Retirement Plans
An individual working part-time has an annual income of $2,500. If this individual has an IRA, what is the maximum deductible IRA contribution allowable? No deduction allowed $2,500 $2,000 $1,000
$2,500
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction? 10% is withheld for income taxes 20% is withheld for income taxes 30% is withheld for income taxes Nothing is withheld
20% is withheld for income taxes
How long does an individual have to "rollover" funds from an IRA or qualified plan? 60 days 90 days 120 days No limit
60 days
How are Roth IRA distributions normally taxed? 10% penalty tax is applied Taxed as ordinary income Capital gains tax is applied Distributions are received tax-free
Distributions are received tax-free
An officer for a corporation takes out numerous loans from the company's qualified retirement plan. Which of these rules is the plan in violation of? Key employee rule Top heavy rule Vesting rule Exclusive benefit rule
Exclusive benefit rule
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted? 20% of the funds are subject to taxes 80% of the funds are invested in a separate account If Tom's employment is terminated, 20% of the funds would be forfeited If Tom's employment is terminated, 80% of the funds would be forfeited
If Tom's employment is terminated, 20% of the funds would be forfeited
Which of these is a true statement regarding survivor benefits under a qualified retirement plan? Survivor benefits can only be waived with the written consent of a married employee's spouse Survivor benefits CANNOT be waived with the written consent of a married employee's spouse Survivor benefits are rarely included in small company plans Survivor benefits do not apply to divorced employees
Survivor benefits can only be waived with the written consent of a married employee's spouse
In a qualified retirement plan, the yearly contributions to an employee's account are not tax-deductible are restricted to minimum levels set by the IRS are restricted to maximum levels set by the IRS must be matched dollar-for-dollar by the employer
are restricted to maximum levels set by the IRS
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid mandatory income tax withholding on the transfer amount paying transfer fees paying trustee fees ever paying income taxes on the distributions
mandatory income tax withholding on the transfer amount
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The widow qualifies for the marital deduction death benefits Section 1035 exchange capital gains taxation
marital deduction
What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan? 25 50 100 250
100
According to ERISA regulations, a Summary Plan Description must be provided to a new plan member within ___ days of the member's eligibility date. 30 60 90 120
90
Tim is retired and has recently separated from his wife. He receives benefits from a qualified retirement plan through his former employer. The plan's trustee has decided to split these benefit payments between Tim and his estranged wife. This decision is likely in violation of which IRS rule? Reasonable expectations Alienation of benefits Minimum coverage Indemnity of benefits
Alienation of benefits
Under the IRS "minimum coverage" rules, a qualified retirement plan must Benefit a broad cross-section of employees Include at least a minimum amount of life insurance Certify that each of the plan trustees are bonded Provide at least a certain amount of retirement income
Benefit a broad cross-section of employees
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? Distribution is subject to capital gains tax Distribution is subject to ordinary income tax Distribution is subject to a tax penalty Distribution is subject to federal income tax withholding
Distribution is subject to federal income tax withholding
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2? 10% tax penalty for early withdrawal Capital gains tax Ordinary income tax and a 10% tax penalty for early withdrawal Ordinary income tax
Ordinary income tax and a 10% tax penalty for early withdrawal
What does a 401(k) plan generally provide its participants? Tax-free distributions Salary-deferral distributions Salary-deferral contributions A defined retirement benefit
Salary-deferral contributions
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity? The 403(b) custodian The financial institution The employer The employee
The employee
In an individual retirement account (IRA), rollover contributions are subject to capital gains tax subject to ordinary income tax partially limited by dollar amount not limited by dollar amount
not limited by dollar amount
A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a rollover plan 403(b) plan profit-sharing plan salary reduction plan
profit-sharing plan