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| 1 | |
Jessica participates in her employer's defined benefit retirement plan. She has worked for her employer for three full years. If her employer uses a five-year cliff vesting schedule, Jessica is only vested in 60 percent of her defined benefit plan retirement benefits. |
| | A) | True |
| | B) | False |
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| 2 | |
Unlike employee contributions to a Roth 401(k), employee contributions to a traditional 401(k) account are deductible by the employee. |
| | A) | True |
| | B) | False |
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| 3 | |
All else equal, a nonqualified deferred compensation plan is preferable from a tax perspective when the employee anticipates that her marginal tax rate will be higher when she receives the deferred compensation than when she defers receiving the compensation. |
| | A) | True |
| | B) | False |
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| 4 | |
In 2013, Jessica is 73 years old at year end but not yet retired. Jessica is required to receive a minimum distribution from her traditional 401(k) plan for 2013. |
| | A) | True |
| | B) | False |
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| 5 | |
A distribution from a traditional 401(k) account is excluded from the taxpayer's gross income. |
| | A) | True |
| | B) | False |
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| 6 | |
Saver's credits are awarded for contributions to both qualified and nonqualified retirement accounts. |
| | A) | True |
| | B) | False |
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| 7 | |
James has earned $60,000 annually for the past three years working at ABC Inc. Under ABC's defined benefit plan (which uses a 7-year graded vesting schedule) employees earn a benefit equal to 4 percent for every year of service, of the average salary for their three highest full years of compensation with ABC. James has worked for five full years for ABC and his vesting percentage (based on the 7-year graded vesting schedule) is 60 percent. What is James's vested benefit (or annual retirement benefit he has earned so far)? |
| | A) | $0 |
| | B) | $3,600 |
| | C) | $4,320 |
| | D) | $7,200 |
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| 8 | |
Shannon participates in her employer's 401(k) plan. She turns 68 years of age on February 15, 2013, and she plans on retiring on May 1, 2014. When must Shannon receive her first distribution from the plan to avoid minimum distribution penalties? |
| | A) | April 1, 2013 |
| | B) | April 1, 2014 |
| | C) | April 1, 2015 |
| | D) | April 1, 2016 |
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| 9 | |
Valerie received a distribution from her traditional 401(k) account this year. In which of the following situations will she be subject to an early distribution penalty? |
| | A) | Valerie is 62 years of age but not yet retired when she receives the distribution. |
| | B) | Valerie is 60 years of age but not yet retired when she receives the distribution. |
| | C) | Valerie is 53 years of age and retired when she receives the distribution. |
| | D) | Valerie is 69 years of age but not yet retired when she receives the distribution. |
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| 10 | |
Janna received a $90,000 distribution from her traditional 401(k) account this year. Assuming Janna's marginal tax rate is 28%, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 60th birthday and she has not yet retired? |
| | A) | $0 |
| | B) | $25,200 |
| | C) | $34,200 |
| | D) | None of the above |
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| 11 | |
Which of the following statements concerning nonqualified deferred compensation plans is true? |
| | A) | These plans can be an important tax planning tool for employees who expect their marginal tax rate to increase over time. |
| | B) | These plans can be an important tax planning tool for employers if they expect their marginal tax rate to decrease over time. |
| | C) | If an employer doesn't have the funds to pay the employee, the employee becomes an unsecured creditor of the employer. |
| | D) | Distributions are taxed at the same tax rate as long-term capital gains. |
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| 12 | |
During 2013 Rebekah, a 20-year-old full-time student, earned $3,400 during the year and was not eligible to participate in an employer-sponsored retirement plan. The general limit for deductible contributions during 2013 is $5,500. How much of a tax-deductible contribution can she make to an IRA? |
| | A) | $0 (Full-time students are not allowed to participate in IRAs) |
| | B) | $3,400 |
| | C) | $5,500 |
| | D) | $8,900 |
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| 13 | |
Cara, who is 42 years old, had some unexpected medical expenses during the year. To pay for these expenses (which were claimed as itemized deductions on her tax return), she received a $10,000 distribution from her traditional IRA (she has only made deductible contributions to the IRA). Assuming her marginal ordinary income tax rate is 10%, what amount of taxes and/or early distribution penalties will Cara be required to pay on this distribution? |
| | A) | $1,000 income tax; $100 early distribution penalty |
| | B) | $1,000 income tax; $1,000 early distribution penalty |
| | C) | $1,000 income tax; $0 early distribution penalty |
| | D) | $0 income tax; $0 early distribution penalty |
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| 14 | |
Aaron retired at the age of 63. The current balance in his Roth IRA is $140,000. Aaron established the Roth IRA eight years ago. Through a rollover and annual contributions, Aaron has contributed $70,000 to his account. If Aaron receives a $60,000 distribution from the Roth IRA, what amount of the distribution is taxable? |
| | A) | $0 |
| | B) | $30,000 |
| | C) | $60,000 |
| | D) | None of the above |
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| 15 | |
Jill is 62 years of age and self-employed. During 2013 she reported $120,000 of revenues and $50,000 of expenses relating to her self-employment activities. If Jill 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? |
| | A) | $13,011 |
| | B) | $14,000 |
| | C) | $50,000 |
| | D) | $70,000 |
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