Fin440 Exam 2

Which of the following is not true regarding profit sharing plans?
A) The plan is established and maintained by the individual employee.
B) Allows employees to derive benefit from profits of the company.
C) Profit sharing plans cannot discriminate in favo

A) The plan is established and maintained by the individual employee.

Which of the following entities is unable to establish a 401(k) plan?
A) Government entity.
B) LLC.
C) Partnership.
D) Tax-exempt entity.

A) Government entity.

Mikael opened a fabulous restaurant ten years ago. The food is so exceptional that the restaurant has become one of the top spots in the city. Mikael, age 55, is the sole owner with compensation of $275,000. Mikael's son Jamel, age 28, is the master chef

B) If Mikael selected the permitted disparity method and the plan contributes 10 percent per individual, the contribution the company makes for Mikael will be increased.
By using permitted disparity, or integration with Social Security, Mikael can increas

ABC Company has three employees: Ann, Brenda, and Curtis. Their compensation is $50,000, $150,000, and $200,000 respectively. ABC is considering establishing a straight 10% profit sharing plan or an integrated profit sharing plan using a 10% contribution

B) The effect of the integrated plan results in an increase in Brenda's contribution of $1,231
If ABC selected the 10% profit sharing plan, the amount for the employee contributions is $5,000 for Ann, $15,000 for Brenda, and $20,000 for Curtis. Alternativ

Aztec Clay Distributor is a family owned business that is owned by Alice, Bill, Chad and Zion. Alice and Bill are over 50. Zion is not an employee, rather a silent or somewhat silent partner. Alice and Bill are married and Chad is their 25-year-old son wh

A) 7.53%
The non-highly compensated employees are Frank, Ginger, Haley, Irish and Jen. The ADP for the NHCEs equals 5.53% [[16% + 0% + 6.67% + 5% + 0%] � 5]. Adding 2 percentage points equals 7.53%. Chad is HC since he is attributed ownership from his par

Thibodaux Company sponsors an integrated profit sharing plan with a base percent of 20%. Boudreaux, who is 60 years old, earns $330,000 per year. Assuming the plan uses the 2018 Social Security wage base as the integration level, how much more will Boudre

A) $0.
Rationale
He would not get any benefit from integration if the base percent is 20% because 20% of $275,000 (2018 compensation limit) equals $55,000 (2018 annual additions limit).

Tyler's Bike Shop has a 401(k) plan that offers an employer match of dollar-for-dollar up to four percent of employee compensation. Although the plan provides for the least generous graduated vesting schedule available, it does allow employees to enter th

B) Tanya should enter the plan and contribute 20 percent of her salary.
Yes, Tanya should enter the plan, but she would not be able to contribute 20%. Remember that the limit for a 401(k) contribution is $18,500 for 2018. Thus to reach the limit, Tanya ma

Which of the following statements is true?
A) Profit sharing plans may not offer in-service withdrawals.
B) Pension and profit sharing plans are both subject to mandatory funding requirements.
C) Profit sharing plans allow annual employer contributions up

C) Profit sharing plans allow annual employer contributions up to 25 percent of the employee's covered compensation.
Answer c is the only true statement. Profit sharing plans allow annual contributions of up to 25 percent of covered compensation. Answer a

Ansley's Art Gallery has a profit sharing plan. The plan requires employees to be employed two years before they can enter the plan. The plan has two entrance dates per year, January and July 1st. Assume today is December 1, 2020 and the Gallery has the f

D) As of today, three individuals are eligible for the plan.
Only three individuals are eligible for the plan, Ansley, Ginny, and Max. Ansley and Ginny are both in the plan, but Max is not yet in the plan because there has not been an entrance date since

JJ is a Marine, who served our country for the last 25 years. He has $250,000 in his U.S. Government Thrift Savings Plan. Which of the following plans is JJ's Thrift Plan most similar to?
A) Defined benefit plan.
B) Cash balance plan.
C) Profit sharing pl

D) 401(k) plan.
The US Government Thrift Savings Plan is very similar to a 401(k) plan. It allows for the same employee deferral limits and maximum contribution limits as a 401(k) plan. The other choices are not correct.

