Retirement Plans and Taxation Flashcards
7 cards from real Series 65 – Uniform Investment Adviser Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Retirement Plans and Taxation flashcards as text
A SEP-IRA allows employers to contribute up to what percentage of an employee's compensation (subject to the annual dollar limit)?
Answer: 25%
Employers may contribute up to 25% of an employee's compensation (or $69,000 in 2024, whichever is less) to a SEP-IRA.
What distinguishes a SIMPLE IRA from a SEP-IRA?
Answer: SIMPLE IRAs allow employee salary deferrals; SEP-IRAs are funded only by employers
SIMPLE IRAs allow employees to make salary deferral contributions, while SEP-IRAs are funded exclusively by employer contributions.
Under a 403(b) plan, which of the following types of employers is eligible to sponsor the plan?
Answer: Tax-exempt organizations and public school systems
403(b) plans are available to employees of tax-exempt organizations under Section 501(c)(3) and public educational institutions.
When a participant rolls over funds from a 401(k) plan to a Traditional IRA, what is the tax treatment if done as a direct rollover?
Answer: The rollover is tax-free and penalty-free with no withholding
A direct rollover (trustee-to-trustee transfer) is not a taxable event, avoids mandatory 20% withholding, and incurs no early withdrawal penalty.
Which of the following best describes 'vesting' in a qualified retirement plan?
Answer: The employee's ownership rights over employer-contributed funds over time
Vesting refers to the schedule by which an employee gains nonforfeitable ownership of employer contributions to the retirement plan.
What type of retirement account is exclusively available to self-employed individuals and small business owners, allowing contributions both as employee and employer?
Answer: Solo 401(k)
A Solo 401(k) (also called an Individual 401(k)) is designed for self-employed individuals, allowing contributions in both the employee deferral and employer profit-sharing capacity.
Which retirement plan is available to state and local government employees and allows deferrals without the 10% early withdrawal penalty upon separation from service at any age?
Answer: 457(b) governmental plan
A 457(b) governmental plan has no early withdrawal penalty upon separation from service, making it uniquely flexible for government employees.