Transcript Chartered Retirement Planning CounselorSM Professional

CERTIFIED FINANCIAL PLANNER CERTIFICATION
PROFESSIONAL EDUCATION PROGRAM
Retirement Planning & Employee Benefits
Module 6
403(b) Plans & Other Plan
Issues
©2013, College for Financial Planning, all rights reserved.
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans..
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-2
Questions to Get Us Warmed Up
6-3
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans.
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-4
Qualified Employer & General Plan Features
Qualified employers
• Public educational systems
• 501(c)(3) organizations
• Ministers performing religious services for forprofit companies
• 403(b) plans are not considered to be qualified,
were around before ERISA
Two basic types of 403(b) arrangements
• Employee-deferral only
• Employer contribution and employee deferral
6-5
Age and Service Requirements
Typical
• Minimum age 21
• One year of service
• If a plan has a two-year service requirement,
100% immediate vesting
• If a plan has a minimum age 26 requirement,
100% immediate vesting and the two-year
service requirement
cannot be used
6-6
Salary Reduction Agreement
• Multiple agreements with same employer in
a taxable year are allowed.
• Agreement is legally binding and irrevocable
as to amounts already earned.
• Employee may terminate agreement
at any time for amounts not yet earned.
• Employer may require $200 minimum
annual deferral to meet nondiscrimination
safe-harbor.
6-7
403(b) Plan Vesting Schedule
Completed
Years of
Service
Cliff Vesting1
% Vested
Graded Vesting2
% Vested
3-Year Cliff
2- to 6-Year
Graded
1
0%
0%
2
0%
20%
3
100%
40%
4
100%
60%
5
100%
80%
6
100%
100%
Vesting schedules
available
1
2
Full vesting occurs after specified number of completed years of service
Participant vests at least 20% per year over a maximum five-year period
6-8
Employer 403(b) Contributions
Nonelective Employer Contributions
• Require the plan to meet coverage and
participation tests:
o Ratio percentage test
o Average benefits test
Matching Contributions
• Require the plan to satisfy only the ACP test
6-9
Permitted 403(b) Investments
• Annuity contracts
• Custodial accounts holding mutual fund shares
• Retirement income accounts (churches)
6-10
Maximum 403(b) Salary Deferrals
The lesser of the following two limits:
• The annual deferral limit: $17,500 in 2013
•
plus the long service catch-up ($3,000 limit)
Section 415(c) limit: lesser of 100% of
compensation or $51,000 (2013)
plus age 50 catch-up
if eligible
6-11
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans.
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-12
403(b) Catch-Up Contributions
• Age 50 catch-up provision
• Long-service rule exception
o Must have worked for the same employer for 15
years or more.
o Must be a “HER” organization
o Additional annual catch-up allowed up to the lesser
of:
• $3,000
• $15,000, reduced by increases to the general limit
that were allowed in previous years due to 15-year
rule
• $5,000 times the number of years of service,
subtracted by the total elective deferrals made by
employee for earlier years
6-13
403(b) Withdrawals & Loans
In-service withdrawals
generally not permitted,
except for
•
•
•
•
attainment of age 59½
separation from service
death
disability
(Soc. Sec. definition)
• hardship
(employee deferrals only).
• loans (same terms as 401(k)
loans)
6-14
Roth 403(b) Accounts
• Same income tax premise as Roth IRA
•
•
•
o after-tax contributions
o tax-free qualified withdrawals
Contributions and distributions follow defined
contribution rules
o 403(b) contribution limits
o required minimum distributions
Employer contributions must be made to a
traditional 403(b) account
Roth 403(b) accounts can be rolled directly into
Roth IRAs
6-15
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans.
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-16
401(k) & 403(b) Plan Comparison
Characteristic
401(k)
403(b)
Sponsor?
Nongovernmental
employers
Public schools and 501(c)(3)
Private employer?
Yes
No
Qualified plan?
Yes
No
Eligibility?
