Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
196 Cards in this Set
- Front
- Back
|
50% of SS Benefits will be taxed when
|
Single 25K to 34k
Married 32K to 44K |
|
|
up to 85% of SS Benefits will be taxed when
|
Single above 34K
Married above 44K |
|
|
Does a self employed worker have to w/h taxes, pay FICA etc to a child employed in the biz?
|
Not if income is less than $5700 (std ded)
|
|
|
A divorced spouse to get SS benefits must have been married for at least ___ years and not be remarried
|
10
|
|
|
Dependent child of a deceased or disabled insured worker gets SS benefits if
|
under 19 and a student
age 18 or over but has disability which began before age 22 |
|
|
SS Benefits between 62-64 are reduced $1 for every $2 earned over
|
$14,160
|
|
|
There is a ___ month waiting period for SS disability benefits.
|
5
|
|
|
for a group life insurance plan..at least ___ % of employees must benefit from the plan.
|
70
|
|
|
Sale of non qual stock options will be reported as income/AMT/capital gain?
|
income
|
|
|
What is the incidental safe harbor rule re: insurance and qual retirement plans?
|
cost of whole life insurance cannot exceed 50% of all benefits.
|
|
|
The max contribution for TSAs incl catch ups is
|
$25,000
|
|
|
Only ____ pension plans are required to pay benfits to the PBGC.
|
defined
|
|
|
The amendment of a defined benefit plan into a money purchase plan will result in termination of the plan T or F
|
T
|
|
|
a 457 plan is a qual/non qual plan
|
non qual
|
|
|
Only the first ____ of comp can be taken into account for a money purchase plan
|
$245,000
|
|
|
Target Benefit Plan Max contribution is lesser of 100% of comp or ______
|
$49,000
|
|
|
Employer profit sharing contributions need to be ________
|
substantial and recurring.
|
|
|
a 401(k) deferral is still subj to ____ and _____ taxes
|
FICA
FUTA |
|
|
Which type of business cannot establish a ESOP?
|
Partnership
|
|
|
A Thrift plan can be a ____ or a ______ plan.
|
money purchase
Profit sharing |
|
|
the most frequently used defined benefit formula is the _______
|
unit benefit formula (also known as % of earnings/year of service
|
|
|
Salary cap on pension plan is _____. Benefit cap is ____.
|
$245,000
$195,000 |
|
|
A cash balance plan is a type of ____. Employer guarantees _____ and
|
DBP
Contribution level Min rate of return |
|
|
Older/younger workers are hurt when a DB plan is converted to a cash balance plan.
|
Older - lump sum payout at termination is considerably smaller under cash balance formula.
|
|
|
Max age and service to participate in a Qual Plan.
|
21 and one year of service
|
|
|
_____ hours of service define 1 year of service
|
I000
|
|
|
Ratio % test
|
plan must cover a % of NHCEs that is 70% of HCEs covered. If this test fails then next text must be passed.
|
|
|
Ave Benefit Test
|
Ave benefits for all NHCEs must be 70% of that for all HCEs.
|
|
|
Min participation rule
|
A DB plan must benefit at least the LESSER of (1) 50 employees (2) greater of (a) 40% of all employees (b) 2 employees.
|
|
|
Highly comped employee defined
|
5% owner or employee earning more than 110K in 2010.
|
|
|
Key Employee
|
Greater than 5% owner OR
officer AND comp > 160K or greater than 1% ownership AND comp > 150K |
|
|
A plan is top heavy if
|
more than 60% of is aggregate accrued benefits or account benefits are allocated to key balances
|
|
|
DC Vesting Schedules
Top Heavy DB plans |
3 yr cliff
2 - 6 yr graded 100% vested w/2 yr eligibility |
|
|
Non top Heavy DB plans
|
5 yr cliff
3 - 7 yr graded 100% vested with 2 yr eligibility |
|
|
If a plan is top heavy, you can only use _____ vesting schedules
|
3 yr cliff
2 - 6 yr graded |
|
|
Parent subsidiary
|
One entity owns 80% of one (or more ) other entities
|
|
|
Brother sister
|
5 (or fewer) owners of 2 or more entities own 80% or more of each entity
|
|
|
DB plans can integrated with SS one of two ways
|
excess
offset |
|
|
What is max disparity allowed with a money purchase plan?
