Chapter 9 Retirement Plans exam

What type of employee welfare plans are not subject to ERISA regulations?

Church plans

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

Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan

What does a 401(k) plan generally provide its participants?

Salary-deferral contributions

Traditional individual retirement annuity (IRA) distributions must start by

April 1st of the year following the year the participant attains age 70 1/2

Premature IRA distributions are assessed a penalty tax of

10%

A 55 year old recently received a $30,000 distribution from a previous employer's 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

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

More than 60% of plan assets are in key employee accounts

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?

None

A qualified profit-sharing plan is designed to

allow employees to participate in the profits of the company

An employer that offers a qualified retirement plan to its employees is eligible to

make tax-deductible contributions to the plan

How long does an individual have to "rollover" funds from an IRA or qualified plan?

60 days

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?

100

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?

$25,000

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

A retirement plan that sets aside part of the company's net income for distributions to qualified employees is called a

Profit-sharing plan

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

59 1/2

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

Annuity