ERISA requirements
Any employee (typically)
Salary deferral?
Yes
Yes
Matching allowed?
Yes
Yes, but seldom done
Nonelective contributions?
Yes
Yes, but seldom done
Nondiscrimination tests?
Yes
No, if only salary deferral
Yes, if employer
contributions
6-17
401(k) & 403(b) Plan Comparison (2)
Characteristic
401(k)
403(b)
Maximum deferral?
$17,500 in 2013 (indexed)
$17,500 in 2013 (indexed)
Overall limits?
The lesser of the 415(a)
limit or annual deferral limit
The lesser of the 415(a)
limit or annual deferral limit
Catch-up election?
Yes, for those age 50 and
older
Yes, two, age 50 and 15
years of service
Loans?
Yes
Yes
Hardship withdrawal?
Yes
Yes
Investment Limitations?
No (all ERISA investments)
Yes, only mutual funds and
annuities
ADP and ACP testing?
Yes, unless
safe harbor plan
Only ACP testing, safe
harbors available
6-18
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans.
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-19
Plan Documents
Every qualified plan is required by law to be
available in the form of a written document.
Three common approaches to plan documents:
1. Custom Plan—Drafted specifically for the company
2. Prototype Plan—Pre-approved plan document with
separate funding medium (separate trust or custodial
account) for each adopting company, and
the ability to designate trustees
3. Master Plan—Pre-approved plan document
with standard funding medium (only one
trust or custodial account) and no ability
to designate trustees
6-20
Advance Determination Letter
• This is a formal determination by the IRS of
•
whether the plan meets the requirements of the
law.
Only if all legal requirements are met will the
plan be considered qualified and the employer
entitled to a tax deduction for
plan contributions.
6-21
Fiduciaries
A fiduciary is an individual who
• has discretionary authority or
control over the
assets/administration of a
qualified plan trust, or
• provides investment advice
regarding plan assets for
compensation.
An individual is not considered a
fiduciary if services provided for
the plan are limited to
• legal
• actuarial
• consulting
• accounting
6-22
Fiduciary Responsibilities
ERISA requires a fiduciary to perform plan
responsibilities solely in the interest of
participants and beneficiaries
• for the exclusive purpose of providing benefits to
participants and defraying reasonable expenses of
administering the plan
• with the care, skill, prudence, and diligence that a
prudent person familiar with such matters would
use under the circumstances
• by diversifying plan investments to minimize risk
• in accordance with plan documents where such
documents are consistent with ERISA
6-23
Prohibited Transactions
• Self dealing by a fiduciary
• Transferring plan assets to a disqualified
•
•
person, or such a person using plan assets
Receipt of consideration by a fiduciary for his or
her own account when dealing with a
disqualified person
Buying, selling, exchanging, or
borrowing between a
disqualified person
and the plan
6-24
Disqualified Persons
A “disqualified person” is
1. the fiduciary
2. any person providing services to the plan
3. an employer or employee organization with
4.
5.
6.
7.
employees covered by the plan
a 50% owner
a member of the family of (1), (2), (3), or (4)
a corporation, partnership, trust, or estate that is
50% or more owned by (1), (2), (3), or (4)
an officer, director, 10%-or-more shareholder,
highly compensated employee, or 10%-or-more
partner in (3) or (6)
6-25
Exemptions from Prohibited Transaction Rules
•
•
•
Receipt of benefits under plan provisions
Distribution of plan assets in accordance with allocation
requirements
Loans made to plan participants and beneficiaries that are:
o
o
•
•
•
o
o
available to all participants and beneficiaries on a substantially equal
basis
not available to highly compensated employees in greater proportions
than to others
made in accordance with plan provisions
at reasonable rates of interest and adequately secured
Loans made to ESOPs
Purchase or sale of qualifying employer securities by an
individual account plan, for adequate consideration, and
without commission
Providing office space or services for the plan for reasonable
compensation
6-26
Plan Administrator Duties
The plan administrator has the primary responsibility
for carrying out the operational requirements of the
plan. It may be the employer or a third party (TPA).