|
5.7%
|
|
|
ADP/ACP testing
|
if NHCE is 0 to 2% then HCE is "times 2"
if NHCE is 2-8% is "plus 2%" |
|
|
GICs pay guaranteed return regardless whether actual return is higher or lower T or F
|
T
|
|
|
A plan which provides a benefit for wages up to the integration level, plus a higher benefit for wages that exceed the integration level, is an integrated defined benefit excess plan. T/F
|
T
|
|
|
A plan which provides that an employee's benefit otherwise computed under the plan formula is reduced by a fixed amount or formula amount is an integrated defined benefit offset plan.T/F
|
T
|
|
|
The base benefit percentage is determined by calculating the benefits provided by the plan based on compensation below the integration level, and expressing these benefits as a percentage of compensation below the integration level. T/F
|
T
|
|
|
When calculating max permitted deductible employer contribution for a profit sharing plan..multiply covered payroll by ___
|
6%
|
|
|
For the $3000 catchup in a 403(b) you need ___ years of service.
|
15
|
|
|
The maximum service requirement a thrift plan can impose is ___ yr(s)
|
2
|
|
|
Would monthly dues to a health club paid by the employer be taxable to the employee? Y/N
|
Y
|
|
|
what are limitations for contributions to a 403(b) plan
|
lesser of 100% comp or 49,000
|
|
|
Over 50 catchup in a 403(b) is
|
$5500
|
|
|
If employee receives annual additions that exceed 415 limit the employer has 3 options. The excess
|
may be reallocated among employees whose 415 limit has not been exceeded.
may be applied to a later year may be used to reduce future plan contributions |
|
|
IRA phaseout
|
Single 55K - 65K
Married 89K to 109K |
|
|
For self employed, owner-employee contribution is based on
|
net earnings
|
|
|
Short cut for self employed contribution
for 15% contribution use for 25% contribution use |
12.12%
18.59% |
|
|
A DC plan is top heavy if
|
more than 60% of the total amount in the accounts of all employees is allotted to key employees.
|
|
|
Min benefits for non key employees. A top heavy plan must provide min benefits or contributions ..must be
|
at least 2% of comp X # employee's years of service in which plan is top heavy up to a max of 10 years.
|
|
|
DC min employer contribution must be
|
no less than 3% of each non key employee's comp.
|
|
|
A loan from qual plan
|
Made under enforceable agreement
Total loans do not exceed lesser of 50% of vested benefit or 50K. (Accounts under 10K..no % limit) Loan to be repaid in 5 years unless used to acquire principal residence...also leave of absence. |
|
|
Which plans do not allow loans?
|
IRA, SEP and SIMPLE.
|
|
|
S corp distributions are earned/unearned income.
|
unearned (doesn't figure into IRA calc)
|
|
|
If one spouse is an active plan participant and other spouse is non active...then non active can do ded IRA if combined adj gross income is less
|
166K
phased out at 176K |
|
|
Exceptions to early distribution before 59 1/2 10% penalty
|
death
subst equal payments disability first home up to 10K qual ed expense qual med expense > 7.5% AGI med ins premium after separation from employment |
|
|
IRA loans allowed/not allowed
|
not allowed
|
|
|
Roth phaseout
|
single 105K to 120K
married 166K to 176K |
|
|
A Roth 401(k) can be rolled over to
|
401(k) with Roth option
403(b) with Roth option |
|
|
SEP must cover all employees over the age of ___ and who have worked for the employer ___ of the preceding 5 calendar years. Part time counts.
