retirement 3

Regarding rollovers, if the distribution is not rolled over within the required time frame, the distribution becomes taxable. 19

true 19

An estate cannot be treated as a designated beneficiary of a traditional IRA. 22

true 22

When there is more than one designated beneficiary, the beneficiary with the shortest life expectancy is used as the measuring life for purposes of determining the distribution period. 25

true 25

Max, age 47, has been participating in his employer's SIMPLE IRA for one year. If he withdraws $1,000 from this plan this year and the withdrawal is not covered by an exception to the penalty tax on premature withdrawals, he will owe a penalty tax of:

$250

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? 1.John can elect a single life annuity without spousal approval. 2.A single life annuity would provide the largest monthly amount of payout. 3.To accept a single life annuity, John must inform Billie but does not have to obtain her consent. 4.To accept a single life annuity, John must obtain a signed, written waiver from Billie.

2 & 4

In which of the following retirement plans is a participant NOT considered an active participant for determining the deductibility of traditional IRA contributions?

A participant in a Section 457 plan.

Bernard recently passed away at age 64 before beginning distributions from his employer's money purchase plan. Bernard was a single individual throughout his life and named his estate as the beneficiary of his accrued plan benefit. Over what time period must this benefit be distributed, if at all?

By calendar year end of the 5th year after the date of Bernard's death

Derek owns a Roth IRA with a current value of $200,000. He turns 70½ years old on August 23, 2018. Which of the following statements is CORRECT?

Derek can continue making contributions to his Roth IRA assuming he has qualifying earned income.

Employees are permitted to make after-tax contributions to the SIMPLE. 10

FALSE 10

Simplified employee pension (SEP) IRAs are primarily used by large corporation with 100 employees or more. 11

FALSE 11

Assets in SIMPLE IRAs can be invested in life insurance. 3

FALSE 3

Simplified employee pension (SEP) contributions made by an employer is capped at $18,500 for 2018. 2

FALSE2

Generally, for SIMPLE contributions:

TAX deferred

Section 457 (public, government) plans do not incur a 10% penalty for early withdrawal prior to retirement or upon termination of employment. 1

TRUE 1

With respect to simplified employee pension (SEP) contributions, employer contributions are currently excludible from the employee's gross income. 10

TRUE 10

SIMPLEs employee elective deferrals are subject to payroll tax. 2

TRUE 2

Section 403 (b) plans are eligible for rollover treatment to IRAs. 3

TRUE 3

An investment in life insurance is prohibited in a SEP plan? 5

TRUE 5

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 form of qualified plans must generally provide for a QJSA form of benefit EXCEPT

an ESOP

Allison retired five years ago. She will be 70 years old on February 28, 2018. When must Allison begin taking distributions from her Section 401(k) plan?

april 1 2019

Steve has dies and named only his adult daughter, Sarah, as the designated beneficiary of his qualified plan account balance. Steve had not yet started making RMDs from this account since he died at 64. When must Sarah begin taking distributions from Steve's account to stretch the balance over her life expectancy?

by dec 31 of the year following steve's death

A simplified employee pension plan (SEP):

can be established by any type of employer

A required minimum distribution payment may be eligible for rollover treatment. 13

false 13

The 20% mandatory withholding requirement applies to distributions from IRAs. 14

false 14

Distributions from qualified plans, SEP plans, SIMPLE plans, and Section 403(b) annuities may qualify for special lump-sum distribution tax treatment. 15

false 15

A nonspouse beneficiary following the death of a traditional IRA owner may roll over the distribution into an IRA the nonspouse has previously established and funded. 16

false 16

A participant may receive an in-service distribution:

from a profit sharing plan

Beverly's husband, age 67, dies with a $1.2 million balance in his traditional IRA. Beverly is the designated beneficiary . 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. She is able to roll her deceased husband's traditional IRA over to her own traditional IRA 26

true 26

A disadvantage of Carol, a 45 year old widow with no children, in considering naming her estate as the beneficiary of her traditional IRA is that her estate cannot be treated as a designated beneficiary for purposes of determining the required minimum distributions after she dies. 27

true 27

In regards to required minimum distributions (RMDs) from a Roth IRA following the death of the account owner, 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. 27

true 27

Required minimum distributions from a qualified plan must be calculated using the Uniform Lifetime Table in all cases EXCEPT:

when the designated beneficiary is the participant's spouse and the spouse is more than 10 years younger than the participant.

