Chapter 9: Retirement Plans
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?
$2,500
Premature IRA distributions are assessed a penalty tax of
10%
All of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawls before age 59 1/2
An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
59 1/2
How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 Days
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity
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
Martial Deduction
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
In an individual retirement account (IRA), rollover contributions
Not limited retirement accounts (IRA)
Post-tax dollar contributions are found in:
Roth IRA investments
A sole proprietor may use this plan ONLY if the employees of this business are included.
Keogh Pension Plan
How are ROTH IRA distributions normally taxed?
Distributions are received tax-free
Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
If Tom's employment is terminated. 20% of the funds would forfeited
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Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
A 55 year old recently 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?1
Income taxes plus a 10% penalty tax on $30,000
Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
Which of the following is true if the owner of an IRA names their spouse as beneficiary but then dies before any distributions are made?
The account can be rolled into the surviving spouse is over age 59 1/2
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The employee
In a qualified retirement plan, the yearly contributions to an employees account:
are restricted to max 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
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 participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
20% is withheld for income taxes
Traditional individual retirement annuity (IRA) distributions must start by:
April 1st of the year following the year the participant attains age 70 1/2
What type of employee welfare plans are not subject to ERISA regulations?
Church Plans
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 federal income tax withholding
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
A qualified profit-sharing plan is designed to
allow employees to participate in the profits of the company