Sheehan works for Andy Company and is a superior sales guy. His total compensation this year is $600,000. Andy sponsors an integrated profit sharing plan with a base percentage of 5.5% and a maximum excess percentage. It uses the current wage base as the

B) $23,188.
The excess percentage is 11% (twice the base percentage). Therefore, Sheehan receives 5.5% from zero to the wage base of $128,400 (2018) and 11% on income above the wage base up to the covered compensation limit of $275,000 (2018). [[$275,000

Skatium, the city's most popular roller skating rink, has a profit sharing plan for their employees. Skatium has the following employee information:
Employee Age Length of Service
Brett 62 14 years
Greer 57 14 years
Jennifer 32 6 months
Dan 22 2 years
Kar

A) Dan and Karen are 20 percent vested in their benefits.
The standard vesting schedule requires individuals to be 21 years of age and have one year of service before becoming eligible for the plan. Brett, Greer, and Dan are the only individuals that meet

Which of the following vesting schedules may a top-heavy profit sharing plan not use?
A) 1 to 4 year graduated.
B) 35% after 1 year, 70% after 2 years, and 100% after 3 years.
C) 2 to 6 year graduated.
D) 4 year cliff.

D) 4 year cliff.
The only choice that is not possible is a 4 year cliff, since 3 year cliff is the standard for a DC plan. Top heavy is irrelevant with DC plans after PPA 2006.

Which of the following statements is true regarding CODAs?
A) A 401(k) can only be established as a stand alone plan.
B) A CODA is allowed with a profit-sharing plan, stock bonus plan, and a cash balance pension plan.
C) Contributions can only be made aft

D) CODAs are employee self-reliant plans.
401(k) plans are not stand alone plans; they must be combined with another plan. A CODA is not allowed with a cash balance pension plan (other than the special DB(k) plan). Contributions can be made pre- and post-

Rex, age 47, an employee at Water Waste, is considering contributing to a 401(k) plan during 2018. Which of the following statements are true?
A) Rex can make a $24,500 elective deferral contribution to a 401(k) plan for 2018.
B) If Rex does make an elect

D) Water Waste must deposit Rex's elective deferral contribution to the plan as soon as reasonably possible.
Rex can only make a $18,500 contribution for 2018. He would only be able to contribute $24,500 if he were over age 50. Employee deferrals are subj

All of the following are advantages of a 401(k) plan except:
A) Employees are permitted to shelter current income from taxation in a 401(k) plan.
B) Employers can sponsor 401(k) safe harbor plans without committing to annual contributions and without crea

B) Employers can sponsor 401(k) safe harbor plans without committing to annual contributions and without creating a deferred liability.
Answer b is false, and thus not an advantage of 401(k) safe harbor plans. Employers are generally required under the sa

Nex sponsors a DB(k) plan that provides benefits for all employees. Nex adopted the plan four years ago. Kleen, who is age 55 and earns $100,000, has been employed for the last ten years with Nex. Which of the following statements is correct regarding Kle

C) All benefits provided under the DB(k) plan will be 100 percent vested for Kleen.
Option a is not correct. He could defer up to the annual limit. Option b is not correct. Since Kleen is over age 50, he would be receiving pay credits of 8% per year. Opti

BigCorp, LLC has a 401(k) plan that allows for hardship distributions. Sandra would like to return to school to get a Masters degree. She has $3,000 in her savings account to use, but would like to take a hardship distribution from her 401(k) plan for the

A) $4,000.
Sandra can take a distribution up to the hardship expense less other assets available to pay the hardship expense ($7,000 for one year of tuition - $3,000 in savings).

Which of the following is true regarding negative elections?
1. A negative election is a device where the employee is deemed to have elected a specific deferral unless the employee specifically elects out of such election in writing.
2. Negative elections

A) 1 only.
Negative elections are approved by the IRS and they are available for both current and future employees. Qualified automatic contribution arrangements use negative elections. However, not all plans that employ a negative election will qualify a

Andi, the 100 percent owner of Andi's Day Care, would like to establish a profit sharing plan. Andi's Day Care's tax year ends July 31 to coincide with the school year. What is the latest day Andi can establish and contribute to the plan?
A) Andi must est

B) Andi must establish the plan by July 31 of the year in which she would like to have the plan and contribute by April 15 of the following year assuming she filed the appropriate extensions.
Andi must establish the plan by July 31 of the year in which sh

One of the disadvantages of an ESOP is that the stock is an undiversified investment portfolio. Which of the following is correct?
1. An employee, age 55 or older, who has completed 10 years of participation in an ESOP may require that 100% of the account

B) 2 only.
The first statement is incorrect because the percentage is 25% (increased to 50% for the final year of the election period), not 100%. The second statement is correct.