|
21, 3
|
|
|
No SEP contributions need to be made for comp for the year is less than
|
$550
|
|
|
SARSEP requirements
|
up to 25 employees
50% of employees must participate deferral limit is $16,500 |
|
|
SIMPLE eligibility
|
must cover any employee earning $5000 in any 2 previous years.
|
|
|
403(b) plan ..also known as a
|
TSA (tax sheltered annuity
|
|
|
A rabbi trust can pay benefits for either a top-hat plan or an excess benefit plan. T/F
|
T
|
|
|
When disability premiums are paid by employer are benefits taxable to employee? Y/N
|
Y
|
|
|
Cash balance plans can be integrated with SS T/F
|
F
|
|
|
At the TSA owner's death, the amount received by the beneficiary is included in the gross estate of the decedent. T/F
|
T
|
|
|
Separate-investment accounts are frequently compared to mutual funds because the accounts are pooled. T/F
|
T
|
|
|
The mandatory 20% income tax withholding requirement does not apply to distributions of employer stock from an ESOP.
|
T
|
|
|
An employer's deduction for ESOP contributions and amounts made to repay interest on an ESOP's debt cannot exceed 25% of the participants' payroll. T/F
|
False..no limit
|
|
|
The 3% matching contribution, however, is not subject to the compensation limit. T/F
|
T
|
|
|
Once committed, the 15% prohibited transaction penalty cannot be waived for extenuating circumstances T/F
|
T
|
|
|
SEPs and tax-sheltered annuities do not qualify for forward averaging. They are not qualified plans. T/F
|
T
|
|
|
Nonelective contributions (2%) are subject to the compensation limit of $245,000 in 2009. T/F
|
T
|
|
|
A target benefit plan is a DC or DB plan?
|
DC
|
|
|
If unrelated business taxable income UBTI is over ____ then the qual plan is subj to income tax
|
$1000
|
|
|
Is income from a ltd/gen partnership (except real estate) considered UBTI?
|
Yes
|
|
|
Which plans cannot provide for death benefits paid from life insurance?
ESOP/403(b)/Profit sharing 401(k)/SIMPLE |
SIMPLE - not a qual plan
|
|
|
Only ____ plans can hold second to die insurance policies.
|
Profit sharing
|
|
|
A financial hardship is defined as _________
|
immediate and heavy.
|
|
|
When a hardship withdrawal is taken, the plan must suspend a right to make deferrals for ____
|
six months
|
|
|
Safe harbor distribution is/is not free of the 10% pre 59 1/2 withdrawal penalty
|
is not
|
|
|
Safe harbor distributions
|
Medical expenses
College tuition/room and board purchase of principal residence Prevent eviction or foreclosure Funeral expenses Repair of principal residence |
|
|
Exceptions to 10% early withdrawal penalty
|
Death
Disability Equal payments following separation Distribution following separation from service at age 55 or later QDRO Medical expenses > 7.5% AGI |
|
|
Lump sum requirements
|
Entire amount payout
Made in one taxable year Employee participated for 5 taxable years Payable due to death, attainment of age 59 1/2, separation from service or disability. Must be elected. |
|
|
Qual pension plans are required to provide a qual joint and survivor annuity QJSA T/F
|
T
|
|
|
Do 457s qual for 10 year averaging Y/N
|
N
|
|
|
What is penalty for not taking enough RMD?
|
50% on the amount not taken
|
|
|
If owner dies before req date (70 1/2) and there is no beneficiary alive as of the owner's death, the ____ applies
|
5 year rule - all the money must be distributed within 5 years of the year the owner died.
|
|
|
If a trust is the beneficiary of a plan then the deadline for beneficiary docs is ____ of the year following the employees death.
