retirement plan outline

Self employed defined contribution retirement plan

·        Aka HR-10 retirement plan

·        A.k.a Keogh plan

·        Contributions must be $ from earned income

·        Self employed: The less of $51,000 per year or 100% of earned income

·        Cannot hold gold,diamonds, coins, antiques

·        Contributions are tax deductible

·        Earnings accumulate tax-deferred

Trustee/custodian

·        oversee account

·        comply with IRS rules

Plan for employee

·        25% of employee’s salary or less

·        Self employed people must contribute for their employees if they want to use plan for their account

·        Vesting in one year

Retirement plan features

·        Withdraw in lump sum-average over 10 years

·        Withdraw at intervals-like annuity pay out

·        IRA rollover into 401k

·        401k rollover into IRA

·        1035 exchange,transfer insurance product into another insurance product or annuity

·        Annuity can NOT be exchanged for insurance policy

·        Pension plans don’t invest in municipal bonds, already tax deferred

·        If employee leaves before one year, $ goes into pot for other employees

·        If employees leave after partial/full vesting they can take $ when leave or take money later, pay income tax or roll into IRA or other tax qualified plan in 60 days

·        Transfer from one trustee to another,allowed to roll money over once per year

·        Same trustee, can move $ from one investment to next investment within same company

What is the maximum contribution a self-employed individual can make to a self-employed defined contribution plan?

·        $51,000

·        Self-employed defined contribution plan a.k.a. HR-10 plan a.k.a. Keogh plan

·        Can do $51,000 or 100% of income whichever is less

·        Employee of self-employed person can contribute up to 25%

ERISA

·        Employee  retirement income security act of 1974

·        Purpose-employers protect $ interests of employees retirement/pension plans

·        How to monitor retirement plans

·        Trustee must put $ in low risk investments

·        Reports to IRS

·        Reports for employees of contribution amounts and earnings

·        ERISA covers corporations

·        ERISA does not cover federal government or municipalities

Which of the following is covered by ERISA?

·        The investing policies of pension plans by private employers

·        Protect employees so pension plans aren’t raided in corporate takeover

·        Makes trustee financially responsible

403b retirement plan

·        For tax exempt organization such as church, school, charitable foundation, nonprofit corporation

·        For teachers, church employees, nurses

·        A.k.a. tax sheltered annuity plans

·        Employees make voluntary contributions

·        Plan set up with bank or financial institution

·        Can be through mutual fund companies, insurance companies

·        Employees put in part of their salary up to limit

·        Contributions-pre tax, tax deductible to employee

·        Withdraw, pay-out-taxed as ordinary income

·        Can rollover into IRA if employee leaves

Which of the following can contribute to a 403b plan?

·        Nonprofit employees