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Chapter 18

VIEWS: 8 PAGES: 4

									Chapter 25

TAX DEFERRED ANNUITY




LEARNING OBJECTIVES:

         Identify basic features and applications of tax deferred annuities


REVIEW:

This chapter covers tax deferred annuities (TDAs), or Internal Revenue Code
Section 403(b) plans. The chapter begins by identifying the type of employer that
can implement such a plan—essentially tax-exempt organizations (per Section
501(c)(3)) and public educational organizations. Advantages and disadvantages
are covered next. The section on design features focuses on: salary reductions;
catch-up contribution provisions; employer contributions and Internal Revenue
Code Section 415 limits; nondiscrimination requirements; vesting; plan
investments; and plan distributions. Coverage of tax implications and ERISA
(Employee Retirement Income Security Act) requirements is followed by
information on how to install a plan. A good question and answer section follows
three references to where the student can learn more.


CHAPTER OUTLINE:

   I. What Is It?
   II. When Is It Indicated?
   III. Advantages
   IV. Disadvantages
   V. Design Features
        A. Salary Reductions
        B. The TDA Salary Reduction Catch-Up
        C. Employer Contributions
        D. Section 415 Limits
        E. Nondiscrimination Requirements
        F. Vesting


                                                                                1
Chapter 25



         G.   Plan Investments
         H.   Plan Distributions
         I.   Tax Implications
         J.   ERISA Requirements
         K.   How to Install a Plan
         L.   Where Can I Find Out More About It?
         M.   Questions and Answers
         M.   Chapter Endnotes


FEATURED TOPICS:
Tax deferred annuities (403(b) plans)

FIGURES:

Figure 25.1 Allowable Distributions from 403(b) Plans


CFP® CERTIFICATION EXAMINATION TOPIC:

    Topic 63: Other tax-advantaged retirement plans
       A. Types and basic provisions
              5) 403(b) plans


COMPETENCY:

Upon completion of this chapter, the student should be able to:

         1. Identify basic features and applications of tax deferred annuities


KEY WORDS:

Tax deferred annuity (TDA)
Section 403(b)
Salary reduction
Catch-up provision
Section 415 limit
401(m) test
501(c)(3) organization
Roth 403(b)
Chapter 25



DISCUSSION:

1. Discuss advantages, disadvantages, and characteristics of tax deferred
   annuities.

2. Discuss considerations in choosing between a 403(b) plan and a 401(k) plan.


QUESTIONS:

1. In addition to public schools and colleges, which of the following types of
   organizations may be allowed to establish a tax deferred annuity plan?

    (1) private colleges
    (2) hospitals
    (3) churches
    (4) political lobbying organizations

         a.   (1) only
         b.   (1) and (2) only
         c.   (1), (2), and (3) only
         d.   (2), (3), and (4) only

    Chapter 25, p. 209

2. When considering employee limits on annual plan contributions, which of the
   following sources must be included?

    (1) 457 plans
    (2) SIMPLE IRAs
    (3) 401(k) plans
    (4) SAR-SEPs

         a.   (1) and (2) only
         b.   (2) and (4) only
         c.   (1), (2), and (3) only
         d.   (2), (3), and (4) only

    Chapter 25, pp. 211, 212

3. Assuming a covered employee is working for a qualified employer, after how
   many years of service can he or she make the additional salary reduction
   catch-up contribution into a TDA?

    a. 10
    b. 15
    c. 20
Chapter 25



    d. 25

    Chapter 25, p. 211

4. Which one of the following non-employee independent contractors may
   contribute to a tax deferred annuity plan?

         a.   radiologist
         b.   anesthesiologists
         c.   both of the above
         d.   neither of the above

    Chapter 25, p. 215


ANSWERS:

1. c

2. d

3. b

4. d

								
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