Under the required minimum distribution (RMD) rules for IRAs, a penalty tax of:

50% is assessed on the amount of required minimum distribution not taken before the required date.

Required minimum distributions from a traditional IRA must begin no later than:

April 1 of the year following the year in which the IRA owner attains age 70½.

A simplified employee pension (SEP) plan requires a specific employer contribution each year. 12

FALSE 12

Section 457 plan contributions are after-tax but funds grow tax deferred. 4

FALSE 4

Employer matching contributions to a Section 403 (b) plan must be immediately 100% vested to the employee. 5

FALSE 5

A SIMPLE requires ADP testing of employee elective deferral contributions. 6

FALSE 6

The maximum annual elective deferral contribution to a SIMPLE 401(k) is $18,500 (2018) for an employee who has not attained age 50. 7

FALSE 7

Unlike traditional IRAs, SIMPLE IRA assets can be invested in life insurance. 8

FALSE 8

The employer isn't required to make any contributions to a SIMPLE IRA plan on behalf of employees. 9

FALSE 9

The premature distribution penalty does NOT apply to which of the following qualified plan distribution that is part of a series of substantially equal periodic payments made at least annually over the life or life expectancy of the participant. 13

true 13

Post-death distributions of a traditional IRA interest to a qualifying charity as beneficiary will be subject to ordinary income tax as income in respect of a decedent. 17

false 17

Maria has a traditional IRA valued at $500,000. She named her daughter, Faith, as beneficiary of the account. If Maria dies prematurely, Faith can rollover the IRA into her own Section 401(k) plan. 18

false 18

Which of the following statements regarding the net unrealized appreciation (NUA) portion of employer stock received in a lump sum distribution is CORRECT? The NUA portion is:

taxed at the capital gains rate when the stock is sold.

Which of the following are reasons a small business might choose the SIMPLE over a Section 401(k) plan?

-Because a SIMPLE is less costly to operate, it is generally the better choice if the employer is not concerned about the design constraints of the plan. -The employer expects that it could not satisfy the Section 401(k) nondiscrimination test. -If a Section 401(k) plan would be top heavy (benefits for key employees will exceed 60% of total benefits), and the employer wants to minimize employer contributions.

All of the following statements regarding the basic provisions of a Section 457 plan are correct

-a Section 457 plan is a qualified plan of governmental units or agencies, and non-church-controlled, tax-exempt organizations. -distributions from a Section 457 plan are not subject to an early withdrawal penalty. -in 2018, an individual who has attained age 50 may make additional catch-up contributions of up to $6,000.

David, who turned age 70½ on June 30, 2018, owns 10% of BCB Company. He has accumulated $5 million in BCB's stock bonus plan as of December 31, 2017 and $5.5 million as of December 31, 2018. The uniform lifetime table distribution factor for age 71 is 26.5. If David receives a distribution of $180,000 during 2018, how much in penalties will he be required to pay for 2018?

0

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.

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 the participant enters the plan

TSAs/Section 403(b) plans can invest in individual stocks and bonds but not options or futures. 1

FALSE1

A 25% early withdrawal penalty may apply to distributions taken within the first 2 years of participation in the SIMPLE IRA plan. 4

TRUE 4

To establish a SIMPLE IRA plan, a business cannot have more than 100 employees (only counting those who earned $5,000 or more of compensation). 6

TRUE 6

An advantage of SIMPLE IRA is there are no actual deferral percentage (ADP) or actual contribution percentage (ACP) tests. 7

TRUE 7

Employees who participate in a SEP plan are considered active participants in an employer-sponsored retirement plan for the tax year in which an employer contribution is made. 8

TRUE 8

The SEP contribution limit for 2018 is the lesser of 25% of covered compensation or $55,000. 9

TRUE 9

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. Beverly's only option is to withdraw the funds from her husband's IRA using the five-year rule. 19

false 19

Valerie, an unmarried individual, recently died at age 74, leaving behind an IRA with a FMV of $200,000. She began taking RMDs after attaining age 70 1/2 and correctly reported the same on her income tax returns. Before her death, Valerie named her granddaughter, Dawn, as the designated beneficiary of her IRA. Now that Valerie has died, Dawn has come to you for advice with respect to how these IRA benefits should be distributed. What do you tell her?