The plan administrator is responsible for
• determining annual contribution amounts
• determining who is eligible for participation, who is vested,
and the accrual of benefits
• communicating with participants and beneficiaries, including
counseling regarding plan choices and distribution options
• ruling on claims
• ensuring that actuarial functions are
carried out
• hiring attorneys and accountants
• reporting, disclosing, and keeping
plan records
6-27
Reporting & Disclosure Requirements
Federal Government
• Filing forms 5500 and 1099-R
• Plan summaries
Plan participants and beneficiaries
• Personal benefits statements
• Summary plan descriptions (SPD)
• Summary of material modifications (SMM)
• Summary annual report (SAR)
Other required notices include
• Report of investment performances
• Description of types of benefit payments and
distribution options permitted under the plan
6-28
Example of Single Employer with Two Defined Contribution Plans
The limit on ABC Corporation’s deduction for total contributions to
the plans is $250,000 (25% of $1 million covered payroll).
Money Purchase Pension Plan
Profit Sharing Plan
ABC Corporation is required to
contribute $100,000
(10% of covered payroll) to the
money purchase pension plan.
ABC Corporation can contribute
up to $150,000
(0% to 15% of covered payroll)
to the profit sharing plan.
Bob, a participant in both plans, earns $100,000 this year.
Annual additions to his two plan accounts are limited to an aggregate of
$51,000 (the lesser of 100% of pay or $51,000).
6-29
Single Employer with Defined Benefit & Profit Sharing Plans
Multiple Plans of a Single Employer (DEF)—Defined Benefit (DB) Plan not
subject to PBGC, Required Minimum Funding Is $300,000 (30% of a
$1 million covered payroll) for this year, and Profit Sharing (PS) Plan
contribution is 6% or less – overall limit does not apply.
Since the minimum finding requirement is $300,000, the limit of DEF Corporation’s
deduction for total contributions to the two plans is $360,000 (DB plan funding
+ up to 6% to profit sharing plan + 401(k) elective deferrals + catch-ups).
Defined Benefit Plan
DEF Corporation is required to
contribute $300,000 to the defined
benefit pension plan. This amounts to
30% of covered payroll.
Profit Sharing Plan
DEF Corporation can contribute
up to $60,000 (6% of covered
Payroll) + 401(k) elective deferrals +
catch-ups to the PS Plan.
6-30
Another Single Employer with Defined Benefit & Profit Sharing Plans
Multiple Plans of a Single Employer—Defined Benefit (DB) Plan subject to PBGC,
Required Minimum Funding is $300,000 (30% of $1 million covered payroll) for this
year, then Profit Sharing (PS) Plan is limited to 25% or less – overall limit does not
apply.
Since the minimum funding requirement exceeds 30% of covered payroll, the limit
of DEF Corporation’s deduction for total contributions for DB funding + 25%
to PS plan is $550,000 (+ 401(k) elective deferrals + catch-up contributions).
Defined Benefit Plan
Profit Sharing Plan
DEF Corporation is required to
contribute $300,000 to the defined
benefit pension plan. This amounts to
30% of covered payroll.
DEF Corporation can contribute up to
$250,0000 or 25% of covered payroll
(+ 401(k) elective deferrals + catchups contributions) to the PS plan.
6-31
Employee with Multiple Plans—Unrelated Employers
An individual (John in this example) who has more than one unrelated employer
generally may participate in the qualified retirement plans of each employer. The
Section 415 limits will apply to the individual’s participation in each employer’s
plan(s) separately.
