CTC CTC Retirement & Deferred Compensation 2

Question 1

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

Accepted Answer

Election timing, distribution triggers, and prohibition on acceleration

Answer

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.

Question 2

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

Accepted Answer

Both 401(k) and IRA accounts

Answer

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.

Question 3

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

Accepted Answer

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

Answer

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.

Question 4

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

Accepted Answer

A hypothetical account balance with annual pay and interest credits

Answer

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.

Question 5

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

Accepted Answer

First-time home purchase up to $10,000

Answer

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.

CTC - Certified Tax Coach Practice Test

CTC - Certified Tax Coach Practice Test

CTC CTC Retirement & Deferred Compensation 2