Zoie has worked for Humple Manufacturing for 16 years. Humple has a pension plan that matches employee contributions by up to 4% of an employee's salary. Zoie, age 60, is ready to retire. She has contributed $20,000 to the plan. Under Humple's pension plan, Zoie will receive $1,000 per month until she dies. Assume that Zoie is expected to live 25 more years. She wants to know the tax consequences of each pension payment that she will receive.
a. Assume Humple's plan is a qualified pension plan.
b. Assume Humple's plan is not a qualified plan. Zoie has paid tax on all contributions into and earned by the plan.