Employer A’s
Employer B’s
Employer C’s
Money Purchase
Pension Plan
Money Purchase
Pension Plan
Money Purchase
Pension Plan
• Employer
contributes and
deducts 10% of
covered payroll
• Annual additions
to John’s
account in
Employer Plan A
are limited to
$51,000
• Employer
contributes and
deducts 12% of
covered payroll
• Annual additions
to John’s
account in
Employer Plan B
are limited to
$51,000
• Employer
contributes and
deducts 25% of
covered payroll
• Annual additions
to John’s
account in
Employer Plan C
are limited to
$51,000
6-32
Employee with Multiple Plans—Employee Elective Deferral Limit
An individual’s elective deferrals to different plans generally must be
aggregated to comply with the limits.
For example, Ann works full time for a corporation and also teaches at a
local community college. She participates in the salary deferral plans
offered by each employer—a 401(k) plan and a TSA. Her compensation
and other relevant factors make her eligible to defer the maximum to each
plan; however, her aggregate deferrals are limited to $17,500 (2013).
Corporate 401(k)
Plan
• Ann’s salary deferrals are limited to
$17,500.
• Ann is allowed to defer a maximum
of $17,500 to the two aggregated
plans.
College 403(b)
• Ann’s salary deferrals are limited to
$17,500.
• Ann is allowed to defer a maximum
of $17,500 to the two aggregated
plans.
6-33
Employee with Qualified Plan & 457
The salary deferral limits for participants in a Section 457 plan are
separate from the salary deferral limits to qualified plans and
403(b) plans.
Corporate 401(k)
Plan
• Ann’s salary deferrals are limited to
$17,500.
• Ann is allowed to defer a maximum
of $35,000 to the two aggregated
plans.
College 457 Plan
• Ann’s salary deferrals are limited to
$17,500.
• Ann is allowed to defer a maximum
of $35,000 to the two aggregated
plans.
6-34
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans.
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-35
Parent-Subsidiary Controlled Group
A group of organizations with a common parent:
Each organization is under control of one or more of
the other organizations, and the common parent has
direct control (at least 80% ownership) over at least
one member of the group.
• For example, if Regis Industries owns 80% of Climate
Controls, both companies would then need to be considered
and treated as one company for retirement plan purposes.
6-36
Brother-Sister Corporation
Brother-Sister test
• Five or fewer people own at least 80% of the
voting power.
• The same five or fewer shareholders
own more than 50% of control,
taking into account ownership
only to the extent of identical
ownership for each
business.
6-37
Affiliated Service Group Example
First Service Group and “A” Organization
Dr. A’s P.C. (A
Organization)
owns 50% of the
Partnership ...
Partners in Health
(partnership)
Owns 100% of FSO.
Dr. B’s P.C. (A
Organization)
owns 50% of the
Partnership ...
and performs
services
for third parties
through the FSO.
Greenville Medical Services, Inc.
(first Service Organization)
provides medical care
to third persons.
and performs
services for third
parties through
the FSO.
Nurse
Nurse/Receptionist
Billing clerk
Clerical assistant
6-38
Affiliated Service Group Example
First Service Group and “B” Organization
Market Shares
(First Service Organization)
provides marketing services to
third parties and its four partners
each own 3% of
Good Words, Inc. (B Organization)
performs services for the FSO
Writer #1
Writer #2
Editor #1
Editor #2
6-39
UBTI
UBTI (unrelated business taxable income) is derived
when a qualified plan participates in running a
business.
Income not considered to be UBTI
• Passive income (interest, dividends, royalties, rent)
• Capital gains
• Leveraged real estate that is held directly
Income considered to be UBTI
• Income from a directly held business
• Dividend income, if stock is margined
• Partnership income
(general and limited)
6-40
Incidental Benefit Definition
Ordinary Life Insurance
• Defined contribution plans: Cost of ordinary life insurance
must be less than 50% of the cost of all plan benefits (it is
assumed that half of the cost of ordinary life is attributable
to “term portion or current protection”).
• Defined benefit plans: Insurance benefit is not more than
100 times the expected monthly pension benefit.
Term Life Insurance
• Term (including universal) life insurance is considered
“incidental” if the cost of current protection is less than
25% of the cost of all plan benefits.