Patrick and Kevin own Irisha Corporation and plan to retire. They would like to leave their assets to their children; therefore, they transfer 70 percent of the stock to a trust for the benefit of their 10 children pro rata. Patrick and Kevin then plan to

B) 2 only.
There must be a sale of at least 30% (not 50%) to the ESOP to qualify for nonrecognition of capital gain treatment. In addition, any transfer that is less than 50% of the stock of the corporation might be subject to a minority discount on valua

Rustin recently retired from Fox, Inc., a national plastics supplier. When Rustin retired his stock bonus plan had 10,000 shares of Fox, Inc. stock. Fox, Inc. took deductions equal to $20 per share for the contributions made on Rustin's behalf. At retirem

A) $0.
Rustin will not be subject to ordinary income at the date contributions are made to the stock bonus plan.

Rustin recently retired from Fox, Inc., a national plastics supplier. When Rustin retired his stock bonus plan had 10,000 shares of Fox, Inc. stock. Fox, Inc. took deductions equal to $20 per share for the contributions made on Rustin's behalf. At retirem

A) $0.
Rustin will not have any capital gain until the stock is sold.

The following definition applies to which of the following terms: "the corporation makes tax deductible contributions to a trust in the form of both principal and interest for the loan."
A) A stock bonus plan.
B) An ESOP.
C) A leveraged ESOP.
D) A S corp

C) A leveraged ESOP.
Only a leveraged ESOP will have a loan and thus, have principal and interest payments.

Which of the following are requirements for a qualified stock bonus plan?
1. Participants must have pass through voting rights for stock held by the plan.
2. Participants must have the right to demand employer securities at a distribution, even if the pla

C) Both 1 and 2.
Both statements are true.

Mike, age 60, is a participant in the stock bonus plan of Tantalus, Inc., a closely held corporation. Mike received contributions in shares to the stock bonus plan and Tantalus, Inc. took income tax deductions as follows:
value per share - at time of cont

B) Mike has ordinary income of $14,650 at distribution.
Mike's ordinary income is exactly equal to Tantalus, Inc.'s deduction at the time of contribution, $14,650 (see chart below). Mike's net unrealized appreciation is $4,850 ($19,500 - $14,650) and will

Which phrase best completes the following sentence: "A repurchase option allows a terminating employee the choice to receive the cash equivalent of the employer's stock if the stock is _____."
A) Convertible.
B) Tradeable.
C) Not readily tradeable.
D) Not

D) Not readily tradeable on an established market.
This phrase is directly from IRC �409(h)(1).

Meb, the owner of Meb's Hardware, is considering establishing a stock bonus plan. She recently talked with her advisor, Don T. Know. Don T. Know never studied when he took his certificate program, therefore he gave Meb incorrect information about stock bo

D) Meb can require the employees to be age 21 and employed for two years before becoming eligible for the stock bonus plan.
Meb must establish the stock bonus plan by the end of the year in which she would like the plan to begin. When the employees of Meb

To qualify for nonrecognition of gain treatment, the following requirements apply:
A) The ESOP must own at least 30% of the corporation's stock immediately after the sale.
B) The corporation that establishes the ESOP must have no class of stock outstandin

E) All of the above.

