Unit 7 Quiz

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? a) Rollover her IRA to his IRA and take distributions based on his own required beginning date (age 70 1/2) b) Keep the assets in her IRA and take distributions when Kathy would have reached 70 1/2.

b) Keep the assets in her IRA and take distributions when Kathy would have reached 70 1/2.

TRUE/FALSE 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.

FALSE

TRUE/FALSE 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.

FALSE

TRUE/FALSE 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.

FALSE

TRUE/FALSE 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.

FALSE

TRUE/FALSE 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.

TRUE

TRUE/FALSE An estate cannot be treated as a designated beneficiary of a traditional IRA.

TRUE

TRUE/FALSE 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

TRUE

TRUE/FALSE Distributions made to an alternate payee under a QDRO are subject to income tax.

TRUE

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

TRUE

TRUE/FALSE 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).

TRUE

TRUE/FALSE 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).

TRUE

TRUE/FALSE 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.

TRUE

TRUE/FALSE 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.

TRUE

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. a) 2 and 4. b) 4 only. c) 3 only. d) 1,2 and 3.

a) 2 and 4.

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? a) By calendar year end of the 5th year after the date of Bernard's death b) According to the life expectancy of the oldest beneficiary of Bernard's estate c) It does not need to be distributed because it is taxable in full in Bernard's estate d) According to the life expectancy of the youngest beneficiary of Bernard's estate reduced by 1 year annually

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

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? a) Rollover his IRA to her IRA and take distributions based on her own required beginning date (age 70 1/2) b) Keep the assets in his IRA and take distributions when Mike would have reached 70 1/2.

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

All of the following form of qualified plans must generally provide for a QJSA form of benefit EXCEPT a) a cash balance pension plan b) a money purchase pension plan c) An ESOP d) a target pension plan

c) An ESOP

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? a) By December 31 of the year Steve died b) When the plan document states that she must take distributions c) By December 31 of the year following Steve's death d) By Sept 30 of the year following Steve's death

c) By December 31 of the year following Steve's death

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? a) Dawn can toll the IRA over into an inherited IRA and take distributions beginning at age 70 1/2 b) In the year following Valerie's death, Dawn must begin taking distributions from the IRA over Valerie's remaining single life expectancy. c) In the year following Valerie's death, Dawn must begin taking distributions from the IRA over Valerie's remaining single life expectancy, reduced by 1 each subsequent year. d) As a nonspouse beneficiary, Dawn must take a lump-sum distribution by the end of the year.

c) In the year following Valerie's death, Dawn must begin taking distributions from the IRA over Valerie's remaining single life expectancy, reduced by 1 each subsequent year.

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) the assignment of income doctrine. b) a collateral assignment. c) a qualified domestic relations order (QDRO). d) qualified domestic trust (QDOT).

c) a qualified domestic relations order (QDRO).

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? a) If Ann elects a lump-sum distribution from her father's IRA, the distribution will be taxed as ordinary income plus a 10% penalty. b) Ann may execute a direct transfer of the account into a traditional IRA she established 10 years ago and has been funding each year. c) Ann may execute a direct transfer of the account balance into an inherited IRA and defer required minimum distributions until she attains age 70½. d) 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.

d) 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.

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? a) The balance must be distributed by December 31 of the year following the year of the owner-participant's death b) The balance must be distributed by December 31 of the year of the owner-participant's death c) The balance must be distributed by September 30 of the year following the year of the owner-participant's death d) Over the longer of 5 years or the remaining life expectancy of the owner-participant, reduced by one for each subsequent year

d) Over the longer of 5 years or the remaining life expectancy of the owner-participant, reduced by one for each subsequent year

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: a) December 31 of the year following the year of the participant/owner's death. b) December 31 of the year of the participant's death. c) April 15 of the year the participant enters the plan. d) September 30 of the year following the year of the participant/owner's death.

d) September 30 of the year following the year of the participant/owner's death.

A participant may receive an in-service distribution: a) in an amount greater than his vested account balance. b) from a defined benefit pension plan at any time. c) from a defined contribution pension plan at any age, if the funds have been in the account for at least two years. d) from a profit-sharing plan.

d) from a profit-sharing plan.