Retirement Plan

How are Roth IRA distributions normally taxed?
10% penalty tax is applied
Taxed as ordinary income
Capital gains tax is applied
Distributions are received tax-free

distributions (withdrawals) are received tax-free

How long does an individual have to "rollover" funds from an IRA or qualified plan?
60 days
90 days
120 days
No limit

60 days

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 capital gains tax
-Distribution is subject to ordinary income tax
-Distribution is subject to a tax penalty
-Distribution is subject to federal income tax withholding

distribution is subject to federal income tax withholding

What does a 401(k) plan generally provide its participants?
Tax-free distributions
Salary-deferral distributions
Salary-deferral contributions
A defined retirement benefit

salary-deferral contributions

In a qualified retirement plan, the yearly contributions to an employee’s account
-are not tax-deductible
-are restricted to minimum levels set by the IRS
-are restricted to maximum levels set by the IRS
-must be matched dollar-for-dollar by the employer

are restricted to maximum levels set by the IRS

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

-Only income tax on the amount withdrawn
-Income tax and a 10% penalty assessed upon funds withdrawn from the Qualified Plan
-Continued tax-free accumulations in the bank savings account
-Only a 10% penalty on the withdrawal of funds

income tax and 10% penalty assessed upon funds withdrawn from the Qualified Plan

Which plan is intended to be used by a sole proprietor and the employees of that business?
SEP Plan
Keogh Plan
Individual Retirement Account (IRA)
SIMPLE Plan

Keogh Plan

Post-tax dollar contributions are found in
401K investments
Traditional IRA investments
SIMPLE investments
Roth IRA investments

Roth IRA investments

Which of these retirement plans can be started by an employee, even if another plan is in existence?
Individual Retirement Account (IRA)
Defined plan
Keogh plan
403(b) plan

individual retirement account (IRA)

An IRA owner can start making withdrawals and NOT be subjected to a tax penalty beginning at what age?
70 1/2
65
55
59 1/2

59 1/2

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The 403(b) custodian
The financial institution
The employer
The employee

the employee

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
-paying transfer fees
-paying trustee fees
-ever paying income taxes on the distributions

mandatory income tax withholding on the transfer amount

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?
No deduction allowed
$25,000
$20,000
$10,000

$25,000

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
-10% tax penalty for early withdrawal
-Capital gains tax
-Ordinary income tax and a 10% tax penalty for early withdrawal
-Ordinary income tax

ordinary income tax and 10% tax penalty for early withdrawal

An employer that offers a qualified retirement plan to its employees is eligible to
-avoid ERISA regulations
-make tax-deductible contributions to the plan
-make tax deductible contributions to key employees only
-make partial tax-deductible contributions to the plan

make tax-deductible contributions to the plan

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
10% is withheld for income taxes
20% is withheld for income taxes
30% is withheld for income taxes
Nothing is withheld

20% is withheld for income taxes

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
marital deduction
death benefits
Section 1035 exchange
capital gains tax rate

marital deduction

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
30%
40%
50%
60%

50%

Premature IRA distributions are assessed a penalty tax of
0%
10%
15%
20%

10%

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?
25
50
100
250

100

A 55 year old recently received 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?
-Only income taxes on $30,000
-Only income taxes on $24,000
-Income taxes plus a 10% penalty tax on $30,000
-Income taxes plus a 10% penalty tax on $24,000

income taxes plus a 10% penalty tax on $30,000

Which of the following is TRUE about a qualified retirement that is "top heavy"?
-More than 30% of plan assets are in key employee accounts
-More than 40% of annual additions are for key employee accounts
-More than 50% of plan assets are in key employee accounts
-More than 60% of plan assets are in key employee accounts

more than 60% of plan assets are in key employee accounts

A qualified profit-sharing plan is designed to
-allow key employees to participate in the profits of the company
-allow employees to participate in the profits of the company
-keep key employees from leaving the company
-allow employees to elect company officers

allow employees to participate in the profits of the company

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Variable Life
Interest-sensitive Life
Universal Life
Annuity

annuity

In an individual retirement account (IRA), rollover contributions are
subject to capital gains tax
subject to ordinary income tax
partially limited by dollar amount
not limited by dollar amount

not limited by dollar amount

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?
-Surrender charge is applied
-The account can be rolled into the surviving spouse’s IRA
-Distributions will be received tax-free if surviving spouse is over age 59 1/2
-Future distributions are payable to the owner’s estate

the account can be rolled into the surviving spouse’s IRA

What type of employee welfare plans are not subject to ERISA regulations?
Church plans
Major medical plans
Corporate
Qualified plans

church plans

Traditional individual retirement annuity (IRA) distributions must start by
age 59 1/2
age 65
April 1st of the year following the year the participant attains age 59 1/2
April 1st of the year following the year the participant attains age 70 1/2

April 1st of the year following the year the participant attains age 70 1/2

Tom has a qualified retirement plan with his employer that is currently considered to be 80% "vested". How can this be interpreted?
-20% of the funds are subject to taxes
-80% of the funds are invested in a separate account
-If Tom’s employment is terminated, 20% of the funds would be forfeited
-If Tom’s employment is terminated, 80% of the funds would be forfeited

if Tom’s employment is terminated, 20% of the funds would be forfeited

All of the following statements about traditional individual retirement accounts are false EXCEPT
-10% penalty is applied to withdrawals after age 59 1/2
-Withdrawals are normally tax-free to the recipient
-10% penalty is applied to withdrawals before age 59 1/2
-Contributions are not tax deductible

10% penalty is applied to withdrawals before age 59 1/2

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
10%
20%
30%
None

none

A retirement plan that sets aside part of the company’s net income for distributions to qualified employees is called a
rollover plan
403(b) plan
profit-sharing plan
salary reduction plan

profit-sharing