Chapter 7: Qualified Plans
An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n) Keogh Plan. Roth IRA. SEP. 403(b) Plan (TSA).
403(b) Plan (TSA).
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 Section 457 Deferred Compensation Plan. 403(b) plan. 401(k) plan. HR-10 (Keogh Plan).
HR-10 (Keogh Plan).
Which of the following is TRUE of a qualified plan? It may allow unlimited contributions. It has a tax benefit for both employer and employee. It does not need to have a vesting schedule. It may discriminate in favor of highly paid employees.
It has a tax benefit for both employer and employee.
If a retirement plan or annuity is "qualified," this means It has a penalty for early withdrawal. It accepts after-tax contributions. It is noncancellable. It is approved by the IRS.
It is approved by the IRS.
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? Age-based penalty stipulated in the contract No penalties 10% penalty tax 15% penalty tax
No penalties
What is the primary purpose of a 401(k) plan? To receive dividends over a certain period Life insurance distribution Retirement Education funds
Retirement
All of the following employees may use a 403(b) plan for their retirement EXCEPT The vice president of a charitable organization. The CEO of a private corporation. A school bus driver. A part-time classroom aide.
The CEO of a private corporation.
Which of the following best describes the tax advantage of a qualified retirement plan? The earnings in a qualified plan accumulate tax deferred. Distributions prior to age 59½ are tax deductible. Employer contributions are tax deductible, as long as employee earnings are considered taxable income. Employer contributions are taxed as income to the employee.
The earnings in a qualified plan accumulate tax deferred.
Employer contributions made to a qualified plan Discriminate in favor of highly paid employees. Are after-tax contributions. Are taxed annually as salary. Are subject to vesting requirements.
Are subject to vesting requirements.
SIMPLE Plans require all of the following EXCEPT No more than 100 employees. Employees must receive a minimum of $5,000 in annual compensation. At least 1,000 employees. No other qualified plan can be used.
At least 1,000 employees.
For a retirement plan to be qualified, it must be designed for the benefit of IRS. Employees. Key employee. Employer.
Employees.
If a company has a Simplified Employee Pension plan, what type of plan is it? An undefined contribution plan for large businesses A qualified plan for a small business The same as a 401(k) plan The same as an IRA, with the same contribution limits
A qualified plan for a small business
Which of the following scenarios will incur a 10% tax penalty on distributions? Distributions are made prior to the age of 72. Distributions are made to the beneficiary. Distributions are made as part of a qualified rollover. Distributions are made on a policy before age 59½.
Distributions are made on a policy before age 59½.
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? Employer's matching contribution can be 50% of employee's salary. 75% of employee's contributions are taxed. They are tax deferred until withdrawn. Taxes must be paid in full.
They are tax deferred until withdrawn.