6-41
Learning Objectives
6–1 Explain the basic provisions of a 403(b) tax-sheltered
annuity (TSA) plan.
6–2 Describe the investment options and catch-up provisions
available in 403(b) TSA plans.
6–3 Explain the similarities and differences between 403(b) and
401(k) plans.
6–4 Identify basic characteristics of retirement plan trust
regulatory issues, including plan installation, fiduciary
requirements, and reporting and disclosure.
6–5 Describe the multiple plan rules for retirement plans.
6–6 Describe the controlled group and affiliated service group
rules, and explain incidental benefits and unrelated business
taxable income (UBTI).
6–7 Explain the basic provisions of a Section 457 plan.
6-42
Qualified & Nonqualified Plans
Qualified Plans
Nonqualified Plans
Pension Plans
Profit Sharing
Plans (DC)
Tax-Advantaged
Plans
Other Nonqualified
Plans
Defined Benefit (DB)
Profit Sharing
Traditional IRA
Section 457 Plans
Cash Balance (DB)
Thrift Plan
Roth IRA
Stock Bonus
SIMPLE IRA
ISO
Money Purchase (DC)
ESOP (LESOP)
SEP
ESPP
Target Benefit (DC)
Age-Weighted
(SARSEP)
NQSO
403(b) (TSA)
Deferred
Compensation Plans
Cross-Tested
(Comparability)
401(k) Plan
SIMPLE 401(k)
6-43
Section 457 Deferred Compensation Plan
A 457 plan is a deferred compensation plan, not a
qualified plan, and therefore not subject to many of
the qualified plan rules.
Two main categories of 457 plans
• 457(f) (non-governmental)
o Participation limited to a select group of highly
paid or management employees (“top hat”
plan)
• 457(b) – “eligible”
o Governmental
o Nongovernmental
6-44
Eligible Employers for 457(b) Plans & Deferral Amounts
Eligible employers are either
• State and local governments
• Tax-exempt (501(c)) organization
Deferral amounts allowed
• Lesser of $17,500 in 2013 or 100% of
compensation ($5,500 age 50 catch-up)
• Amount is not reduced by contributions made to
403(b), 401(k), SARSEP, or SIMPLE plans
6-45
Funded & Unfunded 457(b) Plans
Nongovernmental 457(b) plans:
• Unfunded (money may be set aside, but is available
to creditors)
• Participant does not have constructive receipt
• Since unfunded no loans allowed
• No rollovers allowed (such as to an IRA)
Governmental 457(b) plans:
• Funded (funds are not at risk)
• Loans are allowed
• Can be rolled over to an IRA, Roth IRA, SEP,
403(b), or qualified plan
6-46
Catch-up Provisions of 457(b) Plans
Age 50 catch-up
• Additional $5,500 for those age 50 and older not in the
final three years prior to retirement
Final three years catch-up
• Available for each year of the three years preceding
•
•
•
normal retirement age
Catch-up contribution up to the allowable
deferral for the current year, resulting in
total deferrals up to two times the
allowable deferral for the current year
From unused deferrals only
Cannot use with age 50 catch-up
6-47
Multiple Choice Question 1
Which one of the following is not a provision of
TSAs?
a. The contract between the employer and the
employee must be legally binding.
b. The employee can execute more than one
contract per employer per year.
c. Salary reduction contributions generally are
subject to a $17,500 limit in 2013.
d. The annual TSA contract is irrevocable; the
employee may not terminate the agreement
during the year.
e. Loans are permitted in accordance with
qualified plan rules.
6-48
Multiple Choice Question 2
Which one of the following is not a provision of the
special limits that are available to certain employees in
a TSA plan?
a. It is available to employees of health, education,
and religious organizations (HER organizations).
b. It may use both catch-up provisions if qualified.
c. It may typically defer at least $200 to their TSA
during the first year of service.
d. With 15 or more years of service, a participant may
increase each year’s deferral limit by $3,000 (up to
$15,000 of cumulative increases).
e. If prior salary reductions exceed $5,000 times years
of service, no increase to the deferral amount is
available to employees with more than 10 years of
service.
