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Exam 13: Retirement Savings and Deferred Compensation

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Question 31

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Jacob participates in his employer's defined benefit plan. He has worked for his employer for four full years. If his employer uses a five-year cliff vesting schedule, Jacob will need to work another year in order to vest in any of his defined benefit plan retirement benefits.

A) True
B) False

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Question 32

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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.

A) True
B) False

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Question 33

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Kathy is 48 years of age and self-employed. During 2019 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) ?

Taxpayers withdrawing funds from an IRA before they turn 70½ are generally subject to a 10 percent penalty on the amount of the withdrawal.

Riley participates in his employer's 401(k) plan. He retired in 2019 at age 75. When must Riley receive his distribution pertaining to 2019 to avoid minimum distribution penalties?

Which of the following statements is true regarding distributions from Roth 401(k) accounts?

Shauna received a $100,000 distribution from her 401(k) account this year. Assuming Shauna's marginal tax rate is 25 percent, what is the total amount of tax and penalty Shauna will be required to pay if she receives the distribution on her 59^th birthday and she has not yet retired?

Kathy is 60 years of age and self-employed. During 2019 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 a simplified employee pension (SEP) IRA for 2019? Assume she pays $27,192 in self-employment for 2019. (Round your final answer to the nearest whole number.)

Sean (age 74 at end of 2019)retired five years ago. The balance in his 401(k)account on December 31, 2018, was $1,700,000 and the balance in his account on December 31, 2019, was $1,800,000. Using the IRS tables below, what is Sean's required minimum distribution for 2019?

Retired taxpayers over 59½ years of age at the end of the year must receive minimum distributions from defined contribution plans or they are subject to a penalty.

During 2019, Jacob, a 19-year-old full-time student, earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan. The general limit for deductible contributions to an IRA during 2019 is $6,000. How much of a tax-deductible contribution can Jacob make to an IRA?

Which of the following is true concerning SEP IRAs?

Which of the following statements is true regarding taxpayers receiving distributions from traditional defined contribution plans?

Shauna received a distribution from her 401(k) account this year. In which of the following situations will Shauna be subject to an early distribution penalty?

Riley participates in his employer's 401(k) plan. He turns 70 years of age on February 15, 2018, and he plans on retiring on July 1, 2020. When must Riley receive his first distribution from the plan to avoid minimum distribution penalties?

The standard retirement benefit an employee will receive under a defined benefit plan depends on the number of years of service the employee provides, but does not consider the amount of the employee's compensation near retirement.

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

Which of the following statements regarding Roth IRA distributions is true?

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

Joan recently started her career with PDEK Accounting, LLP, which provides a defined benefit plan for all employees. Employees receive 1.5 percent of the average of their three highest annual salaries for each full year of service. Plan benefits vest under a five-year cliff schedule. Joan worked five and a half years at PDEK before leaving for another opportunity. She received an annual salary of $49,000, $52,000, $58,000, $65,000, and $75,000 for years one through five, respectively. Joan earned $40,000 of her $80,000 annual salary in year six. What is the vested benefit Joan is entitled to receive from PDEK for her retirement? Use Exhibit 13-1.