1.In 2011, what is the maximum amount of employee pretax contribution (elective deferral) that may...

Question

1.In 2011, what is the maximum amount of employee pretax contribution (elective deferral) that may be made to a traditional profit-sharing Section 401(k) plan by an individual younger than age 50? (Points : 3)

$11,500
$16,500
$22,000
The lesser of 100% of compensation or $49,000 annually

2.Which of the following qualification requirements applies to an employee stock ownership plan (ESOP)? (Points : 3)

Assets may be invested primarily in qualifying employer securities.
Stocks must be issued subject to a right of first refusal in favor of the employee.
Employees age 50 or older with at least 5 years of service must be given a right of diversification.
Stocks must be valued at the lesser of historical cost or fair market value.

3.A state or local government would choose to establish a Section 457 plan for all of the following reasons EXCEPT (Points : 3)

tax-deferred growth of assets
tax deductibility of employer contributions
no early withdrawal penalty on distributions
the ability of a participant to make elective deferrals

4.Which of the following statements describes a basic provision or use of a savings incentive match plan for employees (SIMPLE) IRA? (Points : 3)

Only employers that average fewer than 200 employees can establish a SIMPLE IRA.
A SIMPLE IRA must satisfy special nondiscrimination tests in addition to general rules.
One contribution formula that an employer can use in a SIMPLE IRA is to make a 2% nonelective contribution on behalf of eligible employees.
A SIMPLE IRA is primarily suitable for large corporate type of employers.

5.What is the maximum annual amount that may be contributed to a simplified employee pension (SEP) on behalf of an employee during 2011? (Points : 3)

$5,000
The lesser of 100% of compensation or $245,000 annually
The lesser of 25% of compensation or $49,000 annually
Whatever amount is necessary to fund the benefit

6.Terry and Nancy Andersen, both age 39, each plan to contribute $5,000 to their traditional IRAs for the 2011 tax year. They are both employed and file a joint tax return. However, only Terry is eligible for and participates in his employer's retirement plan. Terry and Nancy's modified AGI and earned income for the year 2011 is $99,000. What amount, if any, can Nancy deduct for her IRA contribution? (Points : 3)

$200
$2,500
$4,800
$5,000

7.Which of the following investments may be held in an IRA account? (Points : 3)

Canadian gold coin
US gold coin
German silver coin
Krugerrand

8.Which of the following allows a qualifying lump-sum distribution from a qualified plan to receive favorable income tax treatment? (Points : 3)

The employee's attaining age 59½
The participant's purchase of a primary residence
Financial hardship
A qualifying loan provision in the plan

9.If a loan is to be provided from a Section 401(k) profit-sharing plan and is NOT to be considered a taxable distribution, it must be (Points : 3)

available to all owners over age 59½
adequately secured with negotiable collateral
an amount no greater than $100,000
generally repaid within 5 years

10.Which of the following statements correctly describe the favorable tax treatment possibly available for a qualifying lump-sum distribution from a qualified retirement plan? (Points : 3)

Tax free if taken after the taxpayer's Social Security (full) retirement age
10-year forward averaging for individuals born before January 2, 1936
Long-term capital gain treatment for the entire distribution amount
Tax-free treatment similar to that given to Roth IRA distributions

005_smiu5k-3kdvgtus.docx

Robert · Accepted Answer

1. Which one of the following is a type of traditional defined benefit retirement plan? (Points : 2) 
       A money purchase pension plan 
       A plan using a flat benefit formula 
       An ESOP 
       A profit-sharing plan 

2. Big Bucks Bank, as the plan trustee for the XYZ Corporation profit-sharing plan, has entered into a 
loan with the plan secured by the individual account balances of the plan participants. What has just 
occurred here? (Points : 2) 
       A prohibited transaction 
       A disqualified loan 
       A financial obligation incurred in the ordinary course of business 
       A contribution to the plan consistent with the annual additions limit 

3. ERISA requires reporting and disclosure of plan information to all of the following EXCEPT (Points : 2) 
       Internal Revenue Service 
       Department of Labor (DOL) 
       Pension Benefit Guaranty Corporation (PBGC) 
       plan sponsors 

4. All of the following are alternatives to compensate for a retirement savings deficiency EXCEPT (Points 
: 2) 
       the client can save more 
       the client can reduce his anticipated standard of living during retirement 
       the client can restructure her portfolio to achieve a greater before-tax annual return 
       the client can retire earlier 

5. The primary reason inflation rates for retirees/senior citizens may exceed historical averages is that 
(Points : 2) 
       health care costs may increase during retirement. 
       many people adopt luxurious lifestyles during retirement. 
       vacation travel costs may increase during retirement. 
       federal and state income taxes are often higher during retirement 

6. Which of the following will exempt a qualified plan distribution from the 10% premature distribution 
penalty? (Points : 2) 
       Separation from service under a plan provision at age 50 
       Used to pay qualified higher education expenses 
       Part of a series of substantially equal periodic payments to be paid over the life expectancy of 
the individual 
       As a result of the individual incurring financial hardship, as that term is separately defined in IRS 
Regulations 

 

7. Which of the following descriptions of a regular rollover from a qualified plan to a traditional IRA is 
CORRECT? (Points : 2) 
       It generally must be completed within 90 days of the date of distribution from the previous plan. 
       Amounts rolled over are taxable according to rules governing the source of contribution. 
       A 20% withholding tax applies in the event of the employee-participant's physical possession of 
the amount rolled over. 
       It is subject to the same $5,000 limitation as otherwise applies in the deductible and 
nondeductible form. 

8. Kelly operates a business as a sole proprietor and maintains a Keogh profit-sharing plan. The 
contribution rate to this plan is 25%. If Kelly's net Schedule C income for the business for the year is 
$100,000 and his deductible self-employment tax is $7,065, what is the amount of Kelly's deductible 
contribution to the profit-sharing Keogh plan for the year 2011? (Points : 2) 
       $17,174 
       $18,587 
       $20,000 
       $25,000 

9. Which of the following types of defined contribution plans may borrow money in the name of the plan? 
(Points : 2) 
       An age-weighted profit-sharing plan 
       A tandem profit-sharing plan and a profit-sharing plan 
       A profit-sharing plan with Section 401(k) provisions 
       A leveraged ESOP 

10. Elaine is currently age 76 and is scheduled to take another distribution from her former company's 
qualified retirement plan later this year (2011). Her account balance in the plan as of 12/31 last year was 
$320,000. Under the Uniform Lifetime Table, the divisor is 22. However, Elaine's actual life expectancy is 
only 16 years. What is the amount, if any, of Elaine's required minimum distribution from this plan in the 
year 2011? (Points : 2) 
       $0, because Elaine is over age 70½ 
       $14,545 
       $20,000 
       $53,333 

11. Which one of the following is a unique provision of a Keogh (HR-10) plan? (Points : 2) 
       For defined contribution plans, the maximum annual contribution is determined as a percentage 
of gross compensation. 
       The deduction available for an owner-employee of the business is based on a specified definition 
of net income. 
       For Keogh profit-sharing plans, there is a promised benefit available to a common-law employee. 
       A Keogh plan may only cover the owner-employee. 

12. On October 31 of this year, John died leaving IRA account balance of $5 million.

1. In 2011, what is the maximum amount of employee pretax contribution (elective deferral) that may be made to a traditional profit-sharing Section 401(k) plan by an individual younger than age 50?...

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