6-49
Multiple Choice Question 3
Which one of the following is not a provision of
Section 457 plans?
a. Elective deferrals are subject to a $17,500 limit
in 2013.
b. Employees of tax-exempt organizations and
state/local governments may establish Section
457 plans.
c. An employee retiring at age 65 is not permitted
to receive payments until age 70½.
d. An additional deferral catch-up of up to twice
the regular deferral, less any deferral for the
current year, is allowed in the three years prior
to retirement.
6-50
Multiple Choice Question 4
John Billups, age 53, participated in his former
employer’s 457 plan. He terminated several weeks
ago and just received his distribution check.
Which of the following statements is true?
a. He will pay no tax and no penalty on the
distribution.
b. He will pay tax and a 10% penalty on the
distribution.
c. His distribution is subject to the mandatory
20% withholding.
d. He will pay tax with no penalty on the
distribution.
6-51
Multiple Choice Question 5
Which of the following would be considered an incidental benefit in
a qualified plan?
I.
term life insurance that costs 37% of the cost of all
plan benefits
II. ordinary life insurance that costs 48% of the cost of all
plan benefits
III. term life insurance that costs 24% of the cost of all
plan benefits
IV. ordinary life insurance that costs 27% of the cost of all
plan benefits
V. an insured death benefit that is 100 times the expected
monthly pension benefit
a. I only
b. II and III only
c. I, II, and V only
d. I, III, and V only
e. II, III, IV, and V only
6-52
Multiple Choice Question 6
EFG Corporation is considering establishing a qualified retirement
plan for eligible employees.
Which of the following groups would have to be considered in
meeting the statutory coverage and participation tests?
I.
employees of HIJ Corporation, in which EFG owns 90% of the
stock
II. employees of KLM Corporation, in which EFG owns 75% of
the stock
III. leased employees working at EFG who are covered by their
leasing organization’s profit sharing plan
IV. workers at EFG who are members of a union in which
retirement benefits have been the subject of good-faith
bargaining
a. I only
b. I and II only
c. I and III only
d. II and IV only
e. I, II, and III only
6-53
Multiple Choice Question 7
Which of the following types of income generated
by a qualified plan trust would result in unrelated
business taxable income (UBTI)?
I. dividends from margin stock
II. royalties
III. income from an energy limited partnership
IV. real property rental income
a. I and II only
b. I and III only
c. II and IV only
d. I, III, and IV only
e. II, III, and IV only
6-54
Multiple Choice Question 8
Which of the individuals listed below would be
considered qualified plan fiduciaries?
I. a person providing legal services to the plan
II. a person providing investment advice regarding
plan assets for compensation
III. a person providing accounting services to the plan
IV. a person who has discretionary authority over plan
assets or administration
a. I and II only
b. II and III only
c. II and IV only
d. III and IV only
6-55
Multiple Choice Question 9
Rita, age 63, has worked for the local animal
rescue shelter for the past 17 years. The shelter
offers a 403(b) plan for all of its full-time
employees. Rita is currently the Senior Accountant,
and plans to retire within the next three years. Her
current annual compensation is $75,000.
What is the maximum amount that Rita could
defer this year (2013)?
a. $17,500
b. $20,500
c. $23,000
d. $26,000
e. $35,000
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Multiple Choice Question 10
Which of the following statements is correct
regarding 403(b) plans and Section 457 plans?
a. Investment options in a 403(b) plan include
annuities and stocks.
b. Section 457 plans can be rolled over into an
IRA account.
c. Section 457 plans do not have required
minimum distributions (RMDs).
d. 403(b) plans may be subject to ACP, but not
ADP testing.
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CERTIFIED FINANCIAL PLANNER CERTIFICATION
PROFESSIONAL EDUCATION PROGRAM
Retirement Planning & Employee Benefits
Module 6
End of Slides
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