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Exam 13: Retirement Savings and Deferred Compensation

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Question 31

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Which of the following statements regarding contributions to defined contribution plans is True?

A) Employer contributions to a defined contribution plan are not limited by the tax law.
B) Employee contributions to a defined contribution plan are not limited by the tax law.
C) An employee who is at least 60 years of age as of the end of the year may contribute more to a defined contribution plan than an employee who has not reached age 60 by year-end.
D) The tax laws limit the sum of the employer and employee contributions to a defined contribution plan.

E) A) and C)
F) A) and D)

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Question 32

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Carmello and Leslie (ages 34 and 35, respectively) are married and want to contribute to a Roth IRA. In 2018, their AGI totaled $42,000 before any IRA-related transactions. Of the $42,000, Carmello earned $35,000 and Leslie earned $7,000. How much can each spouse contribute to a Roth IRA if they file jointly? How much can each spouse contribute to a Roth IRA if they file separately?

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If they file jointly, each spouse can co...

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Question 33

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When an employer matches an employee's contribution to the employee's 401(k) account, the employee is immediately taxed on the amount of the employer's matching contribution.

Yvette is a 44-year-old self-employed contractor (no employees). During 2018, her Schedule C net income was 500,000. Assuming Yvette has no contributions to other retirement plans. What is the maximum amount that Yvette can contribute to (1) a SEP IRA and (2) an individual 401(k)? (Round your answers to the nearest whole number).  

In 2018, Tyson (age 52) earned $50,000 of salary. Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2018?

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

Heidi retired from GE (her employer) at age 56. At the end of the year, when she was 56 years of age, Heidi received a distribution from her GE sponsored 401(k) account. Because Heidi was not at least 59½ years of age at the time of the distribution, she must pay tax on the full amount of the distribution and a 10 percent penalty on the full amount of the distribution.

Deborah (single, age 29) earned $25,000 in 2018. Deborah was able to contribute $1,800 ($150/month) to her employer sponsored 401(k). What is the total saver's credit that Deborah can claim for 2018? Use Exhibit 13-9

Katrina's executive compensation package allows her to participate in the company's nonqualified deferred compensation plan. In the current year, Katrina defers 15 percent of her $300,000 salary. Katrina's deemed investment choice will earn 8 percent annually on the deferred compensation until she takes a lump sum distribution in 10 years. Katrina's current marginal tax rate is 30 percent and she expects her marginal tax rate to be 28 percent upon receipt on the deferred salary. What is her after-tax accumulation from the deferred salary in 10 years? (Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)

Heidi (age 57) invested $4,000 in her Roth 401(k) on January 1, 2010. This was her only contribution to the account. On July 1, 2018, when the account balance was $6,000, she received a nonqualified distribution of $4,500. What is the taxable portion of the distribution and what amount of early distribution penalty will Heidi be required to pay on the distribution?

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

Which of the following statements describes how a traditional 401(k) account is similar to a Roth 401(k) account?

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

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

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to deduct contributions to individual retirement accounts (IRAs) under any circumstances.

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

Distributions from defined benefit plans are taxed as long-term capital gains to beneficiaries.

A SEP IRA is an example of a self-employed retirement account.

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

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