LI Part 12

What does a 401(k) plan generally provide its participants?

• Salary-deferral contributions

• Tax-free distributions

• Salary-deferral distributions

• A defined retirement benefit

Tom has a qualified retirement plan with his employer that is currently considered to be 80% “vested”. How can this be interpreted?

• If Tom’s employment is terminated, 20% of the funds will be forfeited

• 20% of the funds are subject to taxes

• 80% of the funds are invested in a separate account

• If Tom’s employment is terminated, 80% of the funds will be forfeited

Which tax would an IRA participant be subjected to on distributions received prior age 59 ½?

• Ordinary income tax and a 10% tax penalty for early withdrawal

• 10% tax penalty for early withrawal

• Capital gains tax

• Ordinary income tax

A retirement plan that sets aside part of the company’s net income for distributions to qualified employees is called a:

• Profit-sharing plan

• rollover plan

• 403b plan

• salary reduction plan

In an individual retirement account (IRA), rollover contributions are:

• Not limited by dollar amount

• subject to capital gains tax

• subject to ordinary income tax

• partially limited by dollar amount

Post-tax dollar contributions are found in

• Roth IRA investments

• 401k investments

• traditional IRA investments

• simple investments

A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6000 withholding. Which referral taxes apply if none of the funds were rolled over

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

• income taxes plus a 10% penalty tax on $24,000

• only income taxes on $30,000

• only income taxes on $24,000

What type of employee welfare plans are not subject to ERISA regulations?

• Church plans

• major medical plans

• corporate

• qualified plans

An employee requested that the balance of her 401k 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 snet to this employee?

• Distribution is subject to federal income tax withholding

• Distribution is subject to capital gain tax

• Distribution is subject to ordinary income tax

• Distribution is subject to tax penalty

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?

• 20% is withheld for income taxes

• 10% is withheld for income taxes

• 30% is withheld for income taxes

• Nothing is withheld