Davin sells stock six months after he received it as a distribution from a qualified stock bonus plan. When the stock was distributed, he had a net unrealized appreciation of $7,500. He also had ordinary income from the distribution of $29,000. The fair v

A) $7,500.
Appreciation on the stock after the date of distribution is taxed as long-term capital or short-term capital gain, depending upon the holding period beginning at the date of distribution. In this case, only the net unrealized appreciation of $7

Baily is 56 years old and obtained ten years of participation in the Blackwater ESOP in Year 1. Assume she elects to diversify 20% of her account balance, which was $100,000, during the 90-day period following Year 1. Which of the following is correct?
A)

D) During the 90-day period following Year 6, Baily could diversify up to $100,000, on a cumulative basis with prior diversification amounts, assuming her plan balance was $200,000 at the end of Year 6.
Choice a is incorrect as she could not diversify $37

Which of the following are false as to ESOPs?
1. An ESOP is controlled through a trust.
2. ESOPs provide corporate owners with a way to transfer ownership interests to their employees.
3. The trust of an ESOP is prohibited from borrowing money from a bank

A) 3 only.
A key characteristic of the ESOP is that the trust may borrow money to purchase the employer stock.

Which of the following are costs of a stock bonus plan?
1. Periodic appraisal costs.
2. Periodic actuarial costs.
A) 1 only.
B) 2 only.
C) Both 1 and 2.
D) Neither 1 nor 2.

A) 1 only.
Stock bonus plans require an independent appraisal of the stock value at contribution and distribution. Stock bonus plans do not require actuarial work.

Sam is a participant in RFK, Inc.'s ESOP. Sam has been a participant in the plan for eight years, and her account balance in the plan is $1,000,000 and is completely funded with employer securities. The plan defines the normal retirement age as 65 years o

A) The only way Sam can diversify her portfolio is to take a distribution of the employer stock from the ESOP and reinvest the value in a diversified portfolio.
Sam is not eligible to require the ESOP to diversify her portfolio because she has not been a

Cavin sells stock several years after he received it as a distribution from a qualified stock bonus plan. When the stock was distributed, he had a net unrealized appreciation of $7,500. Cavin also had ordinary income from the distribution of $29,000. The

C) $52,000.
Sale Price - Adjusted Basis. $81,000 - $29,000 = $52,000 long-term capital gain.

BJ owns NOCTM, Inc. and sells 100 percent of the corporate stock (all outstanding stock) on January 1, 2018 to an ESOP for $5,000,000. His adjusted basis in the stock was $2,400,000. Which of the following is correct?
1. If BJ reinvests the $5,000,000 in

D) Neither 1 nor 2.
The $5,000,000 must be reinvested within 12 months and there is not a 20% small business credit. In addition, to qualify for nonrecognition of gain treatment, the NOCTM, Inc. stock must have been owned by BJ for at least three years.

Taylor, age 65, retires from Tickle Tile corporation and receives 25,000 shares of Tickle Tile stock with a fair market value of $500,000 in 2018. Taylor recognized $48,000 of ordinary income upon the distribution. What is Taylor's NUA immediately after t

C) $452,000.
The NUA immediately after the distribution is $452,000 ($500,000 - $48,000).

Rustin recently retired from Fox, Inc., a national plastics supplier. When Rustin retired his stock bonus plan had 10,000 shares of Fox, Inc. stock. Fox, Inc. took deductions equal to $20 per share for the contributions made on Rustin's behalf. At retirem

D) $150,000 long-term capital gain and $50,000 short-term capital gain.
When Rustin sells the stock any appreciation after the employer's contribution will be capital gain. Rustin's adjusted basis in the stock is the amount that was subjected to ordinary

ESOP distributions can be made in installments:
1. No longer than 5 years under any scenario.
2. No longer than 5 years unless the account balance exceeds $1,105,000 for 2018, in which case an additional year is allowed for each $220,000 (2018) over $1,10

C) 2 and 3.
Statement 1 is false because the scenario with an excess of $1,105,000 allows an additional year for each $220,000 over $1,105,000.

Rustin recently retired from Fox, Inc., a national plastics supplier. When Rustin retired his stock bonus plan had 10,000 shares of Fox, Inc. stock. Fox, Inc. took deductions equal to $20 per share for the contributions made on Rustin's behalf. At retirem

B) $200,000.
Rustin will be subject to ordinary income at the date the stock is distributed equal to the value of the contributions made by the employer ($200,000).

Gary quits his job with a 401(k) account worth $500,000. He wants to roll the funds over to his IRA. If his employer sends the funds to Gary directly, how much will they send?
A) $100,000.
B) $250,000.
C) $400,000.
D) $500,000.

C) $400,000.
An employer will withhold 20%. Gary should use a direct trustee to trustee transfer to avoid the required withholding.

