IRA Products and SIMPLE Plans Exam Study Guide

Transcription

1 IRA Products and SIMPLE Plans Exam Study Guide This document contains the questions that will be on the exam. When you have studied the course materials, reviewed the questions in this document, and feel that you are ready to take the exam, return to the login page to take the online exam. A Center for Continuing Education 1465 Northside Drive, Suite 213 Atlanta, Georgia (404) (800) Fax: (404) Revised 3/2015 1

2 IRA Products and SIMPLE Plans Final Exam 1. The personal savings rate in the United States can be most accurately described as being: A. Less than that in Europe or Japan B. Greater than that in Europe C. Greater than that in Japan D. Greater than that in Europe and Japan 2. Greg s annual pre-retirement income is $100,000. According to the rule of thumb, how much will he need for retirement annually? A. $20,000 to $30,000 B. $50,000 to $60,000 C. $70,000 to $80,000 D. $110,000 to $120, Christopher earns taxable compensation, but is not eligible to make contributions to a traditional IRA due to his age. How old is Christopher? A. At least 59½ B. At least 65 C. At least 69 D. At least 70 ½ 4. Vanessa sets up a Roth IRA in December When is the earliest she may take qualified distributions from the IRA? A. Any time after December, 2010 B. Any time after December, 2012 C. Any time after June, 2013 D. Any time after December Maggie earns numerous forms of taxable compensation. Which of the following is not a form of taxable compensation that she earns for traditional IRA contribution purposes? A. Commissions B. Income from an annuity C. Income earned in self-employment D. Alimony payments 6. Paul moves his assets in his traditional IRA into another traditional IRA via a trustee-totrustee transfer. What percentage of the assets will be taxed under this transfer? A. 0% B. 10% C. 20% D. 50% Revised 3/2015 2

3 7. If a qualified retirement plan makes a mandatory distribution to a safe-harbor IRA for a participant who terminated employment with the company that maintained the plan, then the mandatory distribution amount must not be greater than: A. $1,000 B. $3,000 C. $5,000 D. $6, Chelsea uses an annuity as a product for her IRA. If the annuity uses sub-account unit investment options, the kind of annuity she has used is: A. A fixed annuity B. A variable annuity C. Either a fixed or variable annuity D. Either a fixed, variable or deferred annuity 9. Gerald is 56 years old. What is the maximum he may contribute to a traditional IRA in 2015 if his income is $50,000 a year? A. $3,000 B. $4,000 C. $5,500 D. $6, Ellen is the owner of a traditional IRA. The balance in her IRA at the end of 2014 is $100,000. She turns 70 years old in If her distribution period is 27.4, then her required minimum distribution for 2015 is: A. $2, B. $3, C. $6, D. $10, Peter is the owner of a traditional IRA. His wife, Felicity, is the sole beneficiary of his IRA, and is 12 years younger than he is. The balance in his IRA at the end of 2014 is $100,000. Peter turns 82 in 2015 and Felicity turns 70. Using the table below, calculate Peter s required minimum distribution for 2015: Joint and Last Survivor Life Expectancy Ages A. $2, B. $4, C. $5, D. $6, Revised 3/2015 3

4 12. Joe is a 68 year-old average American citizen. Approximately how much of his postretirement income comes from Social Security? A. 10% B. 25% C. 40% D. 70% 13. Hannah is the owner of a traditional IRA. If the contributions to her plan are recharacterized, which one of the following types of transfer was used? A. Trustee-to-trustee transfer B. Rollover C. Transfer Incident to Divorce D. Either a trustee-to-trustee transfer, or a rollover 14. What is the value of the shaded box in the table below? Contribution Limits for Traditional IRAs Tax Year < Age $3, $4, $4, $4, , 2009, 2010, 2011, $5,500 A. $4,000 B. $4,500 C. $5,000 D. $6, Lorraine rolls over distributions from her traditional IRA into a qualified retirement plan. If the contributions made to the second plan do not qualify for tax-free treatment, she could have made the rollover contributions how many days after the distribution from the traditional IRA? A. 14 days after B. 30 days after C. 45 days after D. 60 days after 16. Sam s tax filing status is single. In 2015, his AGI is $100,000.He may: A. Make the maximum contribution to a Roth IRA B. Make phased-out contributions to a Roth IRA C. May not make contributions to a Roth IRA D. May only make rollover contributions to a Roth IRA Revised 3/2015 4

