaging. Lump-sum distributions, by definition, must come from qualified plans. SEPs and tax-sheltered annuities do not qualify for forward averaging. They are not qualified plans.
Defined benefit plan and cash balance plan contributions are determined by age, as well as salary...
MPP requires annual employer contributions equal to a formula determined by each participant's salary...
Personal objectives of a business owner would include...
Maximizing tax benefits for the owner, maximizing retirement benefits or income for the owner, and providing estate liquidity.
The following is/are true regarding negative elections...
Negative elections are approved by the IRS and they are available for both current and new employees. Negative elections do not require 100% immediate vesting.
If the employer provides a matching contribution with a SIMPLE IRA, the Section 401(a)(17) compensation limitation does not apply. An employer making a 3% matching contribution would contribute up to $12,000 for an employee earning $400,000 or more, if the employee's salary deferral is at least $12,000 (.03 × $400,000).
Note: Nonelective contributions (2%) are subject to the compensation limit of $255,000 in 2013.
The following is/are accurate of a Section 125 cafeteria plan
Only 25% of the total benefits can accrue to key employees.
How do earnings affect Social Security benefit for a 62 year old?
Persons under their full retirement age (FRA) lose $1 of benefit for each $2 of earned income in excess of the exempt amount, which is $15,120 in 2013.
Top Heavy Profits Sharing Plans Must...
Provide a benefit to all non-key employees of at least 3%,
A Denfined Benefit Plan may not cover an employee due to their position in the company, even if they meet the eligibility requirements...
Remember - employees become part of a plan only as early as at the next available entrance date after meeting the eligibility requirements.
The following legal requirements applies to thrift/savings plans...
Section 415(c) restrictions on the maximum amount of contributions permitted by law. Participants are not automatically entitled to direct the investment of their account balances. Employer contributions are deductible when paid to the plan's trust. In-service withdrawals from a Section 401(k) plan (but not a thrift/savings plan) are subject to a showing of financial need.
The IRS does have some flexibility with the 60-day requirements; investors might not be subject to income tax and the 10% penalty on the amount of the check if the IRS finds his circumstance beyond their control...
The IRS considers the 60-day period to begin when a tax-payer actually receives a distribution. As long as the makes the rollover within 60 days of receiving the check, and can prove it, they will not be subject to income tax or the penalty for the amount received. .
Only defined benefit plans can use the offset method.
The Money Purchase Pension plan is a Defined Contribution Plan and must use the excess method.
Which of the following are correct statements about the legal requirements for pension plans that are subject to Pension Benefit Guaranty Corporation (PBGC) coverage?
The PBGC may initiate an involuntary distress termination proceeding if a pension plan is unable to pay pension benefits when they become due. Only defined benefit plans are required to pay PBGC premiums; "pension" plans include some defined contribution plans.
What is the maximum retirement benefit that can be paid from a Profit Sharing Plan.
The actual retirement benefit will be whatever is in the account balance at the time of retirement.
An actuary establishes the required funding for a defined benefit pension plan by determining:
The amount of annual contributions needed to fund single life annuities for the participants at retirement.
The following statements concerning the nature of these accounts is incorrect..
The balance in an employee's FSA cannot be exchanged for cash if not used for expenses incurred.
The following statements is correct regarding the maximum benefit that still meets the incidental benefit rules safe harbor
The cost of term or universal life insurance must be less than 25% of the cost of all plan benefits; and the cost of whole life insurance must be less than 50% of the cost of all benefits. The safe harbor rule states that the death benefit cannot exceed 100 times the expected monthly benefit. For example, if the expected monthly benefit is $1,000, the amount of death benefit could be $100,000.
Premiums under an employer-paid plan are deductible to the employer when paid to the insurance company.
The employee must claim the benefits from the employer-paid policy as taxable income.
Which of the following correctly state an income tax implication of the cost of group life insurance that provides a permanent benefit?
The employer can deduct the premiums if the employee is vested in the insurance in the year the premiums are paid. One of the two conditions that must be met for a policy that provides a permanent benefit to be treated as group term life and receive special income tax treatment. The second requirement is that the part of the death benefit designated as group term for any policy year is at least the difference between the total death benefit under the policy and the employee's "deemed death benefit" at the end of the policy year.
