Multiple Choice
1. Which of the following is an individual-sponsored pension plan?
a. Defined benefit plan.
b. Keogh plan.
c. Roth IRA.
d. SIMPLE plan.
2. Which of the following statements is true?
a. Only employers can establish tax-deferred retirement plans.
b. Generally, plan distributions are taxable if the contributions were made with untaxed dollars.
c. The donor and the beneficiary of a retirement plan are almost never the same.
d. Retirement plan distributions can be made for any purpose and at any time.
3. A participant in a Keogh plan over the age of 50 may contribute up to what amount in 2014?
a. $6,500.
b. $23,000.
c. The lower of $52,000 or 25% of earned income from self-employment.
d. The greater of $52,000 or 25% of earned income from self-employment.
4. A qualified pension plan provides significant tax benefits to both employers and employees including:
a. Employer contributions are not treated as compensation to the employee.
b. Earnings from the investments held in the plan are tax-deferred.
c. No tax on plan assets until the amounts are distributed.
d. All of the above.
5. To obtain and retain qualified status, a pension or profit-sharing plan must not discriminate in favor of highly compensated employees, who include:
a. Employees who own more than 5% of the corporation’s stock.
b. Employees who received more than $100,000 compensation in the previous year.
c. Employees who were in the top 25% of employees based on compensation.
d. All of the above.
6. A participant in a 401(k) plan under the age of 50 may contribute up to what amount in 2014?
a. $5,500.
b. $12,000.
c. $17,500.
d. $52,000.
7. Thomas is a self-employed plumber under the age of 50. His earnings from self- employment, before the Keogh deduction but after deducting half of the self-employment tax, are $80,000. What is his deductible Keogh contribution for 2014?
a. $52,000.
b. $20,000.
c. $17,500.
d. $16,000.
8. Which of the following is true regarding SEPs?
a. The plan cannot discriminate in favor of highly compensated employees.
b. Deductible contributions cannot exceed the lower of 15% of the employee’s compensation or $52,000.
c. Self-employed individuals cannot create and contribute to an SEP.
d. The plan must cover all employees who have reached the age of 18, who have worked for the employer for at least two of the preceding five years, and who received at least $600 in compensation.
9. Generous Corporation provides a SIMPLE plan for its employees. Under the plan, employees can contribute up to 6% of their salary and Generous Corporation will match each employee’s contribution up to 3% of the employee’s salary. Bob is an employee of Generous Corporation and elects to contribute 6% of his $60,000 salary to the SIMPLE plan. What is the total contribution made to his SIMPLE account?
a. $11,500.
b. $5,400.
c. $3,600.
d. $1,800.