Retirement Plans Overview

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Questions and Answers

All of the following would be different between qualified and nonqualified retirement plans EXCEPT

Taxation on accumulation (correct)

Eligibility requirements

Withdrawal penalties

Contributions limits

All of the following are general requirements of a qualified plan EXCEPT

The plan must provide an offset for Social Security benefits. (correct)

The plan must benefit employees.

The plan must have non-discriminatory provisions.

The plan must comply with IRS regulations.

For a retirement plan to be qualified, it must be designed for the benefit of

Employees

An IRA purchased by a small employer to cover employees is known as a

Simplified Employee Pension plan Signup and view all the answers

If a retirement plan or annuity is 'qualified,' this means

It is approved by the IRS Signup and view all the answers

All of the following statements are true regarding tax-qualified annuities EXCEPT

Employer contributions are tax deductible. Signup and view all the answers

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Profit sharing plan Signup and view all the answers

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

SEPs are suitable for large companies. Signup and view all the answers

If a company has a Simplified Employee Pension plan, what type of plan is it?

A qualified plan for a small business Signup and view all the answers

A tax-sheltered annuity is a special tax-favored retirement plan available to

Certain groups of employees only Signup and view all the answers

How are contributions to a tax-sheltered annuity treated with regards to taxation?

They are not included as income for the employee, but are taxable upon distribution. Signup and view all the answers

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval. Signup and view all the answers

Employer contributions made to a qualified plan

Are subject to vesting requirements Signup and view all the answers

Under a defined benefit retirement plan, who determines what benefits a retired employee will receive?

Employer Signup and view all the answers

SIMPLE Plans require all of the following EXCEPT

At least 100 employees. Signup and view all the answers

In a defined contribution plan,

The contribution is known and the benefit is unknown Signup and view all the answers

Which of the following is TRUE of a qualified plan?

It has a tax benefit for both employer and employee. Signup and view all the answers

Which of the following is an IRS qualified retirement program for the self-employed?

Keogh Signup and view all the answers

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)

403(b) Plan (TSA) Signup and view all the answers

Which type of retirement account does not require the owner to start taking distributions at age 72?

Roth IRA Signup and view all the answers

Which of the following characteristics applies to defined benefit plans but not defined contribution plans?

The amount of contributions made by the employer is determined by an actuarial formula. Signup and view all the answers

Which of the following applicants would NOT qualify for a Keogh Plan?

Someone who works 400 hours per year. Signup and view all the answers

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of a family corporation. Signup and view all the answers

A 403(b) plan, commonly referred to as a TSA, is available to be used by

Teachers and not-for-profit organizations Signup and view all the answers

All of the following employees may use a 403(b) plan for their retirement EXCEPT

The CEO of a private corporation. Signup and view all the answers

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

They are tax deferred until withdrawn Signup and view all the answers

Study Notes

Qualified vs. Nonqualified Retirement Plans

Taxation on accumulation is the same between qualified and nonqualified plans.
General requirements for a qualified plan exclude the need for social security benefit offsets.

Qualified Plan Design and Benefits

Qualified plans must benefit employees.
Approval by the IRS is necessary for a retirement plan to be classified as qualified.

Specific Plans and Contributions

A Simplified Employee Pension (SEP) is an IRA for small employers to cover employees.
Profit sharing plans involve employer contributions based on profits realized.
Employer contributions to qualified plans are subject to vesting requirements.

Tax-Sheltered Annuities and Nonqualified Plans

Tax-sheltered annuities benefit only certain employee groups and incur tax upon distribution.
Nonqualified retirement plans do not require IRS approval.

Defined Benefit and Contribution Plans

In defined benefit plans, employers determine the retirement benefits for employees.
Defined contribution plans provide known contributions but unknown benefits at retirement.

Special Retirement Programs

Keogh plans are IRS-approved retirement programs for the self-employed.
403(b) plans, or Tax-Sheltered Annuities (TSAs), primarily serve teachers and not-for-profit organizations.

Distribution and Eligibility

Roth IRAs do not mandate distributions at age 72.
Defined benefit plans use actuarial formulas to determine employer contributions.
An individual must work more than 400 hours annually to qualify for a Keogh Plan.
Family corporation presidents and employees are ineligible to establish Keogh plans.

SIMPLE Plans

SIMPLE plans do not require a minimum of 1,000 employees.
Contributions and earnings in SIMPLE plans are tax-deferred until withdrawn.

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Description

This quiz explores the distinctions between qualified and nonqualified retirement plans, their designs, benefits, and specific types like SEP and profit-sharing plans. Understand the tax implications and requirements involved in these retirement options.