Question 1

Qualified retirement plans include defined benefit plans but not defined contributionplans.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  Employees bear the investment risks of the plan. 
B)  Employers are generally required to make annual contributions to meet expected future liabilities. 
C)  The benefits are based on a fixed formula. 
D)  The vesting period can be based on a graded or cliff schedule.

Question 3

Kathy is 60 years of age and self-employed. During 2017, she reported $500,000 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) for 2017? (Round your final answer to the nearest whole number)

Accepted Answer

A)  $95,351. 
B)  $77,351. 
C)  $54,000. 
D)  $60,000.

Question 4

Which of the following describes a defined benefit plan?

Accepted Answer

A)  Distribution amounts determined by employee and employer contributions. 
B)  Provides fixed income to the plan participants based on a formula. 
C)  Allows executives to defer income for a period of years. 
D)  Retirement account set up by an individual.

Question 5

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

Accepted Answer

A)  Distributions from defined benefit plans are partially taxable as ordinary income and partially nontaxable as a return of capital. 
B)  Distributions from defined benefit plans are taxable as capital gains. 
C)  Distributions from defined benefit plans are taxable as ordinary income. 
D)  Distributions from defined benefit plans are partially taxable as capital gains and partially nontaxable as a return of capital.

Question 6

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

Accepted Answer

A)  Employers typically match employee contributions to the plan to some extent. 
B)  An employer's vesting schedule is used for employers' contributions in determining the amount of the plan benefits the employee is entitled to receive on retirement. 
C)  Employers bear investment risk relating to the plan. 
D)  Employees immediately vest in their contributions to the plan.

Question 7

Kathy is 48 years of age and self-employed. During 2017 she reported $100,000 ofrevenues 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 2017? (Round your final answer to the nearest whole number)

Accepted Answer

A)  $54,000. 
B)  $17,152. 
C)  $60,000. 
D)  $11,152.

Question 8

Tyson (48 years old) owns a traditional IRA with a current balance of $50,000. Thebalance 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 adistribution of the entire $50,000 balance of his traditional IRA and he immediatelycontributes 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?

Accepted Answer

A)  $1,250. 
B)  $0. 
C)  $3,750. 
D)  $5,000.

Question 9

In 2017, Madison is a single taxpayer who is 25 years of age. During 2017, she contributed $3,000 to her employer sponsored 401(k) account. Her 2017 AGI was $66,500 (before considering IRA deductions). What is the maximum deductible contribution, if any, that Madison can make her to IRA?

Accepted Answer

The answer of In 2017, Madison is a single taxpayer...

Question 10

This year, Ryan contributed 10 percent of his $75,000 annual salary to a Roth 401(k) account sponsored by his employer, XYZ. XYZ offers a dollar-for-dollar match up to 10 percent of the employee's salary. The employer contributions are placed in a traditional 401(k) account on the employee's behalf. Ryan expects to earn an 8-percent before-tax rate of return on contributions to his Roth and traditional 401(k) accounts. Assuming Ryan leaves the funds in the accounts until heretires in 25 years, what are his after-tax accumulations in the Roth 401(k) and in the traditional401(k) accounts if his marginal tax rate at retirement is 30 percent? If Ryan's marginal tax rate this year is 35 percent will he earn a higher after tax rate of return from the Roth 401(k) or the traditional401(k)? Explain. (Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)

Accepted Answer

The answer of This year, Ryan contributed 10 percent of...

Question 11

In general, which of the following statements regarding self-employed retirement accounts is true?

Accepted Answer

A)  In general, SEP IRAs have higher contribution limits than individual 401(k)s if the contributing taxpayer is at least 50 years of age at year end. 
B)  In general, Individual 401(k)s have higher contribution limits than SEP IRAs. 
C)  In general, SEP IRAs have higher contribution limits than individual 401(k)s no matter the age of the contributing taxpayer. 
D)  None of the choices are true. In general, both SEP IRAs and individual 401(k)s have exactly the same annual contribution limits.