Josh recently died at the age of 63, leaving a qualified plan account with a balance of $1,000,000. Josh was married to Kay, age 53, who is the designated beneficiary of the qualified plan. Which of the following is correct?
A) Kay must distribute the ent

D) Kay can receive annual distributions over her remaining single-life expectancy, recalculated each year.
Kay can receive distributions over her remaining single-life expectancy. A spouse beneficiary can recalculate life expectancy each year. Statement a

Gerry is 70� on April 1 of the current year and must receive a minimum distribution from his qualified plan. The account balance had a value of $423,598 at the end of last year. The distribution period for a 70 year old is 27.4, and for a 71 year old it i

C) $492.
The required minimum distribution for Gerry is $15,985 ($423,598 divided by 26.5) because he is 71 years old as of December 31 of the current year. Gerry only took a distribution of $15,000, therefore, the minimum distribution penalty (50%) would

Which of the following is/are elements of an effective waiver for a pre-retirement survivor annuity?
1. Both spouses must sign the waiver.
2. The waiver must be notarized or signed by a plan official.
3. The waiver must indicate that the person(s) waiving

C) 2 and 3.
Only the nonparticipant spouse must sign the waiver.

The early distribution penalty of 10 percent does not apply to qualified plan distributions:
1. Made after attainment of the age of 55 and separation from service.
2. Made for the purpose of paying qualified higher education costs.
3. Paid to a designated

B) 1 and 3.
Statement 2 is an exception for distributions from IRAs, not qualified plans. Statements 1 and 3 are exceptions to the 10% penalty for qualified plan distributions.

Ginger, who is 75 years old, requested from the IRS a waiver of the 60-day rollover requirement. She indicated that she provided written instructions to her financial advisor that she wanted to take a distribution from her IRA and roll it over into a new

D) No. Ginger waited an unreasonable amount of time before filing the request.
The IRS generally grants such requests if timely made. However, Ginger should have realized this long before five years. She would have reported interest on her Form 1040 which

Which of the following distributions from a qualified plan would not be subject to the 10% early withdrawal penalty, assuming the participant has not attained age 59�?
1. A distribution made to a spouse under a Qualified Domestic Relations Order (QDRO).
2

C) 1 and 4.
Statement 2 is incorrect for two reasons. The exception to the 10 percent early withdrawal penalty for health insurance premiums is only applicable to unemployed individuals. In addition, this exception is only available for distributions from

Jim, a participant in the Zappa retirement plan, has requested a second plan loan. Jim's vested account balance is $80,000. He borrowed $27,000 eight months ago and still owes $18,000 on that loan. How much can he borrow as a second loan?
A) $13,000.
B) $

B) $22,000.
He can borrow the lesser of $50,000 or half of the vested account balance. The $50,000 must be reduced by the highest outstanding balance in the last twelve months - $23,000. Half of the vested account balance ($40,000) less the outstanding lo

Which of the following statements is/are correct regarding the early distribution 10 percent penalty tax from a qualified plan for years after 2017?
1. Retirement at age 55 or older exempts the distributions from the early withdrawal penalty tax.
2. Distr

D) 1, 2, and 3.
Statements 1, 2, and 3 are correct. The 2017 TCJA reduced the 10% AGI limit to 7.5% of AGI for medical deductions for 2017 and 2018.

On January 5, Cindy, age 39, withdrew $42,000 from her qualified plan. Cindy had an account balance of $180,000 and an adjusted basis in the account of $30,000. Calculate any early withdrawal penalty.
A) $0.
B) $1,200.
C) $3,500.
D) $4,200.

C) $3,500.
$30,000/$180,000 = 0.1667 exclusion.
$42,000 x 0.1667 = $7,000.
$42,000 - $7,000 = $35,000 x 0.10 = $3,500.

Decatur 401(k) Plan maintains a loan program for its participants. The plan has 50 participants, three of whom had participant loans. Decatur conducted a year-end review of its loan program and found the following:
� Bob received a loan from the plan one

C) Both Bob and Sandi.
Bob's loan exceeds the $50,000 limit and Sandi's exceeds the five-year rule.