|
Oct 31
|
|
|
If a charity is named, then the charity's interest should be cash out before ____ of the year following the owner's death
|
Sept 30
|
|
|
A rabbi trust would be used when
|
Hostile takeover
Merger Acquisition |
|
|
A rabbi trust is funded/unfunded
revocable/irrevocable |
unfunded
irrevocable |
|
|
Informally funded plans mainly use _____ not stock grants or options
|
Life insurance
|
|
|
Only the first _____ worth of ISOs granted to any employee that vest in ___ year is entitled to favorable tax treatment
|
100,000
one calendar |
|
|
any ISO that exceeds 100K in one calendar year is treated as a
|
nonqual stock option
|
|
|
Nonqual stock option are taxed at exercise T/F
|
T
|
|
|
Two ISO holding period rules
|
1) Must hold exercised ISO for one year from date of exercise before selling them
2) You must hold shares from ISO exercise at least 2 years from grant issue before selling them. |
|
|
What is the maximum permitted deductible employer contribution to the profit sharing plan?
|
Mult 6% times covered payroll
|
|
|
Separate-investment accounts are similar to a mutual fund in that the accounts are usually pooled, provide the plan sponsor with the type of investments. T/F
|
T
|
|
|
GICs provide a guaranteed rate of return which is paid regardless of whether the actual rate of return is higher or lower. T/F
|
T
|
|
|
Benefits for a top-hat plan or an excess benefit plan can be paid through a rabbi trust. T/F
|
T
|
|
|
Under a salary reduction SEP, the maximum salary deferral percentage for any highly compensated employee is 1.25% of the nonhighly compensated employees' ADP. T/F
|
T
|
|
|
Investment Grade IGs generally provide a minimum guarantee on the rate of return, but pay the actual rate of return if higher than the guarantee. T/F
|
T
|
|
|
for an HSA family plan, the deductible must be from $2,300 to $5,950 with a maximum contribution of the deductible amount, up to these limits. T/F
|
T
|
|
|
The maximum TSA contribution for 2009 is $25,000, including all catch-ups. T/F
|
T
|
|
|
At the TSA owner's death, the amount received by the beneficiary is included in the gross estate of the decedent, T/F
|
T
|
|
|
VEBAs may not offer retirement benefits. T/F
|
T
|
|
|
The mandatory 20% income tax withholding requirement does not apply to distributions of employer stock from an ESOP. T/F
|
T
|
|
|
A rollover to an IRA can be made tax free only after a two-year period of participation in the SIMPLE plan. T/F
|
T
|
|
|
In a SIMPLE IRA, The 2% nonelective contribution is subject to the $245,000 2009 compensation limit. The 3% matching contribution, however, is not subject to the compensation limit. T/F
|
T
|
|
|
In a qual plan, are loans available to sole proprietors and S corporation shareholder-participants. Y/N
|
Y
|
|
|
In an integrated defined benefit plan,the excess benefit percentage cannot be more than double the base benefit percentage. T/F
|
T
|
|
|
ESOPs cannot be integrated with Social Security. T/F
|
T
|
|
|
The 20% withholding requirement does not apply to IRA distributions. T/F
|
T
|
|
|
SIMPLE IRA plans are not subject to the top-heavy or discrimination rules applicable to qualified plans.T/F
|
T
|
|
|
Which of the following general requirements are necessary to exempt a qualified plan loan from prohibited transaction treatment?
(1) reasonable rate of interest (2) dollar limitations (3) term of the loan (4) adequate security |
1 and 4
|
|
|
The excess benefit percentage cannot be more than double the base benefit percentage. T/F
|
T
|
|
|
Which of the following are correct statements about the integration rules for qualified plans?
(1) An integration level for a defined contribution plan that exceeds the current year's taxable wage base may be selected. (2) The permitted disparity level in a defined benefit plan must be reduced for early retirement. (3) It is not possible to have a defined benefit formula in which lower-paid employees receive no benefit. (4) The maximum permitted disparity provided under a defined benefit plan is 26.25% for a flat benefit plan and 0.75% for a unit credit plan. |
2, 3 and 4
|
|
|
The permitted disparity for a flat benefit plan is
|
26.25%
|
|
|
The integration level selected cannot exceed the current year's taxable wage base; however, it may be less.
