CTC Retirement & Deferred Compensation Flashcards

A Non-Qualified Deferred Compensation (NQDC) plan must comply with IRC Section 409A, which primarily governs:

Answer: Election timing, distribution triggers, and prohibition on acceleration

Section 409A governs when compensation can be deferred (election timing), what events can trigger distributions, and strictly prohibits acceleration of payments outside of allowed exceptions.

Which type of retirement account allows individuals aged 50 and older to contribute an additional 'catch-up' amount above the standard limit?

Answer: Both 401(k) and IRA accounts

Both 401(k) plans and IRA accounts offer catch-up contribution provisions for participants aged 50 and older, allowing additional contributions above the standard annual limits.

What is the primary tax advantage of a Health Savings Account (HSA) that makes it a powerful retirement savings vehicle?

Answer: Triple tax advantage: deductible contributions, tax-free growth, tax-free withdrawals for qualified medical expenses

HSAs offer a unique triple tax advantage — contributions are tax-deductible, investment growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.

Under a Cash Balance pension plan, each participant's benefit is expressed as:

Answer: A hypothetical account balance with annual pay and interest credits

Cash balance plans are defined benefit plans where each participant has a hypothetical account credited with annual pay credits (e.g., 5% of salary) and interest credits, but the employer bears the investment risk.

The 10% early withdrawal penalty for IRA distributions before age 59½ does NOT apply to which of the following exceptions?

Answer: First-time home purchase up to $10,000

The IRS provides a penalty exception for first-time homebuyers withdrawing up to $10,000 lifetime from an IRA to pay for qualified acquisition costs.

A Roth IRA is subject to income phase-out limits for contributions. For 2024, the phase-out begins for single filers at a MAGI of:

Answer: $146,000

For 2024, the Roth IRA contribution phase-out for single filers begins at a modified adjusted gross income of $146,000 and is completely phased out at $161,000.