1.Tamara 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.

D.SIMPLEs are not subject to the top-heavy rules that apply to qualified plans.

2.Which of the following may be eligible for rollover treatment?

I.A total distribution from a Section 401(k) plan

II.A distribution from an IRA

III.The nontaxable portion of qualified plan distribution

IV.A required minimum distribution payment

A.II, III, and IV

B.I and II

C.II and III

D.I, II, and III

3.Which of the following statements describing how qualified pension plans differ from SEP and SIMPLE plans is(are) CORRECT?

I.Qualified plan rules provide greater flexibility in the number and makeup of the employees covered by the plan than do the rules pertaining to SEP and SIMPLE plans.

II.Participants must be fully and immediately vested in the contributions to qualified plans, but SEP and SIMPLE plans are permitted to have vesting schedules.

A.I only

B.Neither I nor II

C.II only

D.Both I and II

4.Basic provisions of SIMPLE IRAs include which of the following?

I.They are subject to actual deferral percentage test (ADP) nondiscrimination rules.

II.Employees are 100% vested in their elective deferrals.

III.Employees are not fully vested in employer contributions until completing five years of service.

IV.Employers with fewer than 100 employees who earned $5,000 during any two preceding years and are reasonably expected to earn at least $5,000 during the current year must be allowed to participate.

A.II and IV

B.I and IV

C.II, III, and IV

D.II and III

5.Because a simplified employee pension (SEP) plan is not a qualified plan, it is not subject to all the same rules as qualified plans; however, it is subject to many of the same rules. Which of the following statements when comparing or contrasting a SEP plan to a qualified plan is CORRECT?

A.SEP plans and qualified plans do not have the same protection from creditors

B.SEP plans and qualified plans have different funding deadlines

C.The maximum contribution possible on behalf of an individual participant is$57,000 (2020)

D.SEP plans and qualified plans have different nondiscriminatory and top-heavy rules

6.A simplified employee pension (SEP) plan

I.requires employer contributions on a nondiscriminatory basis.

II.can be integrated with Social Security.

III.cannot deny participation to any employee 21 years of age or older based on age.

IV.imposes mandatory employer contributions.

A.I and II

B.I, II, and III

C.III and IV

D.I, II, III, and IV

7.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

8.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

9.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

10.A state or local government would choose to establish a Section 457 plan for all the following reasons except

A.tax deductibility of employer contributions

B.the ability of a participant to make elective deferrals

C.tax-deferred growth of assets

D.no early withdrawal penalty on distributions

11.Josh is a single taxpayer who retired at age 62 and receives a qualified plan pension of $1,500 each month. He has begun working as a consultant to various firms and is projecting he will earn $70,000 in 2020. What is the maximum deductible contribution Josh may make to a traditional IRA for 2020?

A.$7,000

B.$6,000

C.$0

D.$19,500

12.A traditional IRA is appropriate when

I. it is considered an important supplement or alternative to a qualified pension or profit-sharing plan.

II.sheltering current compensation or earned income from taxation is a taxpayer's goal.

A.I only

B.Neither I nor II

C.Both I and II

D.II only

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

A.$6,000

B.$12,000

C.$4,000

D.$0

14.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

15.Shane inherited his father's Section 401(k) plan account. Which of the following statements regarding Jack's options is (are) CORRECT?

I.Shane is permitted to use a direct trustee-to-trustee transfer of the plan balance into an inherited IRA account.

II.If Shane creates an inherited IRA with the benefit, he can designate his own beneficiary to the account.

III.The payout of the benefit in an inherited IRA is over the lifetime of the original account holder, Shane's father.

A.II and III

B.I and II

C.I only

D.I, II, and III

16.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

17.Robert 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

18.What is the taxable character of distributions that are made from a Roth IRA?

A.Ordinary income if the taxpayer fails to make required minimum distributions

B.Tax-deferred income when converted to a traditional IRA

C.Capital gain income if the distribution meets the required holding period

D.Tax-free income if the distribution meets the holding period and qualified distribution requirements

19.Which of the following statements is NOT correct regarding the conversion of a traditional IRA to a Roth IRA?

