Retirement - Wrong Answers

What accounts may be offered as a roth? Are there any income restrictions to these plans?

403b, 401k, 457; no income restriction

Arthur and Beth are getting a divorce. Arthur owns an IRA with an account value of $500,000. Under a QDRO, Beth has which of the following rights relative to Arthur's IRA? A. None B 50% of the value of the account C. 50% of the value of the account when Arthur turns 59.5 D. A QJSA equal to 50% of the value of the account

A - QDROS only apply to qualified plans, 403(b)s and 457s. Not IRAs

Louise has $500k in her IRA at MF A, and withdraws $100k of that IRA. Before 60 days pass, she deposits $100k into an IRA at bank B. When can she next take a 60-day withdrawal?

12 months from either.

Which of the following is true concerning a Rabbi Trust? 1. The rabbi trust provides complete protection for the deferred compensation 2. The rabbi trust is informally funded 3. The employer may fund the rabbi trust from the general assets of the company 4. Employer contributions to the rabbi trust are not subject to payroll taxes until they are distributed to the employee 5. The rabbi trust assets may be used for purposes other than discharging the obligations to the employee.

1 - the trust is not safe from creditors not true 2 - 5 are all true; 5 is in event of bankruptcy they are subject to creditors

Which statement(s) describes the provisions of constructive receipt as it is applied to nonqualified deferred comp pans? 1. Constructive receipt occurs when the funds are available to the employee 2. Constructive receipt by employee results in taxation to the employee of the applicable benefits. 3. If a company goes through a merger or acquisition, the rabbi trust provisions will automatically trigger constructive receipt the the employee 4. If a company owns the deferred comp assets, the employee will not have constructive receipt Select all that are correct.

1,2 and 4 are true. 3 is not automatic, but usually applies. "Springing" Rabbi Trust

which can you NOT do with a 457 non governmental plan: A. continue to tax defer by rolling it into an IRA B. cannot defer tax by rolling the 457 into a Roth IRA c. continue to tax defer by leaving it in the 457 d. can take a full distribution and have employer withhold regular income and FICA tax

A - you cannot roll a 457 to a traditional IRA you can roll it to a roth, leave it alone or take a lump distribution and have employer withhold

Mrs. Fitch recently retired. She received a 100% distribution from her retirement plan. Her employer did not take a 20% mandatory withholding. What kind of plan did she have? A. Defined benefit plan B. 403(b) plan C. Defined contribution plan D. profit-sharing 401(k) plan E. SIMPLE IRA

A SIMPLE IRA is not a qualified plan. 403b functions as a qualified plan.

On what is the maximum deductible contribution in a target benefit plan based?

A maximum of 25% of the aggregate eligible compensation of all covered participants.

Apex wants to reward it's employees but does not have cash to contribute for year-end 2020. The company feels it will be in av ery profitable position during the year 2022. What would you suggest apex do? A. adopt a profit sharing plan and, in lieu of a cash contribution, provide the plan with a promissory note B. adopt a profit sharing plan and borrow the necessary cash for the contributions from a bank C. Adopt an ESOP and fund the contribution with company stoc D. do not start the plan until 2022

B - allows apex to put in the money now and get a tax deduction now. Answer C is good but there is not indication that apex wants to use company stock

Joseph Mills, owner of Mills Manufacturing, has seen excessive employee turnover. He would like to install some kind of retirement plan. The number of employees on the payroll averages 50-60 yearly. He wants a plan that is relatively easy to start and maintain. He will match to a limited extent. Which plan would you suggest? A. SIMPLE IRA B. Profit-sharing 401(k) c. SIMPLE 401(k) D. SEP

B - expensive to implement D - no match, all employer A/C; A allows him to only match up to 3% but can lower match as needed so it wins out over SIMPLE 401k

Which plans can be integrated with social security? Which cannot?

Can be: DB/DC (NOT ESOP) and SEP Can't be: SARSEP, Simple, 401k, 403b

Which of the following qualified plan distributions is exempt from the 10% early withdrawal penalty? A. hardship withdrawal B. distribution due to a husbands/wife in conjunction with a legal separation c. A distribution for the purchase of the participant's principal residence D. a distribution due to separation from service at age 55

D - QDRO is necessary to avoid 10% early draw penalty in legal separation. Principal residence does not mean first residence.

What investment vehicle may not be used to fund a TSA (403b) A. Open-end ivnestment management companies B. Mutualfunds C. Annuities with incidental life insurance D. Blue chip stock in a domestic corporation (cannot be passive)

D - A TSA cannot be funded with common stock. A/B Are the same answer. C is allowable (annuities & incidental life insurance both ok)

Jack, age 40, has been a participant for fewer than two years in company SIMPLE plan. He contributed $3k and his employer matched $600. He plans to leave and take it all as a distribution. How is this taxed / penalized?

Distributions taken within the first two years of a SIMPLE plan are increased to 25% penalty. Since employer match is vested immediately, he is taxed $3,600 ordinary income and assessed a 25% penalty on the lump sum distribution.

requirements/facts: Age 55, sole proprietor, uncomplicated retirement plan, contribute max allowable each year, no employees, annual net profit always exceeds $250k which plan? a. SIMPLE 401k b. Profit-sharing C. SIMPLE D. SEP E. uni-401(k)

E - uni-401k AKA solo-401k allows for $61k/yr + catchup SEP only allows for 61k (no catchup) profit sharing is complicated SIMPLE 401k / SIMPLE IRA are capped at 14k

How are forfeitures in money purchase plan treated?

If forfeitures are not reallocated to the remaining participants, then the remaining will be used to reduce company contributions

If an individual works for 2 companies and there is a 6% max deferral across multiple companies, what is their max allowable contribution to the 401k?

Lesser of $20,500 or 6% of the aggregate salary

Jane divorced Bill. She is age 42. Per the agreement (QDRO), she receives a direct distribution of Bill's qualified plan account balance ($1,000,000) now. If she receives one half of the account, what will be the amount of her check from the plan admin? A. $500k B. $500k (less 10%) C. $500k (less 20%) D. $500k (less 30%) E. $250,000

No penalty for an early distribution in a QDRO. This is a qualified plan so it applies. The 20% is the mandatory withholding, which applies to qualified plans.

Tom Sellers, owns TS inc and has net income of $80,000 from business. Which plan would provide maximum allowable contribution? SEP, Simple 401k, Simple IRA or Keogh?

SEP allows 25% contribution, or 20k SIMPLE only allows 14k + 3% match (2,400) for total of 16.4k Keogh is an incomplete answer

Which of the following plan contributions is not subject to FICA and FUTA A SEP B SARSEP C 403(b) D SIMPLE IRA E SIMPLE 401k

SEP, the rest all have employee contributions which are subject to payroll tax

Gail, a division manager for Quick, Inc. is granted an ISO for 1,000 shares of stock at $20 per share. Three years later, she exercises them when the stock is $30 per share. Then, two years later, she sells the stock at $35 per share. How is she taxed and how does the company deduct it?

The company does not get a deduction when she exercises or sells, only when they are granted. Gail will recognize the entire $15k as a LTCG.

What is the maximum amount of retirement benefit for a participant in a target benefit plan in 2022?

the value of the participant's account at retirement