Life insurance - Chapter 11 - Retirement Plans

Which of the following is TRUE about a qualified retirement that is "top heavy"?

A plan is considered to be top heavy if more that 60% of plan assets are attributable to "key employees" as of the last day of the prior plan year.

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

Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan This same early withdrawal penalty applies to funds taken out of 401k plans and traditional individual retirement accounts.

A 55 year old recently received a $30,000 distribution from a previous employer's plan 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-All withdrawals from a qualified retirement plan are taxable as current income. In addition, any withdrawals made before age 59 1/2 is subject to an additional tax penalty of 10% of the amount withdrawn.

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

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

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

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?

employee

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

annuity

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

Not limited by dollar amount

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

59 1/2

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?

Distributions is subject to federal income tax withholding A participant must complete a rollover to another qualified plan within 60 days or the distributions considered a nonqualified distribution and is subject to taxes and penalties. A plan sponsors must withhold 20% of the distribution for federal taxes on a rollover. Once the rollover takes place to the new custodian, the remainder of the distribution is released.