5 17. Carl is married, and is filing his tax return jointly with his wife. He makes contributions to a traditional IRA. If he is also covered by an employer retirement plan, and his AGI is $65,000, the deductions for contributions to his IRA: A. Will not be allowed B. Will be phased out C. Will be fully deductible D. Will be considered excess contributions 18. Brenda is an employee who may continue to have her employer contribute part of her pay to a SARSEP plan. When must the plan have been set up? A. Prior to 1993 B. Prior to 1997 C. Prior to 2000 D. Prior to Jerry establishes a traditional IRA. His IRA could be set up as any of the following, except: A. An Individual Retirement Account B. An Individual Retirement Life Insurance Account C. An Individual Retirement Annuity D. An Employer Trust Account 20. Catie, age 32, makes contributions to both a Roth IRA and a traditional IRA. In 2015, if her taxable compensation is equal to $30,000 and all contributions she made for the year to the traditional IRA equal $2,000, the most she may contribute to her Roth IRA for that year is: A. $2,500 B. $3,500 C. $7,000 D. $10, Carole was born in Under Social Security, what is her full retirement age? A. 65 B. 65 and 10 months C. 66 D Emily is 27 years old and makes contributions to a traditional IRA. If her annual compensation is $21,000, what is the maximum she may deduct for those contributions per year in 2015? A. $3,000 B. $5,500 C. $6,500 D. $8,000 Revised 3/2015 5

6 23. Jim is using savings certificates issued by banks that entitle him to receive interest to fund his IRA. Jim is using: A. CDs B. Money market mutual funds C. Variable annuities D. Fixed annuities 24. The mutual fund that Pauline uses as a product for her IRA is a load fund. The load charge is most likely around what percent of the amount invested? A. 0.5% B. 4% C. 15% D. 35% 25. Isaac is the owner of a traditional IRA. If he takes an early withdrawal from his IRA, but does not incur a penalty tax, then he could be in any of the following situations, except: A. He has unreimbursed medical expenses of any amount B. He can provide proof that he cannot do any substantial gainful activity because of a physical or mental disability C. He takes a distribution of no more than $10,000 to buy a first home D. He receives distributions from the traditional IRA that are part of a series of substantially equal payments over his life or life expectancy 26. A grace period applies to an employer who does not meet the employee-limit for a SIMPLE plan. In this situation, the employer will be treated as meeting the employeelimit for how long immediately following the year in which the employer last met the limit? A. 6 months B. 1 year C. 2 years D. 3 years 27. Kim is 28 when she converts her traditional IRA to a Roth IRA. Frank is 46 when he converts his traditional IRA into a Roth IRA. Larry is 63 when he converts his traditional IRA into a Roth IRA. Based on age alone, for which of these individuals will the conversion have been most beneficial? A. Kim B. Frank C. Larry D. The conversion would not have been more or less beneficial based on age alone 28. Sally is considered a highly compensated employee due to the amount of compensation she received from her employer in She must have received more than: A. $80,000 B. $92,500 C. $120,000 D. $125,000 Revised 3/2015 6

7 29. Lance is trying to decide whether or not converting his traditional IRA to a Roth IRA is the most fiscally wise choice based on tax advantage. If he is planning on being in a lower tax bracket at retirement, the option that would provide the best tax advantage is: A. Keeping his assets in his traditional IRA B. Converting his traditional IRA to a Roth IRA immediately C. Converting his traditional IRA to a Roth IRA just before retirement D. Both options would provide an equal tax advantage 30. Patrick is a SARSEP participant, and is also a highly compensated employee. The amount deferred each year by Patrick (as a percentage of pay) must not exceed what percent of the average deferral percentage of all non-highly compensated eligible employees. This requirement is known as: A. The SARSEP ADP test B. The SARSEP HCE test C. The SARSEP regulation D. The SARSEP percentage requirement 31. Jerry converts his traditional IRA into a Roth IRA. If his AGI is $80,000, but the conversion is failed, this could be because his filing status is: A. Single B. Married filing jointly C. Married filing separately D. Qualifying widower 32. An employer establishes a SIMPLE IRA plan for tax year The eligibility requirements of the plan are the maximum an employer may set. Gayle has been working for the employer since She has earned the following annual compensation: Year Compensation 2010 $1, $3, $5, $4, $4,000 In 2015, Gayle was expected to earn $2,000. Under her employer s SIMPLE plan, she will be considered: A. Ineligible for coverage B. Eligible for coverage C. Eligible for coverage only if she is not a leased employee D. Eligible for coverage only if she is not a highly compensated employee Revised 3/2015 7

