Chapter 13 Retirement Savings and Deferred Compensation

| November 9, 2018

42.

Which of the
following statements regarding contributions to defined contribution plans is
true?

A.

Employer
contributions to a defined contribution plan are not limited by the tax
law.

B.

Employee
contributions to a defined contribution plan are not limited by the tax
law.

C.

An employee
who is at least 60 years of age as of the end of the year may contribute
more to a defined contribution plan than an employee who has not reached
age 60 by year end.

D.

The tax
laws limit the sum of the employer and employee contributions to a defined
contribution plan.

43.

When employees
contribute to a traditional 401(k) plan, they _____ allowed to deduct the
contributions and they ______ taxed on distributions from the plan.

A.

are; are
not

B.

are; are

C.

are not;
are

D.

are not;
are not

44.

When
employees contribute to a Roth 401(k) account, they _____ allowed to deduct
the contributions and they _______ taxed on distributions from the
plan.

A.

are; are
not

B.

are; are

C.

are not;
are

D.

are not;
are not

45.

How is a
traditional 401(k) account similar to a Roth 401(k) account?

A.

Employees
contribute before-tax dollars to both types of accounts

B.

Distributions
from a traditional 401(k) account and a Roth 401(k) account are both
subject to minimum distribution penalties

C.

Both
accounts can receive matching contributions from employers

D.

Employers
generally choose how funds in these accounts will be invested

46.

Which of the
following best describes distributions from a traditional defined
contribution plan?

A.

Distributions
from defined contribution plans are fully taxable as ordinary income.

B.

Distributions
from defined contribution plans are partially taxable as ordinary income
and partially nontaxable as a return of capital.

C.

Distributions
from defined contribution plans are fully taxable as capital gains.

D.

Distributions
from defined contribution plans are partially taxable as capital gains and
partially nontaxable as a return of capital.

47.

Shauna
received a distribution from her 401(k) account this year. In which of the
following situations will Shauna be subject to an early distribution
penalty?

A.

Shauna is
60 years of age but not yet retired when she receives the distribution.

B.

Shauna is
58 years of age but not yet retired when she receives the distribution.

C.

Shauna is
56 years of age and retired when she receives the distribution.

D.

Shauna is
69 years of age but not yet retired when she receives the distribution.

48.

Shauna
received a $100,000 distribution from her 401(k) account this year. Assuming
Shauna’s marginal tax rate is 25%, what is the total amount of tax and
penalty Shauna will be required to pay if she receives the distribution on
her 59th birthday and she has not yet retired?

A.

$0.

B.

$10,000.

C.

$25,000.

D.

$35,000.

E.

None of
these.

49.

Riley
participates in his employer’s 401(k) plan. He retired in 2014 at age 75.
When must Riley receive his distribution pertaining to 2014 to avoid minimum
distribution penalties?

A.

April 1,
2014

B.

April 1,
2015

C.

December
31, 2014

D.

December
31, 2015

50.

Riley
participates in his employer’s 401(k) plan. He turns 70 years of age on
February 15, 2013 and he plans on retiring on July 1, 2015. When must Riley
receive his first distribution from the plan to avoid minimum distribution
penalties?

A.

by April 1,
2013

B.

by April 1,
2014

C.

by April 1,
2015

D.

by April 1,
2016

51.

Riley
participates in his employer’s 401(k) plan. He turns 69 years of age on
February 15, 2014, and he plans on retiring on July 1, 2014. When must Riley
receive his first distribution from the plan to avoid minimum distribution
penalties?

A.

by April 1,
2014

B.

by April 1,
2015

C.

by April 1,
2016

D.

by April 1,
2017

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