PFS Communication with Teachers & Parents 2

Question 1

A PFS practitioner is explaining a 403(b) plan to a public school teacher. Which unique feature should be emphasized that is NOT available in a 401(k)?

Accepted Answer

The 15-year catch-up provision for employees with 15+ years of service

Answer

403(b) plans offer a special catch-up provision allowing employees with 15+ years of service with a qualifying employer to contribute an additional $3,000 per year (up to a lifetime cap).

Question 2

When communicating with a parent about funding a child's education, a PFS should clarify that 529 plan distributions used for K-12 tuition are federally tax-free up to:

Accepted Answer

$10,000 per year

Answer

Federal law allows up to $10,000 per year per beneficiary in tax-free 529 distributions for K-12 tuition expenses.

Question 3

A teacher client asks their PFS about the tax treatment of union dues paid for professional association membership. Under current tax law (post-TCJA), employee union dues are:

Accepted Answer

Not deductible for federal income tax purposes through 2025

Answer

The Tax Cuts and Jobs Act of 2017 suspended the deduction for miscellaneous itemized deductions (including union dues) through 2025.

Question 4

In communicating financial planning advice to a parent, a PFS distinguishes between a custodial UGMA account and a 529 plan. Which statement is accurate regarding financial aid impact?

Accepted Answer

UGMA assets are assessed at up to 20% of the asset value as student assets

Answer

UGMA/UTMA custodial accounts are considered student assets and assessed at up to 20% on FAFSA, versus a maximum 5.64% for parental assets.

Question 5

A teacher nearing retirement asks a PFS about the impact of the Windfall Elimination Provision (WEP). WEP primarily affects teachers who:

Accepted Answer

Receive a pension from employment not covered by Social Security

Answer

WEP reduces Social Security benefits for individuals who receive pensions from employment not covered by Social Security, such as many state and local government teachers.

(PFS) Personal Financial Specialist Practice Test

(PFS) Personal Financial Specialist Practice Test

PFS Communication with Teachers & Parents 2