A.An amount in a traditional IRA may be transferred to a Roth IRA maintained by the same trustee

B.An amount in a traditional IRA may be transferred in a trustee-to-trustee transfer from the trustee of the traditional IRA to the trustee of the Roth IRA

C.An amount distributed from a traditional IRA can be rolled over to a Roth IRA within 60 days of the distribution

D.The IRA owner's modified adjusted gross income (MAGI) cannot exceed $100,000 in the year of the conversion

20.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

21.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

22.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

23.A preretirement distribution from a qualified retirement plan can escape the 10% early withdrawal penalty in each of the following situations except

A.distributions made to cover medical expenses in excess of 10% of adjusted gross income for a taxpayer who is age 55

B.distributions made after a separation from service at any age

C.distributions made as part of a series of substantially equal periodic payments made at least annually over the life or life expectancy of the employee or the joint lives or life expectancies of the employee and beneficiary

D.distributions made to a beneficiary or to an employee's estate on or after the employee's death

24.Matthew retired from ABC Corporation this year and received a lump-sum distribution from ABC's qualified retirement plan. The distribution consisted entirely of ABC stock valued at $200,000 on the date of distribution. The fair market value of the stock at the time of contribution to the plan was $80,000. Assuming Matthew does not sell the stock this year, what amount is included in Matthew's gross income this year as a result of the distribution?

A.$80,000

B.$0

C.$120,000

D.$200,000

25.When she retired at age 64, Sophie received a lump-sum distribution from her employer's stock bonus plan. The fair market value of the employer stock contributed to her account was $200,000 at the time of contribution. At the time of the distribution, the employer stock in Sophie's account had a fair market value of $300,000. Six months later, Sophie sold the stock for $310,000. Which of the following statements regarding the sale of Sophie's stock is(are) CORRECT?

I.The $300,000 distribution is taxed at the long-term capital gain rate.

II.Sophie has a $10,000 short-term capital gain when the stock is sold.

III.There was no income tax liability incurred when the stock was contributed to the plan.

IV. The net unrealized appreciation (NUA) on the stock is $100,000.

A.I, II, III, and IV

B.I and II

C.II, III, and IV

D.IV only

26.Tyler, 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. Tyler is not interested in a lump-sum distribution from the plan at this time. Which of the following statements regarding Tyler's options is CORRECT?

I.Tyler 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.Tyler 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

27.Required minimum distributions from a traditional IRA must begin no later than

A.December 31 of the year following the IRA owner's attainment of age 70

B.the year in which the IRA owner attains age 70

C.age 59

D.April 1 of the year following the year in which the IRA owner attains age 70

28.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

29.Henry works for an accounting firm that sponsors a Section 401(k) plan. Henry, 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, Henry learned that he could receive a loan from his Section 401(k) plan without paying any income tax. Henry 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

30.Sally, age 60, has received a $50,000 distribution from $100,000 she is to receive from her ex-husband's (who is age 55) qualified plan account under a qualified domestic relation order (QDRO). Which of the following statements is CORRECT regarding the QDRO and the distributed funds?

I.Irrespective of the plan document, Sally may demand an immediate cash distribution of the remaining funds from the plan trustees.

II.She may roll over the $50,000 distribution into an IRA.

III.Sally's ex-husband is not subject to an early distribution penalty in the execution of the QDRO.

IV.Sally may be required to leave the remaining funds with the plan trustee until the earliest time for distributions under the plan.

A.II, III, and IV

B.I, II, and IV

C.I, II, III, and IV

D.II and III

31.The distribution of earnings from Roth 401(k) employee contributions is tax free if which of the following tests is(are) met?

I.The distribution must be made after a five-year period from the date of the first regular contribution to the Roth 401(k) plan.

II.The distribution is made after the date on which the participant has attained age 62 or becomes disabled, or it is made to a beneficiary of a deceased participant.

A.Both I and II

B.Neither I nor II

C.I only

D.II only

32.Which of the following describe differences between a tax-advantaged retirement plan and a qualified plan?

I.IRA-funded employer-sponsored tax-advantaged plans may not incorporate loan provisions.

II.Employer stock distributions from a tax-advantaged plan do not benefit from net unrealized appreciation (NUA) tax treatment.

A.I only

B.II only

C.Both I and II

D.Neither I nor II

33.In order to be eligible to establish and maintain a SIMPLE 401(k), an employer must have no more than

A.25 employees who earned more than $5,000 last year

B.100 employees who earned more than $5,000 last year

C.150 employees who earned more than $5,000 last year.

D.50 employees who earned more than $5,000 last year

34.Which of the following are advantages of a SIMPLE IRA?

