CRC3 chapter 10 Rollovers between and distributions from qualified plans and IRAs
What is the maximum present value dollar amount of vested benefits allow for a participant to be cashed out in voluntarily from a retirement plan
$5000
72T
-Substantially equal periodic payments after separation from service 1. paid not less frequently than annually 2. paid without changing the amount for the longer of 5 years or until the payee reaches 59.5 (if payment amount changes, the 10% penalty will be retroactively charged against all past distributions) 3. based upon the life expectancy of the recipient 4. based upon reasonable rate of interest 5. if applicable, based upon reasonable mortality assumptions -Only exception is a one time election to switch from the annuity/amortization method to the RMD method. This will reduce 72t payout amounts. No penalty for making this switch.
A SIMPLE IRA Must receive a contribution for at least how many years to be eligible for a roll over to another retirement account that is not a simple IRA
2 years
If the employee request a distribution to himself instead of rolling it over, the benefit generally subject to
20 % mandatory withholding tax, ordinary income tax and a 10% early distribution penalty if distribution occurs before the participate reaches age
In DB plans that offer early retirement as an option how much of the benefit is generally reduced?
5%
If a participant excepts a lump sum payment directly rather than or authorizing a direct rollover to an IRA, how long does the participant have to change her mind and transfer the funds into an IRA?
60 daya
Qualified Domestic Relations Order (QDRO)
A court-issued order that instructs a plan administrator how to pay all or a portion of a pension plan benefit to a divorced spouse or child.
Indirect Rollover
A distribution to the participant with a subsequent transfer to another qualified account (or IRA). No later than the 60th day. Also 20% withholding is required. The only way to avoid it is with a direct rollover
Conduit IRA
A separate IRA established with a rollover from an eligible retirement plan. It's a traditional IRA that has been funded only with amounts that were rolled over from a qualified 401 a plan, 457B plan or 403B annuity. It acts as a holding place for the funds until the participant can rollover the money to a new employer plan.
After-tax IRA rollover conversion to Roth IRA
A traditional IRA can hold after-tax amounts derived from nondeductible contributions or a rollover of after-tax amounts from an employer plan.
Irene and Sam are divorcing. Sam has a traditional IRA and a retirement benefit in his employer is profit-sharing plan. Which of the following is true in a divorce proceeding?
A. A qualified domestic relations order can make Irene an alternate payee, and a portion of a Sam's IRA and profit-sharing account can be distributed to her. B. AQDRO can make Irene an alternate payee for the profit-sharing account, but not the IRA since IRAs are not subject to QDROS C. Only the IRA can be subject to a QDRO. No portion of the profit-sharing account can be distributed to Irene Answer is B
All of the following are true about spouse inherited IRA beneficiary except
A. A spouse beneficiary has more flexibility than a non-spouse beneficiary B. A spouse beneficiary can treat an inherited IRA as their own C. A spouse beneficiary must take beneficiary distributions from the inherited IRA account. D. A spouse beneficiary can make IRA contributions to the inherited IRA account E. A spouse beneficiary can transfer the inherited amount to their own IRA Answer is C
Which of the following amounts would be eligible for Rollover treatment?
A. A total distribution received 90 days ago B. A series of periodic payments for my qualified plan C. Annuity payments from a qualified plan D. Amounts received from a QDRO Answer is D
A participant leave the company and her DC plan at age 47. Which distribution options would apply
A. All benefits must be distributed as a lump sum before the end of the year. B. Benefits can be rolled over to an IRA avoiding any withholding C. Benefits may not be distributed until age 72 D. No benefits made be distributed until age 65 Answer is B
Which of the following statements regarding conduit IRAs
A. It is an IRA were distributions are transferred and no Ira contributions or me. B. Rollover treatment is allowed C. They are no longer necessary to allow rollovers to occur between qualified plans and IRAs. D. All of the above our true Answer is D
When must required minimum distributions begin from qualified retirement plans?
