Module 5--Retirement Plans
An employee earns $1,360.00 semimonthly and defers 1% to a 401(k) plan. Calculate any federal taxes that must be withheld from the 401(k) deferral.
$1.04 Under IRS rules, employee contributions to a 401(k) plan are not subject to income tax but are subject to social security (6.2%) and Medicare (1.45%) taxes. 6.2%x1360=$84.32 ; 1.45%x1360=19.72 ; $84.32+19.72=$104.04 ; 104.04x1%=$1.04
An employee turns age 50 in March and works for an employer that allows catch-up contributions to its 401(k) plan. What is the employee's maximum deferral?
$27,000.00; Under IRS rules, a 401(k) plan may allow an employee age 50 or older to make an additional $6,500.00contribution beyond the $20,500.00 deferral limit.
Which of the following statements is true regarding 401(k) plans?
401(k) plan deferrals are not subject to federal income tax when deferred.; Under IRS rules, employee contributions to a 401(k) plan are not subject to income tax but are subject to social security (6.2%) and Medicare (1.45%) taxes. Under IRS rules, a 401(k) plan may allow an employee age 50 or older to make an additional $6,500.00 contribution beyond the $20,500.00 deferral limit. 403(b) plans are designed for tax-exempt organizations.
An employee earns $50,000.00 annually, is paid biweekly, and defers $625.00 each payroll to a 403(b) plan. Calculate any federal taxes to be withheld from the 403(b) contribution from the first payroll of the year.
50,000/12=$4166.67 monthly; 4166.67/625=6.67% $47.81; Under IRS rules, employee contributions to a 403(b) plan are not subject to income tax but are subject to social security (6.2%) and Medicare (1.45%) taxes.
Who is eligible to make a catch-up contribution to a 401(k) deferred compensation plan?
Employees who will be age 50 or older during the calendar year; Under IRS rules, when an employer's 401(k) plan allows catch-up contributions, a participant who reaches age 50 before the end of a calendar year is eligible to make catch-up contributions.
Which of the following statements is true regarding 401(k) plans?
In 2022, the maximum 401(k) deferral for employees under 50 years of age to a 401(k) plan is $20,500.00.; Under IRS rules, a 401(k) plan may allow an employee age 50 or older to make an additional $6,500.00 contribution beyond the $20,500.00 deferral limit. Under IRS rules, employee contributions to a 401(k) plan are not subject to income tax but are subject to social security (6.2%) and Medicare (1.45%) taxes. Employers are not required to match an employee's 401(k) contribution.
Which of the following plans can discriminate in favor of highly compensated employees?
Nonqualified deferred compensation plans; Under IRS rules, qualified retirement plans such as 401(k), 403(b), defined benefit, and defined contribution plans and cafeteria plans are required to meet certain discrimination rules.
What is the primary difference between a nonqualified deferred compensation plan and a qualified plan?
Nonqualified plans can discriminate in favor of highly compensated employees.; The primary differences between a nonqualified deferred compensation plan and a qualified plan are that nonqualified plans can discriminate in favor of officers and highly compensated employees, and that nonqualified plans have no limits to the contributions made by employees or employers.
Nonqualified deferred compensation plans generally contain all of the following options EXCEPT:
they provide equal benefits for all employees.; Generally, employers use nonqualified deferred compensation plans to compensate certain high-level executives because they are not restricted by the nondiscrimination requirements that apply to qualified plans or the contribution and benefit limitations found in qualified plans.
Calculate an employee's net pay based on the following information. Paid biweekly Hourly rate = $18.00 Nonexempt employee Hours worked week 1 = 45 Hours worked week 2 = 50 2021 W-4 information = Head of Household, Step 3 = $2,000 (1 qualified child under age 17) YTD Wages = $27,000.00 401(k) contribution = 1% of wages Use the Percentage Method (Worksheet 4 in Publication 15-T)
$1,643.95; When calculating an employee's net pay, determine if the employee is exempt or nonexempt to calculate any overtime. Reduce the gross wages by the 401(k) deferral before calculating income tax, but do not reduce the wages by the 401(k) when calculating social security and Medicare taxes. For FITW, use Worksheet 4 from Publication 15-T.
