Small business owners have a number of retirement plans available to them. One type of plan is limited to employers with 100 or fewer eligible employees. Under this type of plan, small employers are exempt from most of the nondiscrimination and administrative rules that apply to qualified plans. Such plans are called A) Keogh plans. […]
To encourage low- to moderate-income workers to save for retirement, a tax credit called the Saver’s Credit is available. Which statement about tax credits and tax deductions is true? A) Tax deductions are more favorable than tax credit for most taxpayers. B) Tax credits reduce taxes owed on a dollar-for-dollar basis. C) Tax credits reduce […]
All the following statements concerning a Roth 401(k) plan are true EXCEPT A) After-tax dollars are used to fund the plan. B) Investment earnings accumulate on a tax-free basis. C) Employees at all income levels may contribute to the plan, but annual contributions are limited. D) Qualified distributions at retirement are fully taxable. […]
The tax credit available through the Saver’s Credit is equal to A) the annual IRA contribution limit. B) $2,000 regardless of income level and tax-filing status. C) a percentage of the contribution made to a traditional IRA, Roth IRA, 401-k, SIMPLE plan, or 403(b) plan. D) one-fourth of the Social Security taxes paid by the […]
JKL Company just converted its traditional defined-benefit plan to another type of plan. Under the plan, benefits are defined in terms of a hypothetical account balance, with retirement benefits dependent upon the value of the participant’s account at retirement. Each year, employees receive an interest rate credit and a pay credit which is a specified […]
Which of the following is a reason that social insurance programs exist? A) to compete with private insurance programs B) to provide a base of economic security C) to provide needs-tested benefits to low-income individuals D) to reduce involvement of the government in insurance markets ANSWER Answer: B
All of the following statements about 403(b) plans are true EXCEPT A) Contributions to a 403(b) reduce an employee’s taxable income. B) 403(b) plans are designed for employees of public school systems and tax-exempt organizations. C) The law limits the amount of income that an employee can elect to defer under a 403(b) plan. D) […]
Which of the following statements about Roth 401(k) plans is true? I. Contributions to a Roth 401(k) plan are made with before-tax dollars. II. Qualified distributions from a Roth 401(k) are received income-tax free. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: B
Which of the following statements about Section 401(k) plans is true? A) Elective salary deferrals to these plans are free of federal income taxation until the funds are actually withdrawn. B) These plans are exempt from rules that prevent discrimination in favor of highly compensated employees. C) There is no limit on the actual percentage […]
Which of the following statements concerning retirement plans for the self-employed is true? I. They can be used by owners of incorporated businesses only. II. With certain exceptions, the same rules that apply to qualified corporate plans apply to retirement plans for the self-employed. A) I only B) II only C) both I and II […]
