Retirement and Employee Benefits Planning Flashcards

What is the primary purpose of a 529 college savings plan in financial planning?

Answer: To allow tax-free growth and tax-free withdrawals for qualified education expenses

529 plans offer tax-deferred growth and tax-free distributions when funds are used for qualified higher education expenses such as tuition, fees, and room and board.

Under SECURE 2.0, unused 529 plan funds may be rolled over to which type of account subject to specific conditions?

Answer: Roth IRA for the 529 beneficiary

SECURE 2.0 allows unused 529 funds to be rolled over into a Roth IRA for the beneficiary, subject to a $35,000 lifetime limit and annual Roth IRA contribution limits.

Which type of employee benefit plan allows both employer and employee to contribute, and contributions are immediately 100% vested?

Answer: SIMPLE IRA

SIMPLE IRA contributions—both employee deferrals and employer matching contributions—are immediately 100% vested at the time of contribution.

A health savings account (HSA) offers which unique tax advantage not available in a flexible spending account (FSA)?

Answer: Funds roll over indefinitely and grow tax-free, with no annual use-it-or-lose-it requirement

Unlike FSAs, HSA balances roll over from year to year and grow tax-free, allowing account holders to accumulate a substantial healthcare reserve.

Which retirement planning concept refers to the risk that an individual will outlive their retirement savings?

Answer: Longevity risk

Longevity risk is the risk that a retiree will live longer than anticipated and exhaust their financial resources before death.

What is the annual contribution limit for a health savings account (HSA) for an individual with self-only HDHP coverage in 2024?

Answer: $4,150

The 2024 HSA contribution limit for self-only high-deductible health plan coverage is $4,150, with those age 55 and older able to contribute an additional $1,000 catch-up amount.