Chapter: Qualified plans

For a retirement plan to be qualified, it must be designed for whose benefit? A. employees B. key employee C. employer D. IRS

A

employer contributions made to a qualified plan A. are after-tax contributions B. are tax annually as salary C. are subject to vesting requirements D. may discriminate in favor of highly paid employees

C

an Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is A. roth IRA B. SEP C. 403(b) Plan (TSA) D. Keogh Plan

C only employees of public education (local, state, or federal), and charitable organizations

under the 4019(k) bonus or thrift plan, the employer will contribute A. all of the money to the plan B. 30% of what the employees contributes C. 75% of what the employee contributes D. an undetermined percentage for each dollar contributed by the employee

D

all of the following employees may use a 405(b) plan for their retirement EXCEPT A. the CEO of a private corporation B. a school bus driver C. a part-time classroom aide D. the vice president of a charitable organization

A only employees of public education (local, state, or federal), and charitable organizations

all of the following are general requirements of a qualified plan EXCEPT A. the plan must be for the exclusive benefits of the employees and their beneficiaries B. the plan must be permanent, written and legally binding C. the plan must provide an offset for social security benefits D. the plan must communicated to all employees

C Plans must meet the general requirements established by IRS

which of the following is TRUE of a qualified plan? A. it does not need to have a vesting schedule B. it may discriminate in favor of highly paid employees C. it may allow unlimited contributions D. it has a tax benefit for both employer and employee

D

which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? A. SEPs are suitable for large companies B. SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income C. SEPs have a higher tax deductible contribution limit than an IRA D. employer contributions are not included in the employee's gross income

A an SEP is an benefit plan that is designed to be provided by a small employer for the benefit of the employees

all of the following statements are true regarding tax-qualified annuities EXCEPT A. they must be approved by the IRS B. withdrawals are taxed C. employer contributions are not tax deductible D. annuity earnings are tax deferred

C

SIMPLE Plans require all of the following EXCEPT A. no more than 100 employees B. employees must receive a minimum of $5000 in annual compensation C. at least 1000 employees D. no other qualified plan can be used

C just for small business and no more than 100 employees

which of the following is NOT true regarding a nonqualified retirement plan? A. it can discriminate in benefits and selecting participants B. earnings grow tax deferred C. it needs IRS approval D. contributions are not currently tax deductible

C nonqualified retirement plans do NOT need the IRS approval for favorable tax treatment of deductions and contributions

which of the following scenarios will incur a 10% tax penalty on distributions? A. distributions are made prior to the age of 72 B. distributions are made to the beneficiary C. distributions are made as part of a qualified rollover D. distributions are made on a policy before age 59 1/2

D

which type of retirement account does not require the owner to start taking distributions at age 72? A. nonqualified IRA B. standard IRA C. traditional IRA D. roth IRA

D In contrast with traditional IRA, distributions do not have to begin at age 72

what is the primary purpose of a 401(k) plan? A. life insurance distribution B. retirement C. education funds D. to receive dividends over a certain period

B

Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose A. 401(k) plan B. HR-10 (Keogh Plan) C. Section 457 Deferred Compensation Plan D. 403 (b) plan

B

all of the following would be different between qualified and nonqualified retirement plans EXCEPT A. taxation of contributions B. IRS approval requirements C. taxation accumulation D. taxation of withdrawals

C

how are contributions to a tax-sheltered annuity treated with regards to taxation? A. they are taxed as income for the employee B. they are taxed as income for the employee, but are tax free upon withdrawal C. they are not included as income for the employee, but are taxable upon distribution D. they are never taxed

C

A 403(b) plan, commonly referred to as a TSA, is available to be used by A. postal employees B. self-employed persons C. teachers and not-for-profit organizations D. government workers

C

all of the following types of distributions are considered exceptions to the early distribution rule and, there fore, are not subject to the penalty tax EXCEPT A. a loan from the plan B. participant's debt C. participant's disability D. death of participant

B

which type of retirement account does not require the owner to start taking distributions at age 72? A. traditional IRA B. roth IRA C. nonqualified IRA D. standard IRA

B

who may contribute to a Keogh (HR-10) plan? A. corporate executive B. partner with at least 5% ownership C. self-employed plumber D. manager of a store

C

a tax-sheltered annuity is a special tax-favored retirement plan available to A. certain age groups only B. certain groups depending on factors such as race, gender, and age C. certain groups of employees only D. anyone

C

which of the following applicants would NOT qualify for Keogh Plan? A. someone who is over 25 years of age B. someone who works for a self-employed individual C. someone who works 400 hours per year D. someone who has been employed for more than 12 months

C a person must have worked at least 1000 hours per year to be eligible for a Keogh Plan

all of the following would be eligible to establish a Keogh retirement plan EXCEPT A. a sole proprietor of a service station who employs four employees B. a sole proprietor of film development store with no employees C. a hair dresser who operates her business at her house D. the president and employee of a family corporation

D Keogh plans are for self-employed individuals and their employees

if a company has a Simplified Employee Pension plan, what type of plan is it? A. the same as an IRA, with the same contribution limits B. an undefined contribution plan for large businesses C. a qualified plan for a small business D. the same as a 401(k) plan

C

which of the following is an IRS qualified retirement program for the self -employed? A. split dollar B. buy-sell agreement C. 401 (k) plan D. Keogh plan

D The Keogh and HR-10 allow self-employed individuals to establish tax favored retirement plans for themselves as employers and their employees

an IRA purchased by a small employer to cover employees is known as a A. 401(k) plan B. defined contribution plan C. 403 (b) plan D. Simplified Employee Pension plan

D a Simplified Employee Pension (SEP) is an employer sponsored IRA

under a SIMPLE plan, which of the followings is TRUE regarding taxation on both contributions and earnings? A. they are tax deferred until withdrawn B. taxes must be paid in full C. employer's matching contribution can be 50% of employee's salary D. 75% of employee's contributions are taxed

A

a 35 year old spouse of the insured collects early distributions from her husband's retirement plan as a result of a divorce settlement. What penalties, if any, will she have to pay? A. age-based penalty stipulated in the contract B. no penalties C. 10% penalty tax D. 15% penalty tax

B

if a retirement plan or annuity is "qualified", this means A. it is noncancellable B. it is approved by the IRS C. it has a penalty for early withdrawl D. it accepts after tax contributions

B qualified retirement or qualified plans is approved by IRS

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? A. Profit sharing plan B. 401(k) plan C. Tax-sheltered account plan D. HR 10 plan

A a profit sharing plan is where the employer will contribute the money into an employee's retirement plan when the company shows a profit.