1. Jenny has decided to offer a retirement plan to her employees. She wants to implement a savings incentive match plan for employees (SIMPLE) and is trying to decide between a SIMPLE IRA and a SIMPLE 401(k). All of the following statements apply to both types of SIMPLE plans except

A. employer contributions are not subject to payroll taxes (FICA and FUTA).

B. there is a 25% penalty for early distributions from a participant' account within two years of entry into the plan.

C. SIMPLE assets may only be rolled over into another SIMPLE within the first two years of initial participation in the plan by a participant.

2. Section 403(b) plan (tax-sheltered annuity plan or TSA) employer contributions

I. must abide by the annual additions limit.

II. must not discriminate in favor of highly compensated employees.

III. are based on a maximum annual covered compensation of $230,000 in 2020.

IV. are subject to FICA (Social Security and Medicare) and FUTA (federal unemployment) payroll taxes.

A. I, II, and III

B. I and II

C. II, III, and IV

D. III and IV

3. While Section 403(b) (tax-sheltered annuity plan or TSA) plans are an excellent source of retirement savings, they do have some disadvantages, such as

I. investments are limited to mutual funds and annuities

II. Section 403(b) plans must comply with the actual contribution percentage (ACP) test for employer matching contributions.

III. actual deferral percentage (ADP) testing causes Section 403(b)/TSA plans to be relatively costly and complex to administer.

IV. account balances at retirement age are guaranteed to be sufficient to provide adequate retirement amounts for employees who entered the plan at later ages.

A. III and IV

B. I, II, and III

C. I and II

D. I, II, III, and IV

4. Which of the following statements regarding Section 457 plans is (are) CORRECT?

I. Deductibility of plan contributions is an important factor for employers choosing a Section 457 plan to consider.

II. Earnings on assets in a Section 457 plan grow tax-deferred until withdrawn.

III. Required minimum distribution rules do not apply.

IV. A Section 457 plan is a nonqualified deferred compensation plan.

A. I, II, III, and IV

B. IV only

C. II and IV

D. II and III

5. Bob and Barbara, both age 48, are married and will file a joint return. Their 2020 modified adjusted gross income is $120,000, (including Bob's $95,000 salary). Barbara had no earned income of her own. Neither spouse was covered by an employer-sponsored retirement plan. What is the total maximum deductible contribution Bob and Barbara may make to a traditional IRA this year?

A. $6,000

B. $12,000

C. $4,000

D. $0

6. Which of the following persons could make tax-deductible contributions to a traditional IRA regardless of their modified adjusted gross income (MAGI)?

I. A person who participates in a SEP IRA

II. A person who participates in a Section 457 plan

III. A person who participates in a Section 401(k) plan

IV. A person who participates in a Section 403(b) plan

A. II only

B. II and IV

C. II and III

D. I and III

7. The premature distribution penalty does not apply to which of the following IRA distributions?

I. A distribution paid to a beneficiary after the death of the IRA owner who had not begun receiving minimum distributions

II. A distribution made after the owner is age 55 and after separation from service

III. A distribution made for purpose of paying qualified higher education costs

A. I only

B. III only

C. I and II

D. I and III

8. Jonathan established a Roth IRA. He turns age 70 this year. Which of the following statements is (are) CORRECT?

I. Robert must begin taking required minimum distributions (RMDs) by April 1 of next year.

II. Robert can no longer make contributions to the Roth IRA.

A. II only

B. I only

C. Both I and II

D. Neither I nor II

9. Which of the following statements regarding the tax effects of converting a traditional IRA to a Roth IRA is (are) CORRECT?

I. The converted amount is treated as a taxable distribution from the traditional IRA.

II. The 10% premature penalty applies if the owner is not at least 59 years old.

A. II only

B. Neither I nor II

C. I only

D. Both I and II

10. Which of the following statements regarding Roth IRAs and pre-tax 401(k) plans is (are) CORRECT?

I. Roth IRAs require distributions no later than age 70 while the participant is living.

II. There is not an income limitation to participate in a pre-tax 401(k) plan or Roth IRA.

A. II only

B. I only

C. Neither I nor II

D. Both I and II

11. Which of the following retirement plans generally permit in-service withdrawals at any age?

I. Money purchase pension plan

II. Profit-sharing plan

III. Section 401(k) plan

IV. SEP plan

A. I, II, III, and IV

B. II, III, and IV

C. I, II, and IV

D. II, III, and IV

12. Scott, age 72, is required to take substantial required minimum distributions (RMDs) from his qualified retirement plan. He has no current need for the income and wants to decrease the amount of the distributions without incurring a penalty. Scott is not interested in a lump-sum distribution from the plan at this time. Which of the following statements regarding Scott's options is CORRECT?

I. Scott may take a distribution in addition to his RMD from his qualified plan and convert the additional distribution to a Roth IRA within 60 days.

II. Scott cannot roll over retirement plan proceeds to a traditional IRA after age 70.

A. I only

B. II only

C. Neither I nor II

D. Both I and II

13. Which of the following qualified plan distributions is subject to the 10% penalty for early withdrawal?

A. An in-service hardship distribution from a Section 401(k) plan to an employee- participant, age 55

B. A lump-sum benefit payable to a disabled employee-participant, age 57

C. A death benefit payable to a beneficiary upon the death of an employee, age 52

D. A lump-sum distribution made to an employee-participant, age 63, from a profit- sharing plan after the funds have been in the plan for two years

14. Rob works for an accounting firm that sponsors a Section 401(k) plan. Rob, who has a current salary of $35,000, was hesitant to contribute to the plan because in the past he felt as though he may need the money before retirement. At a recent employer-sponsored seminar, Rob learned that he could receive a loan from his Section 401(k) plan without paying any income tax. Rob is now considering making pre-tax elective deferrals to the Section 401(k) plan, but he wants to know more specific details regarding loan provisions. Which of the following statements regarding nonpenalized loans from qualified plans is (are) CORRECT?

I. The limit on loans is generally one-half of the participant's vested account balance not to exceed $50,000.

II. The limit on the term of any loan is generally five years.

III. If an employee leaves the company, a retirement plan loan may be rolled over to an IRA and the participant may continue making the loan payments as planned.

IV. Loans to a 100% owner-employee are permissible.

A. I only

B. I, II, III, and IV

C. II only

D. I, II, and IV