1. 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 entire account balance within five years of Josh’s death.

b. Kay must begin taking distributions over Josh’s remaining single-life expectancy.

c. Any distribution from the plan to Kay will be subject to a 10 percent early withdrawal penalty until she is 59.5

d. Kay can receive annual distribution over her remaining single-life expectancy, recalculated each year.

2. Which of the following statements is/are correct regarding the early distribution 10 percent penalty tax from a qualified plan?

1. Retirement at age 55 or older exempts the distribution from the early withdrawal penalty tax.

2. Distributions used to pay medical expenses in excess of the 7.5% of AIG for a tax filer who itemizes are exempt from the early withdrawal penalty.

3. Distributions that are part of a series of equal periodic payments paid over the life or life expectancy of the participant are exempt from the early withdrawal penalty.

a 3 only

b. 1 and 3

c. 2 and 3

d. 1, 2 and 3

3. Jose Sequential, age 70.5 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 balance

A                     $250,000

B                     350,000

C                     150,000

D                     350,000

E                      200,000

Jose is currently employed with company E. what, if any, is his required minimum distribution for the current year from all plans? Life expectancy tables are 27.4 for age 70 and 26.5 for age 71.

a.$0

b.$ 40,146

c.$41,509

d.$47,445

4. Tom age 39 is an employer 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 contributions made by the employer and earnings n those contributions. Tom is 100 percent vested. Which of the following statements is/are correct?

1. Tom may take a loan from the plan, but maximum loan is $41,000 and the normal repayment period will be 5 years.

2. If Tom takes a distribution (plan permitting) to pay health care premiums (no coverage by employer) he will be subject to income tax, but not the 105 penalty.

a. 1 only

b. 2 only

c. 1 and 2

d. Neither 1 nor 2

5. 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 65 is 21 years) of $2,479 per month. Current 30 year treasuries are yielding 6 percent annually. Which of the statements below are true?

1. If he takes the lump-sum distribution, she will receive $263,500 in cash now and be able to reinvest for 34 years, creating an annuity of $4,570 per month.

2. If she takes the lump-sum distribution, she will be subject to the 10% early withdrawal penalty.

a. 1 only

b. 2 only

c. 1 and 2

d. Neither 1 nor 2