Exam 13: Retirement Savings and Deferred Compensation

Just like distributions from qualified retirement plans,distributions from nonqualified deferred compensation plans are taxed as ordinary income to the recipient.

Kathy is 60 years of age and self-employed.During 2013 she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to a simplified employee pension (SEP) IRA for 2013?

Which of the following statements regarding defined contribution plans is false?

When employees contribute to a Roth 401(k) account,they _____ allowed to deduct the contributions and they _______ taxed on distributions from the plan.

Kathy is 60 years of age and self-employed.During the year she reported $400,000 of revenues and $100,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to an individual 401(k) ?

Which of the following statements concerning individual 401(k) s is false?

Amy is single.During 2013,she determined her adjusted gross income was $12,000.During the year,Amy also contributed $1,500 to a Roth IRA.What is the maximum saver's credit she may claim for the year?

Which of the following best describes distributions from a traditional defined contribution plan?

Jenny (35 years old) is considering making a one-time contribution to either a traditional 401(k) plan or to a Roth 401(k) plan.She plans to withdraw the account balance when she retires in 40 years.Jenny expects to earn a 7% before-tax rate of return no matter which plan she contributes to.Which of the following statements is true?

How is a traditional 401(k) account similar to a Roth 401(k) account?

Which of the following is true concerning employer funding of nonqualified deferred compensation plans?

Tyson (48 years old) owns a traditional IRA with a current balance of $50,000.The balance consists of $30,000 of deductible contributions and $20,000 of account earnings.Convinced that his marginal tax rate will increase in the future,Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA.Assuming his marginal tax rate is 25%,what amount of penalty,if any,must Tyson pay on the distribution from the traditional IRA?

Kathy is 60 years of age and self-employed.During the year she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities.If Kathy has no other retirement accounts in her name,what is the maximum amount she can contribute to an individual 401(k) ?

Which of the following is not a self-employed retirement account?

Which of the following statements concerning nonqualified deferred compensation plans is true?

High-income taxpayers are not allowed to receive the saver's credit.

Employers may choose whom they allow to participate and whom they do not allow to participate in their nonqualified deferred compensation plans.

Both 401(k) plans and Roth 401(k) plans are forms of defined contribution plans.

Which of the following statements regarding defined benefit plans is false?

Defined benefit plans specify the amount of benefit an employee will receive on retirement while defined contribution plans specify the amounts that employers and employees will (or can) contribute to an employee's plan.