Retirement Plans Exam Review

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?

100

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

20% is withheld for income taxes

A qualified profit-sharing plan is designed to

allow employees to participate in the profits of the company

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid

mandatory income tax withholding on the transfer amount

Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the

marital deduction

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?

The account can be rolled into the surviving spouse's IRA

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a

profit-sharing plan

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

$25,000

All of the following statements about traditional individual retirement accounts are

-10% penalty is applied to withdrawals after age 59 1/2 -Withdrawals are normally tax-free to the recipient -Contributions are not tax deductible

Premature IRA distributions are assessed a penalty tax of

10%

All of the following statements about traditional individual retirement accounts are false EXCEPT

10% penalty is applied to withdrawals before age 59 1/2

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?

none

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?

59 1/2

How long does an individual have to "rollover" funds from an IRA or qualified plan?

60 days

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

Annuity

Traditional individual retirement annuity (IRA) distributions must start by

April 1st of the year following the year the participant attains age 70 1/2

What type of employee welfare plans are not subject to ERISA regulations?

Church plans

How are Roth IRA distributions normally taxed

Distributions are received tax-free

At the age of 45, an individual withdraws $50,000 from his Qualified Profit-Sharing Plan and then deposits this amount into a personal savings account. This action would result in

Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 withholding. Which federal taxes apply if none of the funds were rolled over?

Income taxes plus a 10% penalty tax on $30,000

Which of these retirement plans can be started by an employee, even if another plan is in existence?

Individual Retirement Account (IRA)

Which plan is intended to be used by a sole proprietor and the employees of that business?

Keogh Plan

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?

Ordinary income tax and a 10% tax penalty for early withdrawal

Post-tax dollar contributions are found in

Roth IRA investments

In a qualified retirement plan, the yearly contributions to an employee's account

are restricted to maximum levels set by the IRS

An employer that offers a qualified retirement plan to its employees is eligible to

make tax-deductible contributions to the plan

In an individual retirement account (IRA), rollover contributions are

not limited by dollar amount