Gary quits his job with a 401(k) account worth $500,000. He wants to roll the funds over to his IRA. If his employer sends the funds to Gary directly, how much will they send?
A) $100,000.
B) $250,000.
C) $400,000.
D) $500,000.

C) $400,000.
An employer will withhold 20%. Gary should use a direct trustee to trustee transfer to avoid the required withholding.

Bobby Brown would not listen to his financial advisor and decided to rollover his qualified plan assets to a traditional IRA. Which of the following is correct?
A) Bobby is entitled to the same alternative tax options in an IRA that are available in a qua

D) Bobby has lost some of his creditor protection by moving the funds from a qualified plan to an IRA.
Choice a is not correct because ten year forward averaging, pre-74 capital gain treatment and NUA treatment are available in a qualified plan, but not a

If Colin receives a distribution from a qualified plan, how long does he have to roll it over to an IRA without it being subject to taxation?
A) 30 days.
B) 45 days.
C) 60 days.
D) 90 days.

C) 60 days.
Colin has 60 days to rollover a distribution to an IRA.

MaryAnn, who is 75 years old, requested from the IRS a waiver of the 60-day rollover requirement. She indicated that she provided written instructions to her financial advisor that she wanted to take a distribution from her IRA and roll it over into a new

B) Yes. The mistake was the fault of the financial advisor and the IRS regularly grants waivers in these circumstances.
The IRS generally grants such requests if timely made.

Laura, age 43, has several retirement accounts and wants to know what accounts can be rolled over to other accounts. Which of the following statements regarding rollovers is not correct?
A) She could take a distribution from her SEP IRA and roll it over t

D) She could rollover her traditional IRA to her SIMPLE IRA.
Choices a, b and c are all correct and permissible. Basically no other retirement assets can be rolled over to a SIMPLE IRA except assets currently in a SIMPLE IRA.

Jose Sequential, age 70� in October of this year, worked for several companies over his lifetime. He has worked for the following companies (A-E) and still has the following qualified plan account balances at those companies.
Company Jose's Account Balanc

B) $40,146.
Jose is required to take a minimum distribution for the years in which he is 70� from each qualified plan, except from his current employer ($1,100,000 � 27.4 = $40,146). He can delay the payment until April 1 of next year, but the question as

Pander's Box, a shop that specializes in custom trinket and storage boxes, has a 401(k) plan. The plan allows plan loans up to the legal limit allowed by law and they may be repaid under the most generous repayment schedule available by law. The plan has

C) The maximum Justin can borrow from his account is $10,000.
Justin can borrow one half of his vested account balance up to $50,000. Since the balance is below $20,000, he can borrow a full $10,000. State law does not require the repayment of the loans w

Tom, age 39, is an employee of Star, Inc., which has a profit sharing plan with a CODA feature. His total account balance is $412,000, $82,000 of which represents employee elective deferrals and earnings on those deferrals. The balance is profit sharing c

D) Neither 1 nor 2.
Statement 1 is incorrect because he can take a loan equal to one-half of his total vested account balance up to $50,000. Statement 2 is incorrect because the exemption from the 10% penalty only applies to IRAs and only to the unemploye

Reese has assets both in her Roth IRA and in her Roth account that is part of her employer's 403(b) plan. However, she is not sure about the differences between the two types of accounts. Which of the following statements would you tell her is correct?
A)

D) The nature of the income received by beneficiaries in a qualified distribution is the same for distributions from both Roth IRAs and Roth accounts.
Choice a is not correct because the five year holding period is separate for each type of account. Choic

If Colin receives a distribution from a qualified plan, how long does he have to roll it over to an IRA without it being subject to taxation?
A) 30 days.
B) 45 days.
C) 60 days.
D) 90 days.

C) 60 days.
Colin has 60 days to rollover a distribution to an IRA.

Which of the following are benefits of converting assets in a qualified plan to a Roth account through an in-plan Roth rollover?
1. The conversion may result in a reduction in income tax in future years.
2. The conversion will result in increasing after-t

A) 1 and 2.
While there are no guarantees, the conversion may result in a reduction in tax in future years since all future income in the account will escape taxation. The conversion does result in increasing after-tax deferred assets and reducing the gro

One approach that is used in some domestic relations orders is to "split" the actual benefit payments made with respect to a participant under the plan to give the alternate payee part of each payment. Under this approach, the alternate payee will not rec

C) The shared payment approach.
This is the definition of the shared payment approach. There is not such term as split payment approach or divided annuity approach.

