Exam 3 Part E

Question 1

Employee Savings Plan

Answer 1

• Voluntary plans designed to supplement other qualified plans or to be used in place of an ER sponsored and funded plan
• Receive certain tax advantages from participation (profit) 403 B (non profit)

Question 2

Section 401 K plans

Answer 2

• AKA cash or deferred arrangement
• Immediate Tax deduction of EE contributions
• The EEs are referred to in tax code as elective deferrals
• EEs generally have the choice of investment vehicles for their accounts

Question 3

IRA

Answer 3

• Individual Retirement Account
• plan designed to supplement other types of retirement income
• Funds are invested in a variety of financial instruments and accumulate on a tax deferred basis until distributed
• Tax deduction for IRA is limited to individuals who do not have access to 401 K plan

Question 4

IRA + 401K

Answer 4

• Funds cannot be withdrawn to 59.5 except in the case of death or disability
• 10% tax to early distribution
• Amount withdrawn after 59.5 are taxed as ordinary income

Question 5

IRA + 401K Rollevers

Answer 5

• ## Occurs when the owner takes funds of one account and places them in another (qualified retirement account)

Question 6

What Is Allowed In IRA + 401K Rollevers

Answer 6

• Transfer from one RIA to another IRA
• Distribution from an ER sponsored retirement plan (401K) to an IRA designed to receive such proceeds
• Transfer from one 401K into another 401K
• Cannot transfer IRA into an ER sponsored plan

Question 7

Roth IRA

Answer 7

• 1997 Reform Act
• No tax deduction for contributions
• Interest grows tax free
• Withdrawals are tax free