Calculate an employee's net pay based on the following information. Paid biweekly Salary = $350,000.00 annually Exempt employee Hours worked week 1 = 45 Hours worked week 2 = 40 2021 W-4 information = Married filing jointly, Step 3 = $8,000 (4 qualified children under age 17) YTD Wages = $270,000.00 401(k) contribution = 5% of wages Use the Percentage Method (Worksheet 1A)
$10,423.85; When calculating an employee's net pay, determine if the employee is exempt or nonexempt to calculate any overtime. Reduce the gross wages by the 401(k) deferral before calculating income tax, but do not reduce the wages by the 401(k) when calculating social security and Medicare taxes. For FITW, use Worksheet 1A from Publication 15-T.
An employee earns $2,200.00 per month and defers 9% to a 401(k) plan. The employee is paid semimonthly. Calculate any federal taxes that must be withheld from the employee's 401(k) deferral each month.
$15.15; Under IRS rules, employee contributions to a 401(k) plan are not subject to income tax but are subject to social security (6.2%) and Medicare (1.45%) taxes. 2200x1.45%=31.90 ; 2200x6.2%=$136.40 ; 31.90+136.40= 168.30; 168.30x9%=$15.15
Calculate an employee's net pay based on the following information. Paid biweekly Annual salary = $75,000.00 Exempt employee Hours worked week 1 = 45 Hours worked week 2 = 50 2020 W-4 information = Single or Married filing separately, Step 3 = $4,000 (2 qualified children under age 17) YTD Wages = $100,000 YTD 401(k) = $20,300 Age on 12/31 = 47 401(k) contribution = 20% of wages Use the Percentage Method (Worksheet 4 from Publication 15-T)
$2,305.33; When calculating an employee's net pay, determine if the employee is exempt or nonexempt to calculate any overtime. Reduce the gross wages by the 401(k) deferral before calculating income tax, but do not reduce the wages by the 401(k) when calculating social security and Medicare taxes. For FITW, use Worksheet 4 from Publication 15-T.
An employee earns $4,700.00 per month and defers 10% to a 401(k) plan. The employee is paid semimonthly. Calculate any federal taxes that must be withheld from the employee's monthly 401(k) deferral.
$35.96; Under IRS rules, employee contributions to a 401(k) plan are not subject to income tax but are subject to social security (6.2%) and Medicare (1.45%) taxes. 4700x6.2=291.40 ; 4700x1.45=$68.15 ; 291.40+68.15=$359.55 ; 359.55x10%=$35.96
Calculate an employee's net pay based on the following information: Paid biweekly Salary = $250,000.00 annually Exempt employee Hours worked week 1 = 45 Hours worked week 2 = 40 2022 W-4 information = Married filing jointly, Step 3 = $8,000 (4 qualified children under age 17) YTD Wages = $197,000.00 YTD 401(k) = $9,850.00 401(k) contribution = 5% of wages Use the Percentage method and Worksheet 4 from Publication 15-T
When calculating an employee's net pay, determine if the employee is exempt or nonexempt to calculate any overtime. Reduce the gross wages by the 401(k) deferral before calculating income tax but, do not reduce the wages by the 401(k) when calculating social security and Medicare taxes.Since the box in Step 2 Form W-4 was not checked, use Form W-4, Standard Withholding Rate Schedules tax table. Consider the Additional Medicare Tax if applicable. For FITW, use Worksheet 4 from Publication 15-T.
All of the following retirement plans are subject to contribution limits EXCEPT:
nonqualified deferred compensation plans.; Under IRS rules, qualified retirement plans such as 401(k), 403(b), and 457(b) plans limit the amount employees can contribute in a plan year ($20,500.00 in 2022). Nonqualified plans provided in a discriminatory manner do not have limits to contributions made to the plan.
