1. Nancy, age 70 on February 2, 2011, had the following account balances in a qualified retirement plan. 

12.13.2007      $300,000

12.13.2009      $350.000

12.13.2010      $500,000

12.13.2011      $478,000

12.13.2012      $519,000

12.13.2013      $600,000

Assuming that Nancy is retired and has never taken a distribution prior to 2012, what is the total amount on minimum distribution required in 2012? Life expectancy factors according to the uniform life table are 27.4 for 70 year old and 26.5 for a 71 year old.

a. $18,038

b. $18, 248

c. $35,597

d. $36,286

2. 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 the following employer information: 

Which of the following statements is correct?

a. If Teddy quit today, state law requires that he repay the loan within five days.

b. The maximum Karen can borrow from her account is $200,000

c. The maximum Justin can borrow from his account is $10,000

d. If Josh wanted to borrow money from his plan for the purchase of a personal residence, he would have to pay the loan back within five years. 

3. Generally, older age entrants are favored in which of the following plans?

1. Defined benefit pension plans.

2. Cash balance pension plans.

3. Target benefits pension plans.

4. Money purchase pension plans.

a. 1 and 2

b. 2 and 3

c. 1 and 3

d. 4 only

4. A distress termination of a qualified retirement plan occurs when:

1. The PBGC initiates a termination because the plan was determined to be unable to pay benefits from the plan.

2. An employer is in financial difficulty and is unable to continue with the plan financially. Generally, this occurs when the company has filed for bankruptcy, either chapter7 liquidation or chapter 11 reorganization.

3. The employer has sufficient assets t pay all benefits vested at the time, but is distressed about it.

4. When the PBGC notifies the employer that it wishes to change the plan due to the increasing unfunded risk. 

a. 2 only

b. 1 and 2

c. 1, 2 and 3

d. 1, 2 and 4

5. Marie the sole shareholder in Marie’s Pastries in considering establishing a qualified plan. The corporation’s employee census is as follows.

Marie’s Pastries employee census

The company experience very low turnover.

Marie, a long- time widow, has always treated the employees like her family and the company has experienced very low turnover. She would like to use the retirement plan to assist her in transferring ownership interest to the employees as she is ready to retire, she has a strong preference for avoiding and deferring taxes. She is opposed to mandatory funding and indifferent to integration. Which plan would be appropriate for Marie?

a. Stock bonus plan

b. B. money purchase pension plan

c. Defined benefit plan

d. Employee stock ownership plan. 

6. Tracy, age 46, is a self-employed financial planner and has Schedule C income from self-employment of $56,000. He has failed to save for retirement until now. Therefore he would like to make the maximum contribution to his profit sharing plan. How much can he contribute to his profit sharing plan account?

a. $9,464.

b. $10,409.

c. $11,200.

d. $14,000. 

Transcribed Image Text:

Outstanding loan 401 (k) balance Employee Karen $400,000 $0 Teddy $250,000 $75,000 $15,000 $30,000 Josh $0 Justin $0