A defined contribution plan's permitted disparity cannot exceed the old age insurance tax of 5.7%...
The excess contribution would be 20.7% or 5.7%, but a Social Security "offset" is only applicable to defined benefit plans. The integration level is not specified in the scenario; however, the integration level is an income level, not a percentage. The integration level would normally be the Social Security wage base.
The maximum defined benefit that can currently be used to determine contributions is...
The lesser of $205,000 (2013) or compensation.
Which of the following statements correctly describe the required characteristics of the plan provided by the leasing organization?
The plan must provide at least a 10% employer contribution, immediate participation, and 100% immediate vesting.
Don't not confuse 2-year Cliff vesting schedule with..
The real 3-year cliff vesting schedule. 0/0/100%
Safe harbor requirements to exclude leased employees from an employer's retirement plan include all but the following:
The retirement plan of the leasing company may be integrated.
Roth distributions are tax free if they are made after 5 years and because of 1)Death, 2)Disability, 3) 59.5 years of age, and 4)First time home purchase.
The treatment for a non-qualifying distribution allows the distributions to be made from basis first, then conversions, then earnings. Basis will be tax free. The conversion is also tax free since we paid tax at the time of the conversion on those earnings.
Which of the following correctly state provisions of a tax-sheltered annuity (TSA) in 2013?
The value of the annuity or other payment receivable by the beneficiary is part of the decedent's estate and is subject to estate tax. Eligibility for the age 50 catch-up begins when the participant attains age 50. The maximum salary reduction is $17,500, plus catch-ups in 2013; thus, if one contributes $5,500 to one plan, $12,000 brings the total to $17,500, assuming no catch-ups. The three-year rule does not exist.
Vested options are Immediately taxable based on ...
The value of the option to the extent the Fair Market Value exceeds the option price.
Sick pay plans can be discriminatory among clearly definable classes, must be in written form, and may require full-time employment to participate.
There is no prohibition against carry-over in sick pay plans, therefore, a worker who is unable to work in December, may be paid in January according to the plan provisions.
The following statements concerning stock bonus plans and ESOPs is(are) true
They both give employees a stake in the company through stock ownership and allow taxes to be delayed on stock appreciation gains.
QNEC are is 100% vested by definition.
You do not forfeit QNEC contributions.
The following statements regarding ISOs and NQSOs is correct...
To the extent that the aggregate fair market value of stock with respect to which incentive stock options are exercisable for the 1st time by any individual during any calendar year exceeds $100,000, such options shall be treated as options which are not incentive stock options.
The following statements is correct regarding a SARSEP?
Under a SARSEP, the maximum salary deferral percentage for each highly compensated employee is 1.25% of the nonhighly compensated employees' ADP. Under a SARSEP, at least 50% of the eligible employees must elect to participate. The 50/40 rule applies only to defined benefit plans. Employer contributions to a SARSEP must be fully and immediately vested, not subject to a vesting schedule.
Safe harbor requirements to exclude leased employees from an employer's retirement plan include all the following:
Under the safe-harbor leasing rules the plan must provide a 10%, non-integrated money purchase plan with immediate vesting. No more than 20% of the employer's non-highly compensated employees may be leased to qualify for the safe harbor rules.
The following statements should you include in your explanation of his unemployment benefits...
Unemployment benefit payments are fully taxable, but they are not subject to FICA or withholding (SUB payments are). The previous earnings of the employee determine the benefits. To receive benefits, a worker must have participated in "covered" employment, earned a minimum income during a base period, and have a continued "attachment" to the work force, meaning willing and able to work at any job for which the employee is suited and qualified by reason of education and experience.
WIth out the proper 83(b) election
W-2 Income is recognized with the vest period is met. Than and sell is subject to proper capital gains rules.
Quiz 15 Questions 18/25
Watch for top heavey & ADP/ACP amounts
The SEP contribution would be limited to 25%,
and it would provide a balance between low administrative costs and employer discretion in future contributions.
the following transactions by a qualified plan's trust are subject to Unrelated Business Taxable Income (UBTI)
income from any type of leverage or borrowing within a plan is subject to UBTI. Additionally, any business enterprise run by a qualified plan is subject to UBTI. There is statutory exemption for rental income.
there is no 25% of covered payroll limitation in a DB plan.
there is no minimum funding standard for profit sharing plans.