1. In 2011, what is the maximum amount of employee pretax contribution (elective deferral) that may be made to a traditional profit-sharing Section 401(k) plan by an individual younger than age 50?
$11,500
$16,500
$22,000
The lesser of 100% of compensation or $49,000 annually
2. Which of the following qualification requirements applies to an employee stock ownership plan (ESOP)?
Assets may be invested primarily in qualifying employer securities.
Stocks must be issued subject to a right of first refusal in favor of the employee.
Employees age 50 or older with at least 5 years of service must be given a right of diversification.
Stocks must be valued at the lesser of historical cost or fair market value.
3. A state or local government would choose to establish a Section 457 plan for all of the following reasons EXCEPT
tax-deferred growth of assets
tax deductibility of employer contributions
no early withdrawal penalty on distributions
the ability of a participant to make elective deferrals
4. Which of the following statements describes a basic provision or use of a savings incentive match plan for employees (SIMPLE) IRA?
Only employers that average fewer than 200 employees can establish a SIMPLE IRA.
A SIMPLE IRA must satisfy special nondiscrimination tests in addition to general rules.
One contribution formula that an employer can use in a SIMPLE IRA is to make a 2% nonelective contribution on behalf of eligible employees.
A SIMPLE IRA is primarily suitable for large corporate type of employers.
5. What is the maximum annual amount that may be contributed to a simplified employee pension (SEP) on behalf of an employee during 2011?
$5,000
The lesser of 100% of compensation or $245,000 annually
The lesser of 25% of compensation or $49,000 annually
Whatever amount is necessary to fund the benefit
6. Terry and Nancy Andersen, both age 39, each plan to contribute $5,000 to their traditional IRAs for the 2011 tax year. They are both employed and file a joint tax return. However, only Terry is eligible for and participates in his employer's retirement plan. Terry and Nancy's modified AGI and earned income for the year 2011 is $99,000. What amount, if any, can Nancy deduct for her IRA contribution?
$200
$2,500
$4,800
$5,000
7. Which of the following investments may be held in an IRA account?
Canadian gold coin
US gold coin
German silver coin
Krugerrand
8. Which of the following allows a qualifying lump-sum distribution from a qualified plan to receive favorable income tax treatment?
The employee's attaining age 59½
The participant's purchase of a primary residence
Financial hardship
A qualifying loan provision in the plan
9. If a loan is to be provided from a Section 401(k) profit-sharing plan and is NOT to be considered a taxable distribution, it must be
available to all owners over age 59½
adequately secured with negotiable collateral
an amount no greater than $100,000
generally repaid within 5 years
10. Which of the following statements correctly describe the favorable tax treatment possibly available for a qualifying lump-sum distribution from a qualified retirement plan?
Tax free if taken after the taxpayer's Social Security (full) retirement age
10-year forward averaging for individuals born before January 2, 1936
Long-term capital gain treatment for the entire distribution amount
Tax-free treatment similar to that given to Roth IRA distributions