PART 6: QUALIFIED PLANS
Are there specified hardship provisions in the 401K QUALIFIED RETIREMENT PLAN?
-Yes, they permit withdrawal for specified hardship reasons such as death or disability. -Loans are also permitted in certain instances up to 50% of the participant's vested accrued benefit or the annual IRS - established dollar amount.
What are the age qualifications to begin a HR-10 KOEGH RETIREMENT PLAN?
1. Any individual who is at least 21 years of age 2. has worked for a self-employed person for one year or more 3. and worked at least 1,000 hours per year (full time) 4. Must be included in the KEOGH PLAN 5. The employer must contribute the same percentage of funds into the employee's retirement account as he/she contributes into his/her own account
What opportunity do HR-10 - KOEGH PLANS make it possible for?
1. For self-employed persons to be covered under an IRS qualified retirement plan. 2. These plans allow the self-employed individuals to fund their retirement programs with pre-tax dollars as if under a corporate retirement or pension plan.
What is the SIMPLIFIED EMPLOYEE PENSION - SEP - suited for and how does it work?
1. Small employer or for the self-employed. 2 An employee establishes and maintains an individual retirement account to which the employer contributes. 3. Employer contributions are not included in the employee's gross income.
What are the 2 most common qualified individual retirement plans?
1. TRADITIONAL IRA'S 2. ROTH IRA'S
Are there contribution limits with the 403B or a TAX-SHELTERED ANNUITY - TSA?
As with any other qualified plan, 403(b) limits employee contributions to a maximum amount that changes annually, adjusted for inflation. The same catch-provision applies.
With the HR-10 KOEGH RETIREMENT PLAN, are there any penalties?
At any time payments may be discontinued with no penalty, and funds can be left to accumulate.
What are the SPOUSAL REQUIREMENTS for contributing to a TRADITIONAL IRA?
Each spouse is required to maintain a separate account not exceeding the individual limit.
Are Non-QUALIFIED PLANS subject to the requirements regarding participation, discrimination, and vesting as qualified plans?
No, they are not. NON-QUALIFIED PLANS 1. Require no government approval and are 2. used as a means for an employer to discriminate in favor of a valuable employee with regard to employee benefits 3. Non-qualified plans accept after-tax contributions
Match the differences between QUALIFIED and NON-QUALIFIED RETIREMENT PLANS
QUALIFIED VS. NONQUALIFIED Tax deductible vs. Not Tax deductible Approved by IRS vs. Doesn't need IRS Approval Earnings grow Tax-deferred All Withdrawals Taxed vs. Excess Over cost basis Taxed
What is the difference between QUALIFIED retirement plans and Non-QUALIFIED retirement plans?
QUALIFIED retirement plans provide tax benefits, as opposed to NON-QUALIFIED retirement plans which do not.
What are PROFIT SHARING PLANS?
Qualified plans where a portion of the company's profit is contributed to the plan and shared with employees.
To whom is the SIMPLE PLAN ANNUITY available to?
Small businesses that employ no more than 100 employees who receive at least $5,000 in compensation from the employer during the previous year.
What is the primary difference between SIMPLIFIED EMPLOYEE PENSION - SEP and an INDIVIDUAL RETIREMENT ACCOUNT - IRA?
The much larger amount that can be contributed each year to a SEP - an IRS established annual dollar limit or 25% of the employee's compensation - whichever is less.
What are the qualifications for the HR-1O KEOGH RETIREMENT PLAN?
The person must be self-employed or a partner working part time or full time who owns at least 10% of the business.
Are catch up payments allowed with the 401K QUALIFIED RETIREMENT ACCOUNT?
The plan allows participants age 50 or over to make additional catch-up contributions (up to a limit) at the end of the calendar year.
Does a PROFIT SHARING PLAN have to provide a definite formula for figuring the profits to be shared?
Yes, or if the plan does not provide a definite formula for figuring the profits to be shared, employer contributions must be SYSTEMATIC AND SUBSTANTIAL.
Are there CONTRIBUTION LIMITS with the HR-10 KOEGH RETIREMENT PLAN?
Yes, the limits are the lesser of an established dollar limit or 100% of their total earned income. The contribution is tax deductible, and it accumulates tax deferred until withdrawal.
Is the QUALIFIED RETIREMENT PLAN approved by the IRS?
Yes, which then gives both the employer and employee benefits such as deductible contributions and tax-deferred growth.
Can anybody with EARNED INCOME contribute to either of the 2 IRA's (Traditional or Roth)?
Yes.
What are the Disability Benefits of the HR-10 KOEGH RETIREMENT PLAN?
If a participant becomes disabled, he or she may collect benefits immediately or the funds can be left to accumulate.
Is TAXATION deferred with the SIMPLE PLAN ANNUITY?
It is DEFERRED on both contributions and earnings until funds are withdrawn.
What is a 403B or a TAX-SHELTERED ANNUITY - TSA?