A. No later than April 1 of the year in which a person a teens age 72 or actually retires B. No later than April 1 of the year after year and participant attains age 72 or actually retires C. Within one year of termination no matter what age D. At normal retirement age as defined by the plan Answer is B
What types of Distributions cannot be rolled over
A. Periodic payments and minimum distributions B. 401(k) contributions and company match C. Profit-sharing contributions D. None of the above Answer is D
All of the following statements are true about when a spouse beneficiary Alex to treat an inherited IRA as their own except
A. The IRAs treated as their own for all purposes including distributions B. RMD's do not need to begin until the year they reach age 70 1/2 C. The spouse may make regular contributions and rollover contributions to the IRA D. RMD's must begin the year the rate is 59 1/2 Answer is D
For inherited IRA distributions, the options that are available to the spouse beneficiary depend on whether the IRA owner died before or after they're required beginning date. If the IRA owner die before their RBD, the following distribution options are available for the spouse beneficiary except beneficiary except
A. Treat the IRA as their own and take Distributions to hear they reach is 70 1/2 B. Take distributions using the five-year rule when the entire IRA balance must be distributed on that date or earlier C. Take distributions using the life expectancy of the spouse beneficiary D. Take distributions using the remaining life expectancy of the decedent Answer is D
What is the only time qualified plan benefits may be alienated transferred to someone else
A. Upon termination for cars B. If an employee transfers to another subsidiary C. Upon plan termination D. When a QDRO is issued Answer is D
Plan to IRA rollover's
Amounts can be rolled over from my 401(k) plan qualified plan, 457B plan or 403B plan to an IRA this can be completed as I direct rollover or indirect rule over
Taxation of QDRO payments
Amounts receipt under a QDRO or not subject to the 10% really distribution penalty; however, amounts qualifying is eligible Rollover distributions are subject to the mandatory 20% income tax withholding. An alternative PE can only avoid the mandatory 20% with holding by completing a direct rollover.
Permissive service Credits
An eligible governmental plan may permit in service plan to plan transfers of all or a portion of a participants or beneficiaries account balance to a defined benefit plan of a government employer for the purpose of purchasing permissive service credits. This transfer is not treated as a reportable distribution for tax purposes and a severance unemployment is not required for the transfer
Which of the following statements are true
And end direct rollover contribution must be transferred within 60 days to avoid income taxation.
Eligible Rollover Distribution
Any distribution to an employee of all or any portion of the balance to the credit of his or her qualified retirement account
How do distributions differ in a defined benefit plan and a defined contribution plan?
DB plans, a distribution usually means the beginning of a stream of payments of the accrued benefit callEd an annuity. In DC plans, on the other hand a distribution usually takes the form of either a cash payment of the entire account balance a lump sum distribution or non-periodic installment payments. The reason for this difference is that most DB plans are required to provide a distribution in the form of an annuity. DC plans except money purchase plans Are not required to offer annuities at all.
In a defined contribution plan a vested employees separates from service may
Deferred distribution until a future date, authorize distribution or Transfer the assets in the account to another employers plan or to an IRA
In-service distributions
Distributions can also occur while still employed
The 10% penalty applies to dividends on stock of a corporation held in an Aesop
False
Roll over from traditional IRA to Roth IRA's have the one per year limit true/ false
False it does not apply in the situation neither does trustee to trustee transfers to another IRA, and IRA to plan rollover's, plan IRA rollover or plan to plan rollovers
Randall is in the process of changing jobs. He is planning on moving the funds from his current employer's plan into the new employer plan. All the rollovers are permitted, the new plan requires a waiting period before he's eligible to join a participate. What may Randall do in the situation?
He can roll the money into an IRA until the waiting period is over
Ineligible rollover distributions
Hey series of substantially equal periodic payments for life, payouts over 10 years or more, Distributions required by section 40189 which are RMD's, hearts of distributions, and loans
Three exceptions to the 10% penalty apply to IRA distributions only
If an owner or eligible family member has not under residence for two years, a maximum of $10,000 can be distributed without penalty for the acquisition costs of a residence. Any distribution must be used within 120 days; the $10,000 is a lifetime. Also distributions can be made without penalty to pay qualified higher education expenses for an owner, spouse, child, or grandchild qualified education expenses are reduced by any amount excluded from gross income relating to scholarships, savings bonds, and educational IRA distributions. Lastly to pay health insurance premiums of an unemployed participant or owner
Deferred vested employee
In a DB plan they must maintain contact with the participant until he/she reaches normal retirement. If the DB plan offers a lump sum option the particpate may select it as long as they have a it notarized by spouse ps
When is the RBF for tax qualifies plans, 403(b), and 457 (b) participants
Is April 1st of the year following the later of The year a participant turns age 72 or the year which the employee retires under the plan, if the plan allows.
Distribution
Is a payment of benefits from retirement plan or IRA. For this purpose the term retirement plan means qualified plans, 403B plans, and governmental 457 be deferred compensation plans
If he IRA owner died on or after the RBD what happens to the spouse beneficiary
Is the IRA owner died on or after the RBD the spouse beneficiary can treat the inherited IRA as their own or take Distributions over the longer of the life expectancy of the spouse beneficiary or the remaining life expectancy of the descendent
A Distribution in the form of an annuity will satisfy the RMD rules if
It begins during or before the first distribution calendar year, the payments or not increasing, the term does not exceed the life expectancy of a participant or participant and join survivor and life expectancies are not recalculated
IRA to IRA transfers
Must be done within the 60 day. And it can only be performed once during a 12 month period if a person has 11 IRAs it is treated as one and you can only perform one IRA to a IRA rollover during a 12 month period of
Adrian has chosen to split her distribution. She will directly roll over part of it and take a portion in cash. The 20% mandatory withholding applies to
Only the portion take any cash
Alternate Payee
QDROs allow this to receive all are some of the benefits payable to participant under a plan. These rights arise in a divorce or legal separation proceeding or because of judgments, decrees, or orders made pursuant to state domestic relations law relating to provisions for child support, alimony payments, or marital property rights.