I.No actual deferral percentage (ADP) or actual contribution percentage (ACP) tests

II.Allows employee pretax contributions

III.Easy to install and administer

IV.Simple to understand and explain to employees

A.I, II, III, and IV

B.I and II

C.II and III

D.I, II, and III

35.Which of the following statements describing how qualified plans are similar to simplified employee pension (SEP) plans and savings incentive match plans for employees (SIMPLEs) is (are) CORRECT?

I.Qualified plans, SEP plans, and SIMPLEs all provide for deferred compensation.

II.Plan sponsors of qualified plans, SEP plans, and SIMPLEs make contributions to either a trust, an insurance contract, or an individual retirement account depending on the type of plan.

A.I only

B.II only

C.Both I and II

D.Neither I nor II

36.All of the following statements regarding simplified employee pension (SEP) plans are CORRECT except

A.they can be established by any form of business entity

B.their major advantage is simplicity

C.employer contributions are discretionary

D.all part-time employees can be excluded

37.Which of the following statements regarding Section 403(b)/tax-sheltered annuity (TSA) plan employee elective deferrals in 2020 is CORRECT?

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

B.Employee elective deferrals are subject to FICA (Social Security and Medicare) and FUTA (federal unemployment) payroll taxes

C.The maximum employee elective deferral contribution is $15,000

D.Individuals age 50 and older can make a maximum additional catch-up contribution of $5,000

38.Which of the following are reasons a qualified employer may consider implementing a tax-sheltered annuity (TSA)/Section 403(b) plan?

I.Employees are interested in accumulating retirement funds with pretax dollars.

II.Employees are interested in reducing their taxable income while saving for the future.

III.The employer doesn't want to bear the full cost of a retirement plan.

IV.The employer wants to implement a plan in which the employer can legally discriminate or pick and choose who participates.

A.I, II, and III

B.I, II, III, and IV

C.II, III, and IV

D.I and II

39.All of the following statements regarding Section 457 plans are correct except

A.may allow for special catch-up contributions in the participant's last three years of employment prior to retirement

B.contributions are after tax, but funds grow tax-deferred

C.church-related organizations, such as schools, may be eligible to establish a Section 457 plan

D.it is a nonqualified deferred compensation plan of state and local government units and agencies, and non-church-controlled, tax-exempt organizations

40.Withdrawals from Section 457 plans can be made

I.as limited in-service withdrawals.

II.for an unforeseen emergency.

III.for separation from service.

IV.in the year the participant attains age 70.

A.I, II, III, and IV

B.III and IV

C.I and II

D.I, II, and III

41.Jerry, age 45, works for a nonprofit organization that has adopted both a Section 403(b) and a Section 401(k) plan. In 2020, he contributes $9,000 to the Section 403(b) plan in before-tax elective deferrals. How much, if any, can Jerry now contribute to the Section 401(k) plan in 2020?

A.$10,500

B.$0

C.$19,500

D.$28,500

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

A.Gary is self-employed and contributes the maximum to a SEP IRA plan he has for himself and his employees

B.Sara works for a Section 501(c)(3) tax-exempt organization, and she participates in the Section 403(b) plan her employer sponsors

C.Janice, a single taxpayer earning $110,000 per year, defers $19,500 to her employer's Section 401(k) plan

D.Max is 55, employed full time and participates in his employer's Section 457 plan

43.When is a traditional IRA appropriate?

I.A taxpayer wants to defer taxes on investment income.

II.Sheltering current compensation or earned income from taxation is a taxpayer's goal.

III.A taxpayer wishes to accumulate assets for retirement purposes.

IV.Traditional IRAs are seen as an important supplement or alternative to a qualified pension or profit-sharing plan.

A.I, II, III, and IV

B.III only

C.I only

D.II and III

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

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

B.A person who participates in a SEP IRA

C.A person who participates in a Section 457 plan

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

46.William is age 47 and qualifies for a Section 457 plan through his job with the state. William's salary is $37,500. What is the maximum salary deferral that William can contribute to the Section 457 plan in 2020?

A.$9,735

B.$13,000

C.$19,500

D.$6,000

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

I.A distribution made after the owner is age 55 and after separation from service with his employer

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

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

A.I and II

B.I only

C.II only

D.II and III

48.Which of the following statements regarding a nonqualified Roth IRA distribution is NOT correct?

A.A distribution that is made before the 5-year period may not be subject to the 10% penalty

B.Conversion amounts may avoid the 10% penalty for the conversion portion

C.Earnings will always incur a 10% penalty for that portion of the distribution

D.A distribution from an inherited Roth IRA could be subject to income tax

49.Which of the following statements regarding the characteristics or use of a Roth IRA is CORRECT?