It is a qualified plan available to employees of certain NONPROFIT ORGANIZATIONS under SECTION 501(c)(3)of the Internal Revenue Code, and to employees of public school systems.
What is the difference between who contributes with the HR-10 Keogh/SEP/SIMPLE/401K/403B-TSA?
HR-10 - Employer matches Employee Contributions SEP - Employee and Employer SIMPLE - Employer matches employee's contribution 401K - Employer matches employee's contribution 403BTSA - Employer and Employee
Are there any exclusions with the 401K QUALIFIED RETIREMENT ACCOUNT?
Contributions into the plan are excluded from the individual employee's gross income up to a specified dollar amount.
When are the PAYOUTS FOR THE HR-10 KOEGH RETIREMENT PLAN available?
Upon the participant's death, payouts can be available immediately.
When man distributions of funds begin with the HR-10 KOEGH RETIREMENT PLAN?
When a participant enters retirement, distribution of funds must occur no earlier than 59 1/2 and no later than 70 1/2. If withdrawn before 59 1/2, there is a 10% penalty.
What are the AGE STIPULATIONS in TRADITIONAL IRA'S?
Withdrawals may begin at age 59 1/2, but no later than age 70 1/2.
What characteristics do QUALIFIED PLANS have?
1. Designed for EXCLUSIVE BENEFIT of the employees and their beneficiaries 2. Are FORMALLY WRITTEN AND COMMUNICATED to the employees 3. Use a BENEFIT or CONTRIBUTION FORMULA that does not discriminate in favor of the PROHIBITED GROUP - officers, stockholders, or highly paid employees. 4. Are NOT GEARED EXCLUSIVELY to the prohibited group. 5. ARE PERMANENT 6. Are APPROVED BY the IRS 7. Have a VESTING REQUIREMENT
Does the employer or the employee contribute to a 403B or a TAX-SHELTERED ANNUITY - TSA?
Contributions can be made by both through salary reduction and are excluded from the employee's current income.
How is a SIMPLE PLAN ANNUITY established?
The employer must not have qualified plan already in place.
Expound upon the ROTH INDIVIDUAL RETIREMENT ACCOUNT - IRA
1. It is a form of an individual retirement account funded with after-tax contributions. 2. An individual can contribute 100% of earned income up to an IRS-specified maximum - as with traditional IRAS - the dollar amounts change every year. 3. Roth contributions can continue beyond age 70 1/2 4. Distributions do not have to begin at age 70 1/2. 5. Roth IRAs grow tax free as long as the account is open for at least 5 years.
How may the 401K QUALIFIED RETIREMENT ACCOUNT PLAN BE ARRANGED?
1. Pure Salary Reduction Plan 2. Bonus Plan 3. Thrift Plan
How does deferment work within the SIMPLE PLAN ANNUITY?
Employees who elect to participate may defer up to a specified amount each year and the employer makes a matching contribution, dollar for dollar, up to an amount equal to 3% of the employee's annual compensation.
How does ELIGIBILITY defer between HR-10 Keogh/SEP/SIMPLE/401K/403B-TSA?
HR-10: Self-employed SEP - Small employer or self-employed SIMPLE - Small employers (no more than 100 employees) 401K - Any employer 403B - TSA = Nonprofits
What choices does the 401K QUALIFIED RETIREMENT PLAN offer?
Participants may choose to do one of the following: 1. Receive taxable cash compensation OR 2. Have the money contributed into the 401K, in CASH OR DEFERRED ARRANGEMENT PLANS - CODA
Does a TRADITIONAL INDIVIDUAL ACCOUNT - IRA - allow individuals to make tax deductible contributions?
Yes, 1. It allows individuals to make tax deductible contributions until the age of 70 1/2. 2. Plan participants are allowed to contribute up to a specified dollar limit each year 3. Or 100% of their salary if less than the maximum allowable amount. 4. Individuals who are age 50 or older are entitled to make additional catch-up contributions. 5. A married couple could contribute a specified amount that is double the individual amount - even if only one person had earned income.
In addition to individual plans, are there different types of qualified plans available?
Yes, and have been designed for use by small and large employers.
Under the BONUS or THRIFT PLAN, will the employer contribute an amount or percentage for each dollar contributed by the employee?
Yes, however, employee contributions are not always required.
What TAX ADVANTAGES apply if the general requirements for QUALIFIED PLANS are met?
1. Employer contributions are tax deductible to the employer, and are not taxed as income to the employee 2. The earnings in the plan accumulate tax deferred 3. Lump-sum distributions to employees are eligible for favorable tax treatment.
What does a 401K QUALIFIED RETIREMENT allow to employees?
1. It allows employees to take a reduction in their current salaries by deferring amounts into a retirement plan. 2. The company can also match the employee's contribution, whether it is a dollar or on a percentage basis.
Is there a ceiling amount with the 401K QUALIFIED RETIREMENT ACCOUNT?
The ceiling amount is adjusted annually for inflation. The plan allows participants age 50 or over to make additional catch-up contributions (up to a limit) at the end of the calendar year.