Economic growth and tax relief reconciliation act of 2001 enabled assets from one plan type to be rolled into another plan type. In other words which plans can transfer funds between each plan without limitation?
Qualified 401k 457b and 403b
What are the exceptions to the 20% with holding requirement
RMD's Installments over 10 years or life annuities Non-taxable distributions Return of excess deferral's and contributions Passed through dividends ESOPS Deemed distributions for defaulted plan loans Taxable distributions of less than $200
What is the special rollover rule that applies to a section 457B plan
Requires dollars rolled or transferred in from a different plan type, including an IRA, to be separately tracked and not combined with the 457V account for record keeping purposes. This is to ensure the Roldan assets are administered to comply with the rules of the submitting plan, such as the 10% early distribution penalty. Assets rolled or transferred out of the 457B plan, however take on the features of the receiving plan; this means a 10% really distribution penalty may be applicable to these assets
What triggers a distribution from a qualified plan?
Separation of service Reaching normal retirement age Death Disability Loans Plan terminations
Rollovers to a spouse in nonspouse beneficiaries of a deceased employee
Surviving spouse of a participant in a qualified plan, 403B plan or 457 plan has the option of rolling over the inherited amount to an eligible employer plan, a traditional IRA, or a Roth IRA
How to calculate minimum distributions
The qualified plan or IRA balance on December 31 prior to each year for which a minimum distribution is required is divided by a figure from the IRS uniform life table the resulting number is the required minimum distributions. If a spouse is more than 10 years younger and I saw beneficiary, the joint and last survivor table maybe use it will most likely result in a smaller RMD
A 457 QDRO is taxable to who?
The recipient to the employee and may be eligible for an IRA rollover
First Distribution year
The year a person turns 72 years old hey while the first payment does not have to be made until April 1 after the first distribution year, or subsequent payments must be May no later than December 31 of the year which the payment is due. Thus at the first payment is made April 1, the second payment must be made by December 31 of the same year; there will be two distributions made that year, which will lead to increase taxable income for that year
Carrie is about to terminate employment with her current employer. She has accumulated an account balance in the employers defined contribution plan of $3500. What will most likely happen to those funds upon separation from service
They will be cashed out and rolled over to an IRA on her behalf
A spouse beneficiary must Rollover the deceased plan to their own employer plan or an inherited IRA or the spouses own IRA true or false
True
Although there are exceptions, a distribution made from a plan or IRA before attaining age 59 1/2 is subject to a 10% penalty true or false
True
Early distributions are exempt from the 10% penalty to an alternate pay under a qualified domestic relations order true or false
True
Employer does not have to accept rollovers T/F
True
From a qualified governmental defined benefit plan during or after the year a public safety employee turns 50 and separates from service are exempt from the 10% penalty
True
If the IRS does BEFORE the RBF: For a spousal inherited IRA would need to begin the year in which the spouse reaches age 72. In addition, the spouse may make regular contributions and rollover contributions to the IRA true or false
True
Most DB plans payments automatically satisfy the RMD rules true or false
True
My brother is a spouse or former spouse as an alternative paying may make a tax free roll over to an eligible retirement plan her IRA. A nonspouse pay for example of child may not rollover Distributions under a QDRO. True or false
True
The 10% penalty is exempt to an employee following separation from service after age 55
True
The spouse beneficiary can change from an inherited IRA to their own at any time true/ false
True
There are no RMD's for the non- spousal inherited IRA during the 10 year period, but the account must be empty by December 31 of the 10th anniversary year of the owners death
True
QDRO's Do not apply to IRAs
True They are simply divided between the owner and the former spouse replacing the owners name without the former spouse. When a former spouse becomes an IRA owner, the normal IRA distribution rules apply. Distributions me to a nonspouse alternate payee are tax to the participant.
Wylie Roth IRA owner is alive Roth IRAs are not subject to RMD rules true or false
True once a Roth IRA or dies, beneficiaries becomes subject to the RMD Roth
If the IRA owner die before the RBD another option for the spouse beneficiary is the five-year rule
Under the five-year rule, distributions are optional until December 31 of the fiscal year that follows the year and with the IRA or die. Entire IRA balance must be distributed on that date or earlier
Should you roll over employer securities
You can but net unrealized appreciation and employer securities could be eligible for special tax treatment, allowing the amount to be taxed at the capital gains rate. To be eligible for this benefit the employer securities must be part of a lump sum distribution and must not be rolled over