A.As with traditional IRAs, Roth IRA contributions may not be made after the participant reaches age 70

B.Roth IRA withdrawals are tax free in their entirety regardless of the participant's age at withdrawal

C.As with traditional IRAs, Roth contribution eligibility is restricted by active participation in an employer's retirement plan

D.Roth IRAs are not subject to the required minimum distribution rules until the death of the owner-participant

50.Which of the following statements regarding the conversion of a traditional IRA consisting entirely of deductible contributions and earnings 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.

III.Taxpayers who are age 70 and older may not convert a traditional IRA to a Roth IRA.

IV.If the converted assets from the traditional IRA will not remain in the Roth IRA for a relatively long time, conversion is generally advisable.

A.I, III, and IV

B.I, II, and IV

C.II and III

D.I only

51.Any amount converted from a traditional IRA to a Roth IRA is

A.not included in gross income

B.subject to the 10% early withdrawal penalty at the time of conversion

C.included in taxable income if it is a return of basis

D.not subject to the 10% early withdrawal penalty at the time of conversion

52.Which of the following statements regarding Roth IRAs and pretax 401(k) plans is(are) CORRECT?

I.There are no income limitations to participate in either of these.

II.Roth IRAs require distributions no later than age 70; for the pretax 401(k) plan, there is no requirement to start taking distributions while the participant is alive.

A.II only

B.Neither I nor II

C.I only

D.Both I and II

53.A preretirement distribution from a qualified retirement plan can escape the 10% penalty in each of the following situations except

A.the distributions was made as part of a series of substantially equal periodic payments made at least annually over the life or life expectancy of the employee or the joint lives or life expectancies of the employee and beneficiary

B.the distributions was made after a separation from service for early retirement at any age

C.the distributions was made to cover medical expenses deductible for the year (medical expenses that exceed 10% of adjusted gross income)

D.the distributions was made to a beneficiary or to an employee's estate on or after the employee's death

54.Which of the following retirement accounts require a 20% mandatory withholding requirement on distributions?

I.Simplified employee pension (SEP) plan

II.Money purchase pension plan

III.Traditional profit-sharing plan

IV.Cash balance pension plan

A.I and II

B.II, III, and IV

C.II and III

D.I, III, and IV

55.Which of the following statements regarding a taxpayer who receives a lump-sum plan distribution consisting at least partially of employer stock is(are) CORRECT?

I.The net unrealized appreciation (NUA) portion of a lump-sum distribution stock is taxed at ordinary income tax rates when sold.

II.The taxpayer will not be liable for income tax on the net unrealized appreciation (NUA) portion of the distribution until the stock is sold or otherwise disposed of.

A.Neither I nor II

B.Both I and II

C.I only

D.II only

56.Which of the following reasons for an early distribution from a qualified retirement plan is NOT an exception to the 10% penalty?

A.It is a distribution for higher education costs

B.The distribution is made to a beneficiary of the account due to the owner's death

C.The plan owner has become totally and permanently disabled

D.It is made after separation from service from an employer-sponsor of the plan after age 55

57.Section 403(b) plans may allow loans to the extent of

A.most Section 403(b) plans do not allow loans

B.the lesser of $50,000 or 50% of the vested benefit

C.$50,000

D.the lesser of $10,000 or 100% of the vested benefit

58.Automatic survivor benefits (qualified joint and survivor annuity [QJSAs] and qualified preretirement survivor annuity [QPSAs]) apply to Section 401(k) plans unless

I.the participant elects to receive payment as a lump-sum distribution with the spouse signing a notarized consent form.

II.the participant does not elect payments in the form of a life annuity.

III.the plan provides that, upon the participant's death, the vested account balance will be paid in full to the surviving spouse.

IV.the plan is not a direct or indirect transferee of a plan to which the automatic survivor annuity requirements apply.

A.I, II, and III

B.III and IV

C.I and II

D.I, II, III, and IV

59.All of the following statements regarding qualified domestic relations orders (QDROs) are correct except

A.distributions made to an alternate payee under a QDRO are subject to the 10% premature distribution penalty

B.distributions made to an alternate payee under a QDRO outside of retirement accounts are subject to income tax

C.an alternate payee who is the former spouse of the participant, and who receives a distribution by reason of a QDRO or other court order, may roll over the distribution in the same manner as if she were the participant (including to her own IRA)

D.a QDRO may specify the time at which the alternate payee will receive the plan benefit (assuming the type of distribution is allowed by the plan document