T/F |
T
|
|
|
A 403(b) plan participant is subject to the 10% early distribution tax, but an exception applies if the participant is at least age 55 and separates from service. T/F
|
T
|
|
|
For group life disability, The employer can deduct the premiums paid if the employee has a nonforfeitable right to the insurance when the premiums are paid.
|
T
|
|
|
457 plans are for which of the following:
I. Governmental units II. Governmental agencies III. Not-for-profit organizations IV. Churches |
I, II and III...(not for churches)
|
|
|
A TSA is subj to a lump sum treatment. T/F
|
F. Profit sharing and ESOPs are
|
|
|
Hardship withdrawals can be made from which of the following?
A. All qualified plans B. Defined contribution plans only C. Profit sharing plans only D. Section 401(K) plans only |
401(k) plans
|
|
|
Which of the following characteristics of a SEP is false?
A. Loans and hardship withdrawals are not available. B. Age-weighting or cross-testing is not permitted. C. Social Security integration is not permitted. D. Employer matching is not permitted. |
C
|
|
|
For the family plan, the minimum deductible must be
|
2300
|
|
|
The maximum annual family contribution is
|
5950
|
|
|
The maximum TSA contribution for 2009 is , including all catch-ups
|
25,000
|
|
|
In a 457 plan, The 457 final three-year catch-up may not be used with the age 50 catch-up. T/F
|
T
|
|
|
The IRA deduction for individuals who are not active participants, but whose spouses are, is phased out if their AGI is between $166,000 and $176,000 in 2009. T/F
|
T
|
|
|
A rollover to an IRA can be made tax free only after a two-year period of participation in the SIMPLE plan. T/F
|
T
|
|
|
Covered Comp
Def Ben Max Def Cont Max HCE Key Employee |
245K
195K 49K 110K 160K |
|
|
4 types of Pension Plans
|
Def Ben
Cash Balance Money Purchase Target Benefit |
|
|
7 types of Profit Sharing
|
Profit Sharing
Stock Bonuses ESOP 401(k) Thrift New Comparability Age Based Profit Sharing |
|
|
is a 403(b) a qual plan?
|
No, it is a tax advantaged plan
|
|
|
Employers are limited to a max of ___ % of total comp paid to employees as contribution to a qual plan
|
25
|
|
|
Purpose of ERISA
|
provides protection for an employee's retirement assets
|
|
|
Qual plan assets are/are not protected from a QDRO (court divorce order), property settlement, child support, fed tax levy, settlement on a ind for crminal act.
|
are not
|
|
|
A highly comp employee is either
|
more than 5% owner (current or past year)
comp >110K |
|
|
A retirement plan annually must pass one of two following tests
|
Safe Harbor % of NHC covered > or = 70%
Ratio % % NHC Covered/ %of HC covered > or = 70% |
|
|
Ave Benefits Test
|
Ave Ben % of NCE/Ave Ben % of HCE > or = 70%
|
|
|
Requred Coverage levels
Nonexcl Must be covered 1 1 2-4 2 <125 40% >125 50 |
know this
|
|
|
Key employee (3)
|
>5% owner
>1% owner with >150K comp officer with >160K comp |
|
|
if >60% of benefits or comp are going to key employees plan is ____. image of 6 keys with top hats
|
top heavy
|
|
|
Top Heavy Vesting (2)
|
2-6 graduated
3 year cliff |
|
|
For def contribuion plans after 2006
|
2-6 graduated
3 year cliff |
|
|
Def Benefit plan Funding
|
2% x yrs service x comp factor
|
|
|
Def Contribution Plan funding
|
3% min or less if less provided to key employees
|
|
|
most conservative method to estimate retirement needs?