Question 12

Both employers and employees may contribute to defined contribution plans. However,the amount that employees may contribute to the plan in a given year is limited by the tax law while the amount that employers may contribute is not.

Accepted Answer

A) True 
 B)False

Question 13

Gordon is a 52-year-old self-employed contractor (no employees). During 2017, his Schedule C net income was $88,000. What is the maximum amount that Gordon can contribute to (1) a SEP IRA and (2) an individual 401(k)? (Round your answers to the nearest whole number).

Accepted Answer

The answer of Gordon is a 52-year-old self-employed contractor (no...

Question 14

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements regarding Roth 401(k) accounts is false?

Accepted Answer

A)  Employees can make contributions to a Roth 401(k). 
B)  Employers can make contributions to Roth accounts on behalf of their employees. 
C)  Qualified distributions from Roth 401(k) plans are not taxable. 
D)  Contributions to Roth 401(k) plans are not deductible.

Question 16

Taxpayers never pay tax on the earnings of a traditional 401(k) account.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is true regarding employer-provided qualified retirement plans?

Accepted Answer

A)  Executives are generally ineligible to participate in these plans. 
B)  Deductible contributions are generally phased-out based on AGI. 
C)  They are generally referred to as defined benefit plans or defined contribution plans. 
D)  May discriminate against rank and file employees.

Question 18

Amy files as a head of household. She determined her 2017 adjusted gross income was$70,000. During the year, she contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for 2017?

Accepted Answer

A)  $1,000. 
B)  $2,000. 
C)  $1,250. 
D)  $0. 
E)  $2,500.

Question 19

Jessica retired at age 65. On the date of her retirement, the balance in her traditional IRA was $200,000. Over the years, Jessica had made $20,000 of nondeductible contributions and $60,000 of deductible contributions to the account. If Jessica receives a $50,000 distribution from the IRA on the date of retirement, what amount of the distribution istaxable?

Accepted Answer

A)  $45,000. 
B)  $0. 
C)  $50,000. 
D)  $5,000. 
E)  $37,500.

Question 20

Sean (age 74 at end of 2017) retired five years ago. The balance in his 401(k) account on December31, 2016 was $1,700,000 and the balance in his account on December 31, 2017 was $1,750,000. In2017, Sean received a distribution of $50,000 from his 401(k) account. Assuming Sean's marginaltax rate is 25 percent, what amount of the $50,000 distribution will Sean have left after paying incometax on the distribution and paying any minimum distribution penalties (use the IRS table below in determining the minimum distribution penalty, if any).

Accepted Answer

The answer of Sean (age 74 at end of 2017)...

Exam 13: Retirement Savings and Deferred Compensation

Qualified retirement plans include defined benefit plans but not defined contributionplans.

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

Which of the following describes a defined benefit plan?

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

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

In 2017, Madison is a single taxpayer who is 25 years of age. During 2017, she contributed $3,000 to her employer sponsored 401(k) account. Her 2017 AGI was $66,500 (before considering IRA deductions). What is the maximum deductible contribution, if any, that Madison can make her to IRA?

In general, which of the following statements regarding self-employed retirement accounts is true?

Both employers and employees may contribute to defined contribution plans. However,the amount that employees may contribute to the plan in a given year is limited by the tax law while the amount that employers may contribute is not.

Gordon is a 52-year-old self-employed contractor (no employees). During 2017, his Schedule C net income was $88,000. What is the maximum amount that Gordon can contribute to (1) a SEP IRA and (2) an individual 401(k)? (Round your answers to the nearest whole number).

Individual 401(k) plans generally have higher contribution limits than SEP IRAs.

Which of the following statements regarding Roth 401(k) accounts is false?

Taxpayers never pay tax on the earnings of a traditional 401(k) account.

Which of the following statements is true regarding employer-provided qualified retirement plans?

Amy files as a head of household. She determined her 2017 adjusted gross income was$70,000. During the year, she contributed $2,500 to a Roth IRA. What is the maximum saver's credit she may claim for 2017?