in the year following valerie's death, dawn must begin reduced by 1 each subsequent year

Mike is age 69 and his spouse, Kathy is age 64. If Kathy dies before Mike, what is the best option for her IRA if Mike wants to delay distributions as long as possible?

keep the assets in her IRA and take distributions when kathy would have reached 70 1/2

Gary is 56 years old and has a traditional IRA comprised of deductible contributions. He will withdraw $25,000 from the account to use as a down payment on a second home to be used as a winter retirement home. What are the tax ramifications of this withdrawal?

the withdrawal is subject to ordinary income tax and a 10% early withdrawal penalty tax.

Funds from qualified pension, profit-sharing, stock bonus, Section 401(k), Section 403(b), and Section 457 plans can be converted to a Roth IRA. 11

true 11

Distributions from a qualified plan (except life insurance distributions) or from an individual retirement arrangement can be made on a tax-free basis if the distribution is reinvested within 60 days in an IRA. 12

true 12

A partial distribution from a qualified plan directly to the participant is subject to the mandatory 20% withholding. 14

true 14

Under the IRA minimum distribution rules, if the IRA account owner dies before distribution payments begin the beneficiary can begin receiving distributions based on the beneficiary's individual life expectancy. 15

true 15

If an individual take's advantage of the plan's loan provision, a participant's loan must be repayable by its terms within 5 years, except if the loan is used to acquire a participant's principal residence. 16

true 16

If the distribution is not rolled over within the required time frame, the distribution becomes taxable. 17

true 17

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). 20

true 20

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). 21

true 21

Distributions made to an alternate payee under a QDRO do not subject the payor to the 10% penalty tax on premature distributions. 23

true 23

Distributions made to an alternate payee under a QDRO are subject to income tax. 24

true 24

Mike participates in a Section 401(k) plan maintained by his employer. His vested account balance is $18,000, and he has not taken any plan loans. What is the maximum loan amount Mike can take from his Section 401(k) plan?

10,000

What is the maximum elective deferral limit for a Section 403(b)/TSA plan in 2018, assuming no catch-up provisions apply?

18,500

Myra, age 52, has worked for XYZ Educational Opportunities ("The last word in not-for-profit education") for the past 18 years. XYZ sponsors a Section 403(b)/TSA plan. Myra wants to contribute the maximum amount possible to her TSA. Assuming Myra has never before used her available catch-up allowance, what is the total maximum amount she can contribute to her TSA plan for 2018?

27,500

Emma is a school librarian and participates in a Section 403(b) plan at work. Four years ago, she borrowed $10,000 from the plan. Eight months ago, she made the final payment of $1,000 to pay off that loan. Her vested account balance is currently $400,000. What is the maximum loan amount Emma can take from the plan this year?

49,000

Charles was an employee of ABC Corporation for 20 years. He received a lump sum distribution from his qualified retirement plan this year. The distribution was comprised entirely of ABC stock valued at $100,000 on the date of distribution. The value of the stock contributed to Charles's individual account in the plan over the years was $70,000. If Charles does not sell the stock this year, what amount is included in his gross income this year as a result of the distribution?

70000

Steve retired from ABC Corporation this year and received a lump sum distribution from ABC's qualified retirement plan. The distribution consisted entirely of ABC stock valued at $200,000 on the date of distribution. The fair market value of the stock at the time of contribution to the plan was $80,000. Assuming Steve does not sell the stock this year, what amount is included in Steve's gross income this year as a result of the distribution?

80,000

Shawn, age 32, needs $10,000 for the purchase of a primary residence. She has no other source of funds at her disposal. Her Section 401(k) plan allows participant loans. The current value of Shawn's deferral account is $14,000 of which $9,500 is her aggregate vested balance. What is the maximum loan Shawn can take from the Section 401(k) plan?

9500

Historically, employees receiving lump-sum distributions from qualified plans were allowed to elect from one of several options available under special tax rules; however, many of these tax advantages have been eliminated and distributions are treated as ordinary income when calculating income tax for the year. 18

true 18

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

Mike is age 69 and his spouse, Kathy is age 64. If Mike dies, what is the best option for his IRA if Kathy wants to delay distributions as long as possible?

rollover his IRA to her IRA and take distributions based on her own required beginning date (age 70 1/2)