Question

4.How are distributions from qualified plans treated?

            

a.          Retirees must report distributions received as income.

b.         Retirees must report distributions received as income only if they are less than 59-1/2 years old.

c.          Retirees must report distributions received as income only if they are more than 70-1/2 years old.

d.         Retireesmust report distributions received as income only if employer contributions to the plan are greater than the allowable amounts.

6.         Roscoe is 54, and is considering requesting a distribution this year from his employer’s qualified plan.  What are the consequences of a distribution to Roscoe?

            

a.          The distribution is subject to income tax, but not to any additional penalties.

b.         The distribution is subject to income tax and also a 10% tax on early distributions.

c.          The distribution is not subject to income tax, but is subject to a 10% tax on early distributions.

d.         Since Lester has achieved age 55, the distribution is not subject to income tax, and not to any additional penalties.

         

7.         Phil is 75 years old, and retired several years ago.  At the beginning of the year, his balance in his former employer’s defined contribution plan was $1 million.  What is the minimum amount that the plan must distribute to Phil this year to avoid penalty?

            

a.          $40,500.

b.         $42,000.

c.          $43,700.

d.         $45,400.

8.         How does a Roth 401(k) plan differ from a traditional 401(k) plan?

            

a.          Employee contributions to Roth plans are deductible, but employee contributions to traditional plans are not deductible.

b.         Employee contributions to traditional plans are deductible, but employee contributions to Roth plans are not deductible.

c.          Employer contributions to Roth plans are deductible, but employer contributions to traditional plans are not deductible.

d.         Employer contributions to traditional plans are deductible, but employer contributions to Roth plans are not deductible.

Answer 1

4.How are distributions from qualified plans treated?

ANSWER: a. Retirees must report distributions received as income. (Any distribution from defined contribution plans are taxable, also subject to penalty in case of early distribution)

6.         Roscoe is 54, and is considering requesting a distribution this year from his employer’s qualified plan.  What are the consequences of a distribution to Roscoe?

ANSWER: b. The distribution is subject to income tax and also a 10% tax on early distributions.

7.         Phil is 75 years old, and retired several years ago.  At the beginning of the year, his balance in his former employer’s defined contribution plan was $1 million.  What is the minimum amount that the plan must distribute to Phil this year to avoid penalty?

ANSWER: c. $43,700. (IRS uniform lifetime table for 75 years 22.9 Required Minimum Distribution = $1million /22.9)

8.         How does a Roth 401(k) plan differ from a traditional 401(k) plan?

ANSWER: b. Employee contributions to traditional plans are deductible, but employee contributions to Roth plans are not deductible.