Questions and Answers
What are the income tax benefits of a qualified plan?
Employer contributions are tax deductible and are not taxed as income to the employee. The earnings accumulate tax deferred.
What are some examples of qualified plans?
What is required to qualify an individual to contribute to a traditional IRA?
Earned income
What are the consequences of withdrawing funds from the traditional IRA prior to the age of 59 1/2?
Signup and view all the answers
SIMPLE plans are available to groups of how many employees?
Signup and view all the answers
In qualified plans, are employer contributions taxed as income to the employees?
Signup and view all the answers
What is a penalty for excessive contributions to a traditional IRA?
Signup and view all the answers
For a retirement plan to be qualified, it must be designed for whose benefit?
Signup and view all the answers
What qualified plan is suitable for the self-employed?
Signup and view all the answers
What is this type of plan called: An employer sponsoring the qualified retirement plan for its employees where the employer contributes money whenever the business has profit?
Signup and view all the answers
In what formal payment must the contributions to a traditional IRA be made?
Signup and view all the answers
What is the primary purpose of a 401(k) plan?
Signup and view all the answers
What type of plan is a 401(k)?
Signup and view all the answers
Who qualifies for tax sheltered annuities, or 403B plans?
Signup and view all the answers
If a retirement plan is 'qualified', what does that mean?
Signup and view all the answers
Study Notes
Income Tax Benefits of Qualified Plans
- Employer contributions to qualified plans are tax deductible.
- Employee contributions are not taxed as income.
- Earnings within the plan accumulate tax-deferred.
Examples of Qualified Plans
- Individual Retirement Account (IRA)
- 401(k) plans
- HR10 (Keogh) plans
- Simplified Employee Pension (SEP)
- Savings Incentive Match Plan for Employees (SIMPLE)
Contributions to Traditional IRA
- Contributions require the individual to have earned income.
Penalties for Early Withdrawal
- Withdrawing from a traditional IRA before age 59 1/2 incurs a 10% penalty.
SIMPLE Plan Employee Limit
- Available for employers with no more than 100 employees.
Employer Contributions in Qualified Plans
- Employer contributions are not considered taxable income for employees.
Excessive Contribution Penalty
- A penalty of 6% applies for excessive contributions to a traditional IRA.
Qualification of Retirement Plans
- Qualified plans must be designed specifically for the benefit of employees.
Qualified Plans for Self-Employed Individuals
- HR-10 or Keogh plans are suitable for the self-employed.
Profit Sharing Plans
- Employer-sponsored plans that contribute funds based on business profits are known as profit-sharing plans.
Payment Form for Traditional IRA Contributions
- Contributions must be made in cash.
Primary Purpose of a 401(k) Plan
- Aimed at providing income during retirement.
Nature of 401(k) Plans
- Classified as qualified profit-sharing plans.
Tax Sheltered Annuities (403B Plans)
- Available to employees of nonprofit organizations and public school systems under Section 501(c)(3).
Definition of 'Qualified' Retirement Plans
- A 'qualified' retirement plan enjoys favorable tax treatment.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on group life insurance, retirement plans, and social security disability programs. This quiz covers qualified plans, their tax benefits, and examples. Perfect for those preparing for relevant exams like Exam FX.