Lesson 9 Quiz

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Qualified vs. Nonqualified Plans

Retirement plans that meet federal government approval and receive tax benefits are known as ___________ plans.

The basic concept for plan regulation is to attempt to make all employees equally eligible for retirement benefits and to eliminate favoring highly compensated employees.

ERISA

ERISA was created to protect employees from possible loopholes in retirement plans and to allow them to receive their own contributions along with company contributions for retirement.

Tax Treatments

Participation, coverage, vesting, funding, and contributions are basic requirement categories retirement plans must fulfill in order to be approved by the:

The earnings of investments in a qualified plan are exempt from income taxation.

In order for a retirement plan to be qualified, it must be:

In order for retirement plans to be approved by the IRS for favorable tax treatment, they must fulfill the basic requirement categories of:

IRAs

Anyone under the age of 70 1/2 with earned income can open an IRA.

No cash withdrawals from a traditional IRA are permitted prior to the policyowner reaching the age of 59 1/2 without having to pay a ______ excise tax, with few exceptions.

In a Roth IRA qualified withdrawal, earnings are distributed tax-free.

In a Roth IRA nonqualified withdrawal, earnings are taxable.

Definitions

Match the following retirement plans with their respective descriptions.

a)	Deferred compensation plan for employees of state and local governments in which amounts deferred will not be included in gross income until they are actually received or made available.
b)	type of qualified retirement plan under which the employer contributes to an individual retirement account set up and maintained by the employee.
c)	An individual retirement account established with funds transferred from another IRA or qualified retirement plan that the owner had terminated.
d)	A tax sheltered annuity plan similar to a 401(k) plan except it is for nonprofit organizations.
e)	Plan allowing employees to take the money as usual in their paycheck or defer a specific amount from their paycheck. Typically, the employer will match the contribution made by the employee. Amounts deferred are not included in the employee's gross income and the funds and earnings are not taxable until distribution.
f)	Designed to fund retirement of self-employed individuals, under which contributions to such plans are given favorable tax treatment.
a) Section 457 Plans b) Simplified Employee Pension Plan (SEP) c) Rollover IRA d) 403(b) Plans e) 401(k) Plans f) Keogh Plans (Key Concepts) CONGRATULATIONS on completing Lesson 9. Now complete Florida study manual Unit 13 Questions for Review.