Roger and Robin were happily married until Roger fell in love with Sam. As a result, Roger and Robin have agreed they need to get a divorce. As part of the process, the court has provided a domestic relations order that calls for Robin's profit-sharing pl

A) The separate interest approach.
The separate interest approach calls for splitting a retirement account into two separate accounts. Each party is free to act with regard to their separate account without the interference or consent of the other party.

Steve, age 69, is an employee of X2, Inc. He plans to work until age 75. He currently contributes 6 percent of his pay to his 401(k) plan, and his employer matches with 3 percent. Which one of the following statements is true?
A) Steve is required to take

B) Steve is required to take minimum distributions from his 401(k) plan beginning April 1 of the year after he retires.
Generally, an individual must receive his or her first minimum distribution by April 1 following the year the individual attains age 70

In June 2018, Cody converts $100,000 in his 401(k) plan to a Roth account through an in-plan Roth rollover. The value of the assets in the Roth account drops by 40 percent due to a significant decline in the stock market that occurs in August 2018. The in

A) Cody cannot recharacterize the conversion.
In-plan Roth rollovers cannot be "undone" or recharacterized. The other choices are not correct.

Which of the following is true regarding QDROs?
A) The court determines how the retirement plan will satisfy the QDRO. (i.e. split accounts, separate interest).
B) In order for a QDRO to be valid, the order must be filed on Form 2932-QDRO provided by ERIS

D) A QDRO distribution is not considered a taxable distribution if the distribution is deposited into the recipient's qualified plan.
The plan document, not the court, determines how the QDRO will be satisfied. No particular form is required for a QDRO, a

In May 2018, Seth converts $100,000 in his traditional IRA to a Roth IRA. The value of the assets in the Roth IRA drops by 40% due to a significant decline in the stock market that occurs in October 2018. The Roth conversion results in Seth incurring $100

A) Seth cannot recharacterize the conversion.
Prior to 2018, taxpayers had the ability to recharacterize a Roth conversion up to the due date of the income tax return, including extensions. As a result of The 2017 TCJA, Roth conversions cannot be recharac

Brenda, age 53 and a recent widow, is deciding between taking a lump-sum distribution from her husband's pension plan of $263,500 now or selecting a life annuity starting when she is age 65 (life expectancy at 65 is 21 years) of $2,479 per month. Current

D) Neither 1 nor 2.
Statement 1 is false. She will only receive $210,800 ($263,500 less 20% withholding). Statement 2 is also false. The distribution is on account of death, an exception to the 10% early withdrawal penalty rule.

Tim, a participant in the Zappa retirement plan, has requested a second plan loan. Tim's vested account balance is $70,000. He borrowed $30,000 ten months ago and still owes $20,000 on that loan. Could he increase his maximum permissible loan if he repaid

C) Yes. Paying off the loan will increase the loan available by $5,000.
He can borrow the lesser of $50,000 or half of the vested account balance. The $50,000 must be reduced by the highest outstanding balance ($30,000) in the last twelve months, which eq

Nancy, age 70 on February 2, 2018, had the following account balances in a qualified retirement plan.
12/31/2017 $500,000
12/31/2018 $478,000
12/31/2019 $519,000
12/31/2020 $600,000
Assuming that Nancy is retired and has never taken a distribution prior t

D) $36,286.
For 2018, look back to 2017: $500,000 � 27.4 = $18,248
For 2019, look back to 2018: $478,000 � 26.5 = $18,038
$18,248 + $18,038 = $36,286
She must take a distribution for 2018 and 2019. However, she can wait to take the 2018 distribution until

Andrea recently died at age 77, leaving behind a qualified plan worth $200,000. Andrea began taking minimum distributions from the account after attaining age 70� and correctly reported the minimum distributions on her federal income tax returns. Before h

D) Reese can roll the account over to an IRA and name a new beneficiary.
Statement a is incorrect because the five-year rule only applies if there is no designated beneficiary, or if a charity is the beneficiary. Since minimum distributions had already be