CPC CPC Plan Distributions & Taxation

Question 1

Under IRC Section 72(t), which distribution from a qualified retirement plan avoids the 10% early withdrawal penalty?

Accepted Answer

Distributions made as part of a series of substantially equal periodic payments (SEPPs)

Answer

Any distribution after age 55

Answer

Lump-sum distributions for any reason after 5 years of plan participation

Answer

Distributions to pay off a home mortgage

Question 2

What is the required beginning date (RBD) for required minimum distributions (RMDs) for an employee who retired in 2024?

Accepted Answer

April 1 following the later of the year the employee turns 73 or the year they retire

Answer

April 1 following the year the employee turns 70½

Answer

December 31 of the year the employee turns 72

Answer

January 1 of the year the employee turns 75

Question 3

A participant receives a plan distribution and rolls it over to an IRA within 60 days. The plan withheld 20% for taxes. What happens to the withheld amount?

Accepted Answer

It must be replaced from other funds to complete a full rollover; otherwise the withheld portion is taxable

Answer

It is permanently forfeited to the IRS

Answer

It is automatically returned to the participant after filing a tax return

Answer

It is credited to the participant's IRA directly by the plan trustee

Question 4

Which plan distribution option allows a participant to receive employer stock at its cost basis and defer tax on the net unrealized appreciation (NUA) until the stock is sold?

Accepted Answer

Lump-sum distribution with NUA treatment under IRC Section 402(e)(4)

Answer

Installment distribution over 10 years

Answer

Direct rollover to an IRA

Answer

In-service withdrawal after age 59½

Question 5

A 401(k) participant takes a hardship withdrawal. Which statement is correct under post-2019 rules?

Accepted Answer

The 6-month suspension of elective deferrals following a hardship withdrawal was eliminated

Answer

The participant must take all available loans before a hardship withdrawal

Answer

Hardship withdrawals are always exempt from the 10% early withdrawal penalty

Answer

The participant must repay the hardship amount within 3 years

Question 6

What is the tax treatment of a qualified distribution from a Roth 401(k) account?

Accepted Answer

Completely tax-free if made after age 59½ and the 5-year holding period is met

Answer

Fully taxable as ordinary income

Answer

Partially taxable based on the pro-rata rule

Answer

Subject to 10% penalty but not income tax