|
Capital enhancement method
|
|
|
HIIPA limits "pre-existing look-back period" to ___months
|
6
|
|
|
Can deductibles be paid out of an HSA? Y/N
|
Yes
|
|
|
Early withdrawal penalty of SIMPLE
|
25%
|
|
|
If money in an HSA is not used at the end of the year is it forfeited? Y/N
|
N
|
|
|
Does SE retirement plans provide for loans to common law employee participants? Y/N
|
Y
|
|
|
money purchase and target benefit plans (pension) are DCP or DBP?
|
DCP
|
|
|
When an employee makes a deferral, is FICA paid? Y/N
|
Y
|
|
|
vesting for qual plans
|
2-6 grad
3 year cliff |
|
|
is the participation test same as safe harbor test Y/N
|
Y
|
|
|
Ratio test
|
% of NHC Covered/% of HC Covered
|
|
|
Coverage tests in order
|
Safe Harbor
Ratio Ave Bene |
|
|
50/40 rule only covers DB plans T/F
|
T
|
|
|
50/40 test
|
plan must cover the lesser of 50 employees or 40% of employees
|
|
|
Top Heavy is when ____ account balance or benefits is attributable to a key employee
|
>60
|
|
|
DCP ..employer must provide non key employee with a contribution equal to at least ___ of comp
|
3%
|
|
|
Covered comp for plans
|
245K
|
|
|
DBP limit
|
lesser of
195K 100% of av last 3 years salary |
|
|
DCP limit
Limit consists of |
lesser of 100% comp
49K EE, ER contributions and any forfeitures |
|
|
if employee has annual additions into their qual plan...can they have a DEDUCTIBLE IRA? Y/N
|
No
|
|
|
Can you put a life insurance product into any type of IRA? Y/N
|
N
|
|
|
For DB plans actuary is required
DB and Cash Balance Plans Target Benefit |
DB and Cash annually
Target at inception |
|
|
which plans favor older workers
|
DB and Target Benefit
|
|
|
Profit sharing plans can only use ____ method for SS integration
|
excess
|
|
|
ADP testing
|
EE HC
0-2% 2x ADP for NHC 2-8% 2% plus ADP for NHC >8% 1.25 x ADP for NHC |
|
|
if employee dies with a 401(k) can beneficiary elect NUA Y/N
|
Y
|
|
|
what is tax treatment when NUA first comes out of the account
|
deferred LTCG (not LTCG til sold)
|
|
|
for a lump sum dist from a qual plan...the distributions are subj to ___ income tax w/h
|
20%
|
|
|
Plan loans are the lesser of
|
50K
1/2 vested account balance if <20K the max is limited to lesser of 10K or vested account balance |
|
|
non penalized distributions specific
Qual Plans IRA Only |
qual plans IRA
Sep Service/55 Health Ins for unemploy QRDO Higher ED 1st Time Homebuyer up to 10K |
|
|
Plan loans are the lesser of
|
50K
1/2 vested account balance if <20K the max is limited to lesser of 10K or vested account balance |
|
|
non penalized distributions specific
Qual Plans IRA Only |
qual plans IRA
Sep Service/55 Health Ins for unemploy QRDO Higher ED 1st Time Homebuyer up to 10K |
|
|
Plan loans are the lesser of
|
50K
1/2 vested account balance if <20K the max is limited to lesser of 10K or vested account balance |
|
|
calc for self employed doing 15% contribution
SE max is 20% |
.15/1.15 = 13.04%
|
|
|
Figure SE Net Earnings
|
Times 92.35%
|
|
|
File Form ___ with Form 1040 to track adj tax basis in IRA
|
8606
|
|
|
VEBA pays for
|
prepaid legal
dental and vision insurance NOT retirement or commuting benefits |
|
|
What trust allows gift splitting?
|
B or bypass
|
|
|
A clause in a 401(k) plan can assist the plan in meeting the requirements of the ADP test?
|
Negative election
|