8 33. Rachel contributes $10,000 over the traditional IRA contribution limit that applies to her. If this contribution is not withdrawn by the date her tax return for the year is due, how much will she owe as a tax for the excess contribution? A. $100 B. $600 C. $1,000 D. $2, Zach is eligible for his employer s SEP plan. He earns $300,000 in compensation in What is the most that may be contributed to his SEP-IRA in 2015? A. $30,000 B. $53,000 C. $55,000 D. $75, Suzy is the beneficiary of a traditional IRA. The owner of the IRA died after the required minimum distribution beginning date. On what must Suzy base the required minimum distributions from the traditional IRA? A. Her single life expectancy, only B. The IRA owner s life expectancy, only C. The longer of either her single life expectancy or the IRA owner s life expectancy D. The shorter of either her single life expectancy or the IRA owner s life expectancy 36. Hosea sets up a SIMPLE plan for his employees. He must provide required information to his employees before the beginning of the election period. The shortest election period that Hosea may establish is: A. 30 days B. 60 days C. 120 days D. 180 days 37. Matthew is the owner of a Roth IRA. He wants to claim the Saver s Credit. If he is married and is filing jointly, in order to claim the Saver s Credit he must not have an AGI of more than: A. $30,500 B. $45,750 C. $61,000 D. $71, Distributions from David s traditional IRA are rolled over into a tax-sheltered annuity plan. The distributions are treated as including otherwise taxable amounts. The amount left in David s IRA must: A. Exceed the basis in his traditional IRA B. Be less than the basis in his traditional IRA C. Be at least equal to the basis in his traditional IRA D. Be negligible Revised 3/2015 8

9 39. Lisa s employer establishes a SIMPLE IRA plan, of which she is a participant. Her compensation was $52,000. Lisa chooses to contribute $140 a week (14% of her weekly pay) as salary reduction contributions to her SIMPLE IRA. Under Lisa s plan, her employer chooses to make nonelective contributions. Her employers nonelective contributions are limited to: A. $1,040 (2% x 52,000) B. $2,600 (5% x 52,000) C. $5,200 (10% x 52,000) D. $10,400 (20% x 52,000) 40. Joel is 33 years old. He withdraws funds from his SIMPLE plan after participating in the plan for one year. If funds from a SIMPLE plan are withdrawn within 2 years of the start of participation, they will be subject to an additional tax of: A. 10% B. 25% C. 40% D. 55% 41. Social Security was originally meant to: A. Increase America s share in the global marketplace B. Replace all Americans needs to use personal savings for retirement C. Be a means to provide benefits for poor, elderly Americans D. Encourage population growth 42. Amy owns her own business. In order to be eligible to set up a SIMPLE IRA, how many eligible employees must her business employ? A. 100 or fewer B. 70 or fewer C. 20 or fewer D. 1 or more 43. A corporation establishes a SEP plan in Gary worked for the corporation in 2010, 2011 and In 2010 and 2014 he only worked for the corporation for a total of three weeks. David was 19 years old and received $1,000 from the corporation in 2014 and turns 20 in Why is he ineligible for the SEP plan? A. Because he only worked for the corporation for three different years B. Because he only worked for the corporation for a total of three weeks C. Because he is only 20 years old D. Because he only received $1,000 from the corporation in Julia is the owner of a traditional IRA. She is also eligible for the Saver s Credit, so she must have been 18 before: A. The end of the prior tax year B C. The end of the applicable tax year D Revised 3/2015 9

10 45. An employer who sets up a SEP plan claims a tax credit as part of the ordinary and necessary costs of starting that plan. If the cost to set up and administer the plan was $1,000 in 2015, for that year the credit will cover: A. $100 B. $250 C. $500 D. $1, In 2015, an employer who is a corporation sets up a SEP plan but cannot claim a tax credit as part of the ordinary and necessary costs of starting that plan. The employer had 120 employees who received at least $5,000 in compensation for the preceding year. Three non-highly compensated employees were participants of the plan as well. Why is the employer ineligible for the SEP plan? A. Because the employer was a corporation B. Because the employer employed 120 employees C. Because the employer s employees received at least $5,000 in compensation for the preceding year D. Because three non-highly compensated employees were participants in the plan 47. Under which United States President was Social Security established? A. President Abraham Lincoln B. President Franklin D. Roosevelt C. President John F. Kennedy D. President Bill Clinton 48. Melissa is an employer who establishes a SEP plan. She may prohibit her employees from taking distributions from their individual SEP-IRAs: A. At any time B. Once every six months C. Once annually D. At no time they belong to the employees 49. In 2015 Dan s compensation is $230,000. Dan is 45. For that year, the most Dan, a SARSEP participant, may choose to defer to his plan is: A. $7,800 B. $11,500 C. $18,000 D. $13, Harriet is covered under her employer s SIMPLE plan. If she chooses to make salary reduction contributions, the most that may be made on her behalf in 2015 is: A. $7,000 B. $9,200 C. $12,500 D. $16,500 Revised 3/