Jim Tandy, age 65, will retire next month from Algor Industries. Last month, Jim withdrew $40,000 from his qualified retirement savings plan at work. Before the withdrawal, Jim had an account balance of $500,000. While employed at Algor, Jim made $100,000 of after-tax contributions to his retirement plan. The taxable portion of his withdrawal is
E. not enough information to calculate
Shannon McDougal will retire December 31 of this year. Shannon has worked for Shamrock Construction for 30 years. During his last 5 years, he earned $40,000, $47,000, $44,000, $46,000, and $48,000. Shamrock's retirement plan uses a unit credit formula that awards employees 1.5% for each year of service using a financial average of the last 3 years. Shannon's annual benefit will be:
Eileen Tate, an employee of Great Corp., is 52, and her company has just converted its defined benefit plan to a cash balance plan. The present value of her accrued benefit is $375,000. Under the cash benefit plan, Great Corp. will make an annual contribution of 11% to the employees' hypothetical accounts and guarantee a 6% interest rate. If a cash balance plan had been in effect since Eileen's date of hire, she would have $300,000. Eileen's annual salary is $105,000. Under the cash balance plan, the value of the annual contribution to Eileen's retirement account will be
d.the same contribution amount that she received under the defined benefit plan
e.$0 until the excess $75,000 is credited to her hypothetical account
a.$9,750 [$30,000 × .10 = $3,000...($75,000 - $30,000) = $45,000 × .15 = $6,750...$3,000 + $6,750 = $9,750]; The owner of Whitney Corporation, Inc., earned $250,000 in 2013. In the same year, three highly compensated employees earned $100,000 each. The remaining 30 line workers earn about $20,000 each, for a total payroll of $600,000 for this group of workers. Whitney Corporation made the maximum allowable contribution to each employee's money purchase plan in 2013. In 2013, what was the total amount that Whitney Corporation contributed to their money purchase plan?
d.$276,000[calculated as $51,000 + .25(100,000) +.25(100,000) + .25(100,000) + .25(600,000)... the owner's contribution is capped at $51,000 (in 2013) because 25% of $250,000 is greater than the $51,000 statutory limit... the maximum contribution for all other workers is 25% of their compensation, 25% of ($300,000 + $600,000)] T. L. Timber, age 40, works for Treeline, Inc., a logging company. Treeline uses both compensation and service as a basis for allocating Treeline's $20,000 annual contribution to Treeline's profit sharing plan. How much would be allocated to T. L.'s account if he received 40 units of credit for his 20 years of service and 160 units for $80,000 in earnings? Total units for all employees are 1,000.
e.need more information to calculate
Last week while driving to work, Mike Salsbury's car broke down. He called a tow truck and got a ride with a friend to and from work that day. When the auto repair shop called, Mike learned repairs would cost $2,000. That was $2,000 more than he had. Mike is considering taking money out of his 401(k) plan to cover cost of the repair. If he does
a.there will be no tax or penalty since it is a hardship withdrawal
b.Mike must pay income tax, but will avoid a 10% penalty tax since it is a hardship withdrawal
c.Mike can withdraw $2,000, but he must pay income tax on the amount withdrawn. If he replaces the withdrawn amount within two years, he can avoid paying a penalty on the amount withdrawn.
d.Mike cannot withdraw money from a 401(k) unless he is 59 1/2, disabled, or has unusually high medical or housing expenses
e.Mike will pay income tax and a 10% penalty for an early withdrawal and must satisfy requirements to show it qualifies as a hardship
Shannon McDougal will retire December 31 of this year. Shannon has worked for Shamrock Construction for 30 years. During his last 5 years, he earned $40,000, $47,000, $44,000, $46,000 and $48,000. Shamrock's retirement plan uses a unit credit formula that awards employees 1.5% for each year of service using a financial average of the last 3 years